If you ask someone in Germany how the Energiewende – the German word for “transformation of the energy system” which has already found it’s way into the English language like Kindergarten and Kitsch – is going, you’ll probably get one of two answers. Some people point to the tens of thousands of rooftop solar panels and to the wind turbines and biogas tanks that dot the landscape. In their view, the Energiewende is making good progress. Other people point out that cost of power and the energy system has skyrocketed, that Germany’s power supply is becoming increasingly unreliable and fragile, and that—despite the growth in renewables—carbon emissions have actually increased in relative terms. In their view, the Energiewende has failed. I think that it’s too early to make a final pronouncement. But enough time has passed for a fair assessment of what it has achieved—or not achieved—so far.
Germany has so far installed a lot of renewables capacity, predominantly in the last few years: 65 gigawatts in all, about half which is wind and the other half solar. This capacity supplies about one fourth of Germany’s power. Germany has achieved this growth with lavish subsidies. At 5.3 cents per kilowatt-hour, the cost of such subsidies for the average consumer in Germany is very high. Most attempts by German policymakers to achieve significant reductions in subsidies have failed. For the 65 gigawatts of renewables capacity the German government faces obligations totalling about 250 billion euros over the next two decades. Solar capacity in particular continues to grow steadily even though subsidies were reduced. This is because the reduction in solar subsidies has been more than offset by declining prices for solar panels.
As renewables have grown in Germany, so too have our grid-management problems. Wind farms and solar panels have built regardless of whether the local grid has enough capacity to handle the power they produce. The growth in grid capacity is far from keeping pace with the growth in renewables capacity. On sunny, windy days when Germany produces more green power than it can use, it exports it—usually at ridiculously low prices or sometimes even negative prices—to neighbouring countries, thus exporting the domestic grid overload problems.
As more of Germany’s power comes from wind and solar farms, less needs to come from fossil-fueled power stations. That ought to be good for the earth’s climate, but in fact Germany’s carbon emissions increase. The reason is, that power stations that burn lignite or hard coal met a much greater share of Germany’s baseload power needs than in the previous year, because the European Emissions Trading Scheme—that theoretically would make lignite prohibitively expensive due to its CO2 content—isn’t working. On the other hand high-efficiency gas-fired power plant that would be a perfect match to renewable now produce power for far fewer hours per year as they would need to be profitable to operate. The result is ironic: Energiewende leads to a drastic change in our energy system, but does not contribute much to the overall goal: fight climate change. And, the way the system works will destabilize the profitability of all conventional backup facilities and thus risk the stability of the energy system and the investibility of utilities.
If one thus places the so described Energiewende in a European context, this has three aspects: First, all of Europe is heading in generally the same direction—namely: decarbonization—the direction laid out in the EU’s “Energy Road Map 2050.” Second, other countries are anxiously looking toward Germany to see whether the radical approach of the Energiewende succeeds. Third, in its determination to be a pacesetter, Germany is actually moving further and further away from a common European energy and climate policy.
Germany’s Energiewende—and thus similar energy transformations of all European countries, which are keeping a watchful eye on us—is in a critical phase. It risks becoming an empty political slogan, but no longer a serious attempt to put in place an effective set of policies to address the greatest global challenge of this century. What can we do so that this doesn’t happen?
As a prerequisite, there should be a consensus about four things: First, the Energiewende is ultimately a European project. The EU accounts for nearly 25 percent of the world’s economy and 11 percent of global carbon emissions. Only if Europe puts its full weight behind this project will there be a breakthrough for global climate policy. Second, the Energiewende is an industrial project. Only if we allow industries and companies to compete to deliver the most efficient solutions will we maximize the climate protection we get for each euro we invest. Third, the Energiewende is a project for all of society. For it to succeed, everyone—governments, companies, and individuals—must invest in it and have a stake in it. Fourth, we need precise targets and policy mechanisms that will stimulate investments in climate-friendly energy technology.
If we can agree about those four political goals, then stakeholders should state clearly and precisely what kind of policy framework it needs to loosen the investment blockade. At the heart of it is the question, how can Europe secure a consistent and holistic climate strategy by revitalizing the emissions trading system as the central European policy mechanism promoting decarbonization? What kind of renewables subsidies should there be? What’s the best market design for a system with inherent over capacities but supply shortages at times? And above all: how can we incorporate all of these issues into an overarching energy strategy? If we achieve that degree of clarity, then we’d be in a position for the debate to become more concrete. This is what I’ve set out to do during my term as incoming president of EURELECTRIC, which begins this June. I’m not sure whether we’ll succeed in giving new impetus to the European Energiewende. But I can promise you one thing: the European energy industry will do everything it can to see that we do.
Dr. Johannes Teyssen is Chief Executive Officer (CEO) and Chairman of the Board of Management of E.ON SE, Düsseldorf, Germany