Redefining the Energiewende: New German Government Coalition Issues A Roadmap for the Nation’s Most Ambitious Domestic Energy Reform

GERMANY EDIT

Redefining the Energiewende: New German Government Coalition Issues A Roadmap for the Nation’s Most Ambitious Domestic Energy Reform

By Anna Milena Jurca, Staff Contributor

On March 11, 2011, the Japanese nuclear power plant Fukushima Daiichi was damaged by an earthquake and hit by a subsequent tsunami, which initiated a cascade of failures in several of the plant’s nuclear reactors. The catastrophe sparked a global debate, and particularly in Germany, over the safety of nuclear power plants. This discussion led to Germany’s decision to phase out all nuclear power plants by 2022. The simultaneous phase-out of conventional energy and the reduction of greenhouse gas emissions, collectively known as the Energiewende (energy transition), is Germany’s most ambitious and risky domestic reform ever. Its goals include a reduction of greenhouse gas emission pursuant to the Kyoto Protocol, a reduction of energy imports, enhanced energy security, eliminating the risk of nuclear power, and stimulating green technology development in the economy.

In 2011, Germany still operated seventeen such nuclear plants, accounting for 17.2 percent of German electricity. Just four days after Fukushima, however, Chancellor Merkel imposed a moratorium on the lifetime extensions the German government granted the nuclear power plants just half a year earlier. Eight of the seventeen power plants would never go back onto the grid – a decision that caused large write-offs for nuclear power plant operators who are now successfully seeking compensation from the German government.

“[Germany] now produces about 22.9 percent of its electricity from renewables, a share it wants to increase to 80 percent by 2050.”

What has at times been perceived as an overblown policy reaction to Fukushima, actually began over twenty-five years ago with a small one-page legislative bill. The German Electricity Feed-In Law of 1990 (now superseded by the Renewable Energies Act) was designed to promote the generation of electricity from renewable sources. Under the law, small renewable electricity producers could sell any electricity they produced into the grid at 90 percent of the price that big utilities charged the end consumer. Wind power generation became a reliable investment, especially for efficient wind parks in the country’s windy north and along the North Sea. At the time the Electricity Feed-In Law was enacted, Germany generated only 3.1 percent of its electricity from renewables. The country now produces about 22.9 percent of its electricity from renewables, a share it wants to increase to 80 percent by 2050.

Due to several developments unique to Germany, renewable energies have enjoyed a strong and continued political support compared to other European neighbor states.  First, there has been a strong environmental movement opposing nuclear energy since the 1970s.  Second, the political party the Greens was continuously represented in the German parliament since the mid-1980s and supported numerous environmental protection bills. Third, Germany has maintained a strong political ambition to meet its international commitment to reduce greenhouse gas emissions. The Energiewende remains a popular domestic reform among the German population according to recent polls: Eighty-four percent of Germans “agreed” or “mostly agreed” that an economy run on 100 percent renewables should be achieved as safely and as quickly as possible.

A point of contention, however, is the cost that the Energiewende framework imposes on consumers. In 2013 alone, the Renewable Energy Act caused some 22.9 billion Euros (US$ 31 billion) to be paid to renewable energy producers under the feed-in-tariff structure. Private end consumers and small businesses pay for most of the costs because the Ordinance on Limitation of the Renewables Surcharge exempts certain electricity-intensive industries (1,716 companies in 2013) from paying the renewable surcharge.  Moreover, the Ordinance imposes only a very low energy levy of 0.05 Euro cents (US¢ 0.067) per kWh for electricity-intensive industries – compared to 5.3 Euro cents per kWh (US¢ 7.2) for all other users.

” … the Energiewende is at a crossroads: On the one hand, renewables have seen massive growth. On the other hand, with increased costs and unregulated growth, new challenges arise, including balancing supply and demand, and regulating costs.”

After the German elections in 2013, the new coalition of conservative Christian Democrats (CDU/CSU) and liberal Social Democrats (SPD) faces  balancing the main principles of security of supply, competition in supply, and environmental protection, all of which have guided German energy law for the past quarter-century. In January 2014, Economy Minister Sigmar Gabriel proposed to amend the Renewable Energy Act to address some of these challenges. While the high surcharges to promote renewable energy production have been criticized for years and while the successive reduction in subsidies is a necessary step for a sustainable energy industry, they have led to a seven-fold increase in renewable electricity production from 3.1 percent in 1990 to 22.9 percent in 2012.

Gabriel’s proposal now seeks to restore a better balance between the overall environmental trajectory of the Energiewende and the issues of costs, which are determined by the competition in supply and security of supply. The proposal will lower the average compensation for renewables from 17 Euro cent (US¢ 23) per kWh to 12 Euro cent (US¢ 16) per kWh and will cap production quantities. This reflects the fact that the Energiewende is at a crossroads: On the one hand, renewables have seen massive growth. On the other hand, with increased costs and unregulated growth, new challenges arise, including balancing supply and demand, and regulating costs. Some challenges remain to be solved in the coming years. Solar technology, for example, will be producing electricity at peak demand times during the day. However, an increased input by renewable energy sources requires a different geographic and temporal balancing of the grid compared to the current infrastructure that was built to support conventional power production. The government already has plans for massive upgrades to the German power grid system, including north-south connections from the wind-rich North Sea shore to the energy-hungry cities in the south. The Renewable Energy Law has provided a flexible framework for the Energiewende. It has been amended every few years since its enactment. The current proposal is the next step on Germany’s journey to balance security of supply, competition in supply, and environmental protection.

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