Oktoberfest and the Energiewende

Continuing the October theme established in our blog earlier this week and taking a small vacation from covering the U.S. energy policy landscape, today PACE brings you an update on Germany’s Energiewende, or energy transition. PACE has covered this before, noting how artificial timelines, weather, and economics can prove troublesome for even the best-laid plans, and noting the costs to consumers.

Energiewende has been winding its way through German politics and energy policy for the past two decades. The plan currently aims to cut carbon emissions 40 percent by 2020 and 95 percent by 2050.

While German Chancellor Angela Merkel (Christian Democratic Party) won re-election to a 4th term on September 24, she can’t unilaterally shape the next phase of energy policy. Negotiations began this week among the 5 leading parties on how to govern for the next four years; the Energiewende will figure large in these talks. 

While the German elections focused around top-tier issues of immigration, national security, European Union ties, and same-sex marriage, it’s reasonable to think that energy costs played a role. The New York Times relayed recently that Germany has spent $220 billion (just about 189 billion euros) on renewable energy subsidies. This time last year, reports circulated estimating costs in the electric sector alone of 520 billion euros.

The Times also described that “benefits of the [subsidy] program have not been universally felt …. A de facto class system has emerged, saddling a group of have-nots with higher electricity bills that help subsidize the installation of solar panels and wind turbines elsewhere.” Power bills for consumers have doubled since 2000. 

On the positive side, Germany has succeeded at increasing the share of power it gets from renewables. Yet, for all the investment, emissions are up, with slight increases last year and expected again for 2017. It seems inevitable that the country will miss its 2020 target by a hefty margin, likely coming in closer to a 32 percent cut.

Since climate policy is really generation fuel policy, a quick exam of the traditional German portfolio is enlightening. Nuclear power’s capacity contribution has fallen from about 30 percent to 13 percent, and will rapidly fade to black thanks to a nuclear ban set to take full effect in 2022.

The Green Party enters negotiations fueled by its election platform of removing all coal generation by 2030. Today, coal provides up to 40 percent of Germany’s power. Some will push for an even more rapid shut-down of lignite plants in hopes of jumping the emissions reductions and meeting the 2020 target. Some advocate for using natural gas as a bridge fuel until wind, solar and storage become technologically and economically feasible. Other voices urge skipping this phase and leaping ahead to the predominantly renewables future as soon as possible. 

None of this policy can be implemented or even debated in a vacuum. Improving the Energiewende emissions and costs track-record probably requires linking German power markets more tightly to a broader European energy market. It’s unclear how Germany would make this a reality when a unified E.U. energy policy and market evolution seem elusive, to say the least.

Looking back, this wasn’t actually much of a vacation from U.S. energy policy, as the German story brings to mind costly subsidies, unfair burdens on consumers who don’t choose distributed renewables, ceaseless committee meetings, and dogmatism driving decisions on all sides.

Attempts to transition a complicated energy sector and make carbon emission reductions are laudable. However, the Energiewende continues to remind us that transition without due consideration of consumer costs, technology realities, and reliability impacts can make the winds of change even more unpredictable and politically perilous.   


October 2017: “Reliability Month”

Although October hasn’t been officially named “Reliability Month,” it might as well have been, owing to all the recent news bearing on how our country will generate power in the future.

In Texas, a merchant power company announced the closure of two large coal-fired plants, totaling over 2300 MW of capacity across 4 units, along with a mine that supports one of the plants. The company said that the plants fell victim to “an oversupplied renewable generation market, and low natural gas prices.”

Beltway coverage focused on Texas’ lost capacity and laudatory comments from the environmental community. However, there was insufficient attention to the 600+ good jobs that will evaporate, and to potential reliability impacts in Texas, where citizens clearly remember winter-time brownouts and rolling curtailments in the recent past.

On Friday, FERC Chairman Neil Chatterjee spoke to reporters about DOE Sec. Rick Perry’s request that FERC write new rules compensating for reliability attributes. PACE agrees with the Chairman that “compensating for baseload generation does not equate to destruction of the markets,” and that discussing the value of reliability attributes is a positive “step toward accurately pricing the contribution of all market participants.”

Sec. Perry did an admirable job Thursday, in over 2 hours of testimony to the House Energy Subcommittee, socializing that it’s acceptable and necessary to have an ongoing, robust conversation about reliability and that blind trust in the electricity “marketplace” can’t be the sole guidance.

