Germany Faces Electricity Shortfall

We’ve written many times about the problems facing Germany’s Energiewende program, often arguing it will unfairly raise costs for consumers and ultimately affect power supplies. Now, a federal audit seems to underscore our position. The as-yet-unpublished audit found that reforms are needed to fix the system that has left Germany with Europe’s highest retail electricity prices and at risk of grid blackouts. The audit comes as Germans prepare to go to the polls this September.

What is the Energiewende? Energiewende is Germany’s name for its ambitious commitment to transitioning to renewable energy. This goal is being accomplished by heavily subsidizing wind and solar while aggressively closing coal and nuclear power plants. When the program first began 20 years ago, Germany only received 6.6% of its electricity from renewables. As of 2019, that percentage has increased to 41.1%. Some may view the increase as a success, but the costs are worth considering. 

Germans now face some of the world’s highest electricity prices at around 34 cents per kilowatt-hour, compared with the U.S. average of 13 cents per kilowatt-hour.  More than half of ratepayer bills are made up of taxes and fees, mainly supporting the transition away from coal, gas, and nuclear power.

But high prices aren’t the only concern. The audit office also warned of an imminent electricity shortfall with the retirement of the country’s last nuclear and coal-fired power plants. This warning is the same one that German grid operators have been giving for years, but policymakers have largely ignored it. How much of a shortfall are consumers facing? Estimates place the number 4.5 gigawatts, which is enough electricity to power over a million homes. It won’t be easy to make up that much electricity. 

How can Germany get its energy transition back on track? Government policy calls for importing power from neighbors in times of shortage, but that may not always be an option. Germany’s neighbors are also investing in their own energy transitions and may not always have the extra electricity to spare. 

As we’ve stated before, the key to making the Energiewende work could be for Germany to revive its nuclear energy commitment. Nuclear energy is the most reliable form of carbon-free baseload power generation. Keeping more nuclear plants online could help make up the shortfall without undermining emission reduction goals.  That’s something even the most environmentally friendly lawmakers are starting to realize in the U.S.The problems with the Energiewende are many, but there is hope for getting it back on track. German regulators have to act now, however. If recent history has taught us anything, it’s that access to affordable and reliable electricity is vital for our 21st century way of living. Let’s hope German policymakers heed their own audit and change course before the ratepayer does it at the ballot box in September.