Why is Germany so motivated to change their energy system?
Germany has committed to perhaps the boldest energy transformation in the world. With near unanimous political support, they adopted legislation in 2010 that sets ambitious targets for carbon reductions, renewable energy and energy efficiency, and commits to a phase-out of nuclear power. According to Peter Altmaier, minister of environment, “this is unprecedented and brings to an end decades of public debate in Germany.”
While much international attention is paid to the rapid growth of solar energy and the phaseout of nuclear power, the legislation is a comprehensive energy policy, covering transportation, heat, and electricity use across the whole economy.
German energy policy goals
Source: Dr. Martin Schöpe, Federal Ministry for the Environment
Now that the political debate is over, they have moved on to implementation. “The bulk of our energy is to come from renewable sources by the middle of the century,” writes economics minister Peter Rosler. “At the same time, Germany is to remain a competitive business location. This requires a complete restructuring of our energy system.” With typical German practicality, member of parliament Hans-Josef Fell has said, “This is not a problem, it is a task.”
But why?
While many countries have clean energy goals, what motivated Germany to move so aggressively?
Altmaier and Rosler’s ministries (the federal Ministry for Environment, Nature Conservation and Nuclear Safety (BMU) and the Ministry of Economics and Technology (BMWi)) share responsibility for energy policy. They have laid out “five good reasons for transforming our energy system.”
1. Responsibility for the future
“A policy of responsibility for the future, policy that also takes account of the interest of our children and grandchildren, means that wherever technologically and economically feasible it is our duty to choose an alternative form of energy supply.” The multiple meltdown at Fukushima, only six months after the adoption of the German energy policy, compelled the parliament to close seven nuclear plants right away and phase out the nine remaining plants by 2022. The anti-nuclear movement in Germany is strong, motivated by the Chernobyl disaster of 1986 – less than 800 miles from Berlin – and perhaps by a lingering distrust of authority from the days of the Nazi regime.
2. Protecting the climate
Germany has committed to reducing carbon emissions 40 percent by 2020 and up to 95 percent by 2050, economy wide. Transforming the energy system enables Germany to capture the “positive dynamics of renewables and a modern energy infrastructure.” In other words, getting ahead of the challenge allows for an orderly transition.
3. Supply security, competitiveness and cost stability
Germany imports 97 percent of its oil, 90 percent of its natural gas, and two-thirds of its hard coal. Europe is expected to increase total energy imports from 53 percent in 2010 to 70 percent in 2030. Increasing competition for energy from emerging economies like China and India, coupled with limited supplies, “are good reasons to develop new energy sources.” With increasing global demand for energy, German industry will face greater competition, higher prices, and less stability. By setting long term energy policy, the government can create “planning certainty for industry.”
At the same time, “in a highly industrialized country energy not only has to satisfy the high demands of industry and be available in sufficient amounts at all times, it also has to remain affordable.”
The main policy tool for renewable power, the feed-in tariff (FIT), pays renewable producers a fixed amount for 20 years. This predictability results in low financing costs, which lowers the cost of capital-intensive renewables. The tariff prices are adjusted according to market conditions to reduce total costs. As renewables scale up and mature, there is an ongoing debate about the evolution of feed-in tariffs. Already, solar tariffs are less than the retail price of electricity, making it more attractive to self-generate than sell into the grid. It is possible that some technologies may “graduate” from the FIT market to the competitive wholesale market.
4. Growth and new jobs
Like many countries, German energy policy is an arm of their industrial and competitiveness policy. Major corporations like Siemens and BASF, along with many smaller companies, are selling clean energy technology around the world. A strong domestic policy is a good way to give these companies a domestic market to incubