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The Energiewende: An introductory look at Germany’s energy transformation

  • 24 Jul 2013, 13:15
  • Mat Hope

Credit: Dirk Ingo Franke

Germany is considered one of the most environmentally conscious countries in the world - but it wants to do more. Decarbonising one of the world's biggest industrial economies is no small task, and as Germany's government pushes ahead with sweeping policy reforms, the world is watching to see whether the Germans can pull it off.

The Energiewende - or 'energy transformation' - seeks to cut emissions, ramp up renewable electricity, and halve energy consumption, all while keeping the economy afloat. The repercussions will be felt beyond Germany, with English-speaking media already using the Energiewende to illustrate both the benefits and pitfalls of government-directed decarbonisation.

But there is some confusion over what the the transformation entails. And debate about the Energiewende is far from settled in Germany itself, with commentators continuing to argue over the potential costs and benefits of the far-reaching reforms.

Transforming an energy system

Germany's government laid out its energy reform plans in 2010, looking 40 years ahead. The plan requires a radical overhaul of Germany's electricity generation, heating systems, and energy efficiency standards.

The economics and environment ministries declared the Energiewende would make Germany"one of the most energy-efficient and greenest economies in the world while enjoying competitive energy prices and a high level of prosperity."

The heady rhetoric was accompanied by a set of the kind of high-level targets beloved of policymakers the world over. The Energiewende sets an 80 per cent emissions reduction target by 2050, compared to 1990 levels. The government also aims for renewable sources to provide for 80 per cent of electricity consumption, and seeks to reduce the amount of energy Germany consumes by 50 per cent, by 2050 compared to 2008.

Agora EW table 2
Source: Agora, 12 insights on Germany's Energiewende

The task of moving away from fossil fuels was made more complex shortly after setting the goals when the government ruled out nuclear power as a low carbon energy option.

Chancellor Schröder's government had committed to phasing out nuclear by 2022 at the start of the millenium. In 2010, Angela Merkel's government decided to keep the reactors open, but in the wake of the Fukushima nuclear disaster it changed course again, deciding not to restart eight nuclear reactors that had been shut for servicing, and again committing to phasing out Germany's remaining nine reactors by 2022.

The decision has proved popular with a German public which remains largely hostile to nuclear power. But it does mean Germany is aiming for more renewable electricity, less demand, and lower emissions - all in a cost effective manner and without the aid of nuclear power. Ambitious, indeed.

In practice

Targets are one thing, but putting them into action is another.

The Energiewende touches on a wide range of sectors - from electricity generation, to construction and transport - and seeks to overhaul energy supply and demand management.

At the moment, generators get paid a fixed rate to supply renewably-sourced electricity to the grid. This extra cost is covered by a surcharge on household energy bills. In Germany, these tariffs are guaranteed for 20 years, similar to the UK.

Renewables support is popular with some sections of the public, partially because a large proportion of renewables projects are owned by them. 40 per cent of Germany's installed renewables capacity was owned by community cooperatives in 2010.

But the media and some politicians have blamed the subsidy for rising energy bills. Germany's Environment Minister, Peter Altmaier, has called for the end for a particular part of the subsidy - which rises as more renewables come online - to be frozen at current levels. He says the associated cost threatens public confidence in the Energiewende. But Altmaier's proposal was rejected at an energy summit between the federal government and state representatives earlier this year.

Some subsidy reforms have already been carried out. In 2012, for example, the government agreed to end new solar subsidies once solar capacity reaches 52 gigawatt - almost six times the UK's current installed capacity. Germany's environment ministry says this could happen as early as 2014.

Energy consumption

Ramping up renewables is only part of the Energiewende plan. Reducing energy consumption will mean making houses and appliances more efficient, too.

In summer 2011, the government pledged €1.5 billion of funding per year for a Building Rehabilitation Programme. The government has also imposed strict standards on electrical appliances by declaring the most efficient products the 'standard', and banning any less efficient new appliances from the market.

Reducing demand will also be necessary to balance a grid increasingly reliant on renewable power. A power consumption market opened earlier this month allowing companies to bid to reduce demand at peak times. This could be cheaper and less emitting than switching on fossil fuel plants to back up renewables - most likely powered by gas. The market is still in its early stages, with only around 500 megawatts of demand reduction bids, but the scheme could be rolled out on a larger scale in a year's time.

So the Energiewende is deploying a wide-range of policies to try and create a low carbon economy in the most cost effective way.

Cost

As in the UK, the cost of supposedly 'green' policies is a political flashpoint. Unsurprisingly, the estimated cost of the Energiewende changes dramatically, depending on who you ask.

Altmaier caused controversy in February when he claimed the Energiewende could cost Germany €1 trillion over the next 20 years. But Altmaier's own department previously calculated the cost as closer to €203 billion.

The MIT Technology review says the cost of the Energiewende has been estimated as anywhere between €100 and €200 billion up to 2020, while Businessweek says the it could cost around about €200 billion - equivalent to about 8 per cent of Germany's GDP.

The figures change depending on whether or not the benefits of the policies are included. Miranda Schreurs of Berlin Free University says Germany's green technologies alone could be worth around €9.5 billion. Environmental NGO, Green Budget Germany, says benefits such as avoided environmental damage and the cost of fossil fuel imports also need to be included in the calculations to give the full picture.

As is often the case, estimates change depending on technology and fuel prices, and how much benefit is expected to come from the policies. All of those are uncertain, making it hard to produce a precise estimate. But whatever the precise cost ends up being, it's clear the Energiewende is a long term, multi-billion euro project.

Where next?

Germany's strong green political tradition, combined with public support for nuclear decommissioning, may have laid the foundations for public acceptance of the sweeping reforms - but it won't guarantee that they can be enacted.

Manufacturing sector profits and benefits for communities who invest in the renewables transition have helped maintain support for the Energiewende. But there has been a backlash in both the German and English-speaking media as critics question whether or not the policies are being rolled out in the most cost-effective way.

The Energiewende is still in its early stages and is being adjusted as it develops. Merkel's government still appears to be committed to the transformation, though with September's elections looming, the expense is making some politicians nervous.

The Energiewende's ambition is undoubtable. But despite Germany's clear commitment to long-term environmental policy, there are still plenty of obstacles to overcome.

 

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For more information, see our other blogs in this series:

The Energiewende: Transforming Germany's energy sector

The Energiewende and energy prices: Public support and Germany's long term vision

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