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The downside of Germany’s ‘Energiewende’

Author : Alan Franck, Editor, HazardEx

06 June 2013

Germany’s plan to shift from fossil and nuclear power sources to renewables such as solar and wind, the so-called ‘Energiewende’ or energy transformation, is having a number of undesirable consequences that could transform the country’s political landscape.

The country’s original energy plan called for a growth in renewables and a rapid decarbonisation of energy generation, with a 40% reduction in CO² from 1990 levels by 2030. This plan envisaged the country’s nuclear plants, which produced about a fifth of Germany’s electricity, remaining open until the 2030s.

But the Fukushima incident in March 2011 caused a significant rethink. The disaster in Japan helped the anti-nuclear Green Party to win control of the state of Baden-Wuerttemberg, which the ruling Christian Democratic Union (CDU) party had held for 58 years. Three months later, Chancellor Angela Merkel and her cabinet decided to permanently switch off the country’s eight oldest reactors and moved forward the closing date of the remaining nine plants to 2022.

A direct consequence of this has been a rise in greenhouse gas emissions in Germany, which increased 1.6% in 2012 as more coal was burned to generate power.

Electricity from renewables gets priority on the German grid, but because the country’s extensive wind and solar facilities only produce power intermittently, fossil-fired stations need to remain on standby to provide backup. And as coal is now considerably cheaper in Europe than gas, this has led to an expansion of coal-fired plants at the expense of gas, which is considerably less polluting.

By displacing conventional forms of energy, renewables have undermined German utilities’ finances. Ratings agency Moody’s said at the end of 2012 that the whole sector’s creditworthiness is under threat.

Some 10.6 GW of new coal-fired electricity will come online in the years 2012-2015, much of it from brown coal or lignite-fired plants, which produce 27% more CO² than black coal. All these new plants are considerably cleaner than traditional coal-burning stations, but they will still produce massive amounts of CO².

One estimate suggests that by 2020, Germany will have produced an extra 300 million tonnes of CO² as a result of the nuclear closure, equivalent to almost all the savings that will be made in the 27 member states as a result of the EU’s energy efficiency directive.

Nor is the country’s reliance on lignite likely to change soon. Reserves in Germany are estimated to be 77 billion metric tons and around 180 million tonnes are produced every year, with the 20,000 jobs reliant on the sector providing a powerful political lobby.

Near Cologne, three huge strip mines continue their expansion, encroaching on villages and causing wholesale relocation of their inhabitants. A report in The Atlantic claims that over the past 60 years, some 35,000 people from more than 100 villages in the area have been relocated, and in the eastern part of the country, tens of thousands have been displaced from nearly 250 villages. 

The rapid rise in wind and solar power has also created serious difficulties for grid operators, who face power surges when the wind blows and the sun shines, and shortages when they don't. In 2011, more than 200,000 blackouts exceeding three minutes were reported, and there is a growing risk of major power failures.

This also destabilises the power grids of neighbouring countries. So-called “loop flows” of German renewable energy swamp both Poland’s and the Czech Republic’s networks on sunny and windy days, pushing them to the brink of collapse and costing significant amounts to remedy.

A further issue is the massive expense of the Energiewende. Apart from the high cost of the generation and distribution of electricity from renewables, keeping fossil-fired plants on standby for baseload capacity is very expensive indeed.

In February of 2013, Germany’s Environment Minister Peter Altmaier announced that the German energy reform could cost upwards of one trillion Euros by 2030. EU Energy Commissioner Günther Oettinger, a former politician in Germany, has been quoted as saying he doubts "whether German consumers will accept rising electricity prices resulting from the energy turnaround in the long term."

Some reports project that German energy bills, already the second highest in the European Union (EU) after the Netherlands, will increase between €185 and €250 annually. About half of an average consumer’s bill now goes to taxes and subsidies for renewables rather than the actual price of electricity.

Heavy industry is exempt from green energy surcharges, a bone of contention among surcharge-paying domestic consumers, and is designed to protect Germany from a mass-exodus of industries seeking cheaper energy elsewhere. Despite this, German industry still paid 40% more for electricity than companies in France and the Netherlands in 2012, according to the Cologne-based IW economic institute. US business magazine Forbes says a number of German-based companies have closed their domestic operations citing excessive energy costs, including ThyssenKrupp, GEA, Aurubis and Norsk Hydro.

There have been a number of positive outcomes from the Energiewende and majority support still exists for the broad aims of the country’s energy renewal plans. Indeed, by generating about a quarter of its power from renewables, Germany saves more than €5 billion a year on energy imports and jobs in the country’s renewable energy sector have more than doubled to around 380,000 since 2004.

But polls show the issue has become a political hot potato in this election year. As Chancellor Merkel runs for a third term in September, political opponents and industry groups are attacking her for ineptitude in handling the energy transformation, particularly the big rise in domestic electricity prices.

Merkel’s main opponent, Peer Steinbrueck of the Social Democratic Party (SPD), is capitalising on discontent with the energy switch. In January the SPD beat Merkel’s CDU in a vote in Lower Saxony -- the third straight regional defeat for the incumbent party and a sign that the SPD is well-placed to beat the CDU in the national election.

In response, Merkel’s government has increased cuts to clean-energy subsidies during the past three years, and has proposed freezing the related surcharge to consumers in 2014 at the current level.

The German electorate obviously has many other issues on which to give its verdict in September, but most observers agree this will be an important factor.

In December, at a CDU summit in Hanover, theChancellor said that the €550 billion effort to transform the energy sector is the most ambitious, complex and difficult project in Germany’s recent history. She has a few months to persuade the electorate her party can tackle the serious problems that have arisen out of its implementation.

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