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.