by Judith Curry
The wheels are falling off of Germany’s green energy revolution. – Walter Mead
The Economist has a special report entitled Tilting at windmills: Germany’s Energiewende bodes ill for the country’s European leadership. Excerpts:
OSTERATH’S 12,000 citizens are angry. Their quiet backwater in the Ruhr, close to Düsseldorf, is the proposed site for the biggest converter station in Europe. This vast installation will transform high-voltage direct current to alternating current. It will be an important link in Germany’s new “power highway”, a network of transmission lines that will send electricity generated by wind farms in the north of the country, and offshore in the North and Baltic Seas, to the manufacturing belt in the south. Osterath’s residents reckon it will be a monstrous eyesore, and intend to stop it.
This kind of nimbyism is only one of many problems facing Germany’s Energiewende. The literal translation is energy change or turn, but this is more of a revolution, designed to convert Europe’s biggest industrial economy so that it runs largely on renewable energy. This includes ambitious conservation and efficiency goals, but above all it involves changing the power supply. By 2022 all nuclear power plants, which now produce 16% of the country’s electricity, are to be switched off. And by 2050 about 80% of electricity is to come from renewable sources, compared with 22% now.
Businessmen say the Energiewende will kill German industry. Power experts worry about blackouts. Voters are furious about ever higher fuel bills. The chaos undermines Germany’s claim to efficiency, threatens its vaunted competitiveness and unnecessarily burdens households. It also demonstrates Germany’s curious refusal to think about Europe strategically.
The result is a web of grotesque distortions. On sunny days Germany pushes its excess power into the European grid at a loss. Because producers of renewables are paid a fixed price, their subsidy rises as the spot price of electricity falls. On cloudy days Germany relies ever more on brown coal. Last year its CO2 emissions rose.
The cost of this mess is passed on to electricity users. Household fuel bills have gone up by a quarter over the past three years, to 40-50% above the EU average. And because the contracts guaranteeing renewables prices are set for 20 years, the problem will get worse as more such supplies come on stream. Thomas Vahlenkamp of McKinsey reckons that the cost of the Energiewende will double over the next decade. Rising electricity bills will dampen German consumers’ spending, exactly the opposite of what is needed to rebalance the economy.
All this is happening as prices for natural gas and electricity in North America are plunging, thanks to the shale revolution, so Germany’s most energy-intensive industries are now eyeing expansion on the other side of the Atlantic. There is a risk of a ripple effect as their customers start to move, too.
The strategically minded are pushing for more fundamental overhauls. Bold ideas include replacing the pricing distortions with a market based on production capacity rather than output: power producers would be paid by the amount of capacity they had installed rather than the amount of electricity they actually produced. There would also be a greater focus on energy conservation, including more incentives for investment in retrofitting buildings; more public investment into energy-storage research; and, from planning the expansion of the grid to the creation of new renewables capacity, a European, rather than a national, vision for the Energiewende.
Such boldness would be good for German economic rebalancing and for Europe as a whole. After all, Europeans live so close to each other that a national energy policy makes little sense: how safe is a reactor-free Germany when nuclear power stations go on running next door in France, the Czech Republic and, in due course, in Poland? And in a supposedly single European market, is a renewables revolution at national level even possible? Instead of a national Energiewende marked by U-turns and uncertainty, Germany needs to think European.
Walter Mead
Walter Mead has a post at The American Interest entitled Germany’s Green Plan is Crumbling that comments on the Economist article. Excerpt:
The Economist does an excellent job painting the grim picture, but it draws the wrong conclusions, suggesting that Germany should push for “a European, rather than a national, vision for the Energiewende.” That could be disastrous for Europe, which is already struggling to find its footing in the wake of the recent debt crisis.
Instead, Germany—and Europe, for that matter—might consider developing domestic shale reserves, and start diverting government subsidies for wind and solar towards the research and development of the technologies underpinning these resources.
Germany’s struggles with green energy should be a warning to leaders and policymakers around the world. Renewable energy isn’t ready for primetime, and no amount of government subsidies or green pie-in-the-sky hopes are going to change that.
JC comments: This post underscores the complexity of transitioning to green energy and some unintended consequences that can arise from government regulations. I think that Walter Mead’s analysis is spot on.