This fall’s DOE-FERC interplay largely bears on coal and nuclear plants. But natural gas costs and supply impacts on reliability have also come up this month. EIA’s October Short-term Energy Outlook predicts that natural gas prices will edge farther above $3 per MM/Btu in the coming months. On Friday, FERC approved two pipelines needed to deliver natural gas from the Marcellus Shale to the mid-Atlantic and beyond. Even so, the Atlantic Coast and Mountain Valley pipeline projects still face more levels of federal and state review.

PACE will address the nexus between natural gas and reliability next week as we host a Facebook live panel on Thursday afternoon, October 26 examining utilities’ reliance on natural gas and the common-sense business tactics used to manage commodity costs. We’ll share details soon on how to join the live session. Please join us to hear directly from both experts featured in a video PACE released earlier this month.

Nuclear should be recognized in “Reliability Month” as well, with news of progress for construction of two new units at Georgia’s Plant Vogtle. University of Georgia Prof. David Gattie, co-author of PACE’s recent net metering report, published a thoughtful op-ed reminding policymakers why our nuclear fleet supports reliability and national security.

On a lighter note, if you’re curious about what our wonderfully diverse nation has chosen to mark this month, check out this awareness days calendar, which has a little something for everyone. In 2018, just before mid-term Congressional elections, a real Reliability Month might be just the ticket for focusing policymakers on consumers, energy costs and keeping lights on for all. 


Climate Policy Swings and Balloons

As anticipated since just after the November 2016 election, the Trump Administration, through Environmental Protection Agency Administrator (EPA) Scott Pruitt, has officially released documents that set the stage for repeal of the Clean Power Plan. PACE welcomes this move. The original CPP, especially its approach to existing plants, failed to adequately consider how the CPP would raise electricity costs and create lasting impacts on consumers. It deserved the nickname PACE and countless other groups gave it – a carbon reduction mandate. 

Creation of the original CPP was complex and lengthy. It sprang into public view June 2013, when President Obama gave a significant speech at Georgetown University. Early looks at the plan prompted millions of consumers and businesses to register complaints starting that fall. The agency issued a final rule in 2015, but it never took effect, after a Supreme Court stay in February 2016.

CPP repeal could be equally time-consuming. But it’s appropriate to start now that EPA has brought on more high-level team members, had a chance to evaluate career staff in the agency, and ahead of the 2018 kickoff for many state legislatures.

In the (probably) near future, the Federal Register will publish EPA’s Notice of Proposed Rulemaking, kicking off an initial 60-day public comment period designed to foster discussion of whether and how to replace the rule. It also seems certain that advocacy groups and some state attorneys general will file court challenges to EPA’s new NOPR.

In contrast to the relatively understated (for the Trump era, especially) manner in which EPA announced its plans, some opponents have already wound up the hyperbole (fundraising) machine. Take for example, this tweet from a leading California lawmaker: “Washington’s utter failure to confront the existential threat of climate change will go down among the most shameful chapters in US history.”  Or a leading national advocacy group: “Trump and Pruitt will go down in infamy for launching one of the most egregious attacks ever on public health, our climate, and the safety of every community in the United States.” 

Before the rhetoric wars begin again in earnest, policymakers and media pundits should focus on key questions and the overarching need to navigate the U.S. toward a thoughtful national energy policy. Conversations from the first round of CPP debate are still necessary, including:

• The Clean Air Act wasn’t designed to deal with carbon emissions; Congress has a responsibility to address this.

• The Clean Power Plan asked U.S. consumers and businesses to take enormous steps, yet seemed to ignore global trends in use of coal for power generation.

• EPA’s plans for reaching far outside the operations of power plants exceeded its legal authority.

• Reliability is critically important, and raising it isn’t a dodge by utilities and businesses. EPA doesn’t answer the calls when blackouts and brownouts roll over consumers. 

• State lawmakers, businesses and regulators have the best first-hand knowledge about their local power market and consumer needs.

• Natural gas may not always be overwhelmingly cheap and plentiful, nor favored by environmental advocates.

• Rules aren’t worth much without accessible technology to implement them.

As the climate policy pendulum swing picks up speed, PACE will resume our efforts to make sure that consumer voices are heard, key questions get sufficient airtime, and rhetorical balloons are punctured with common-sense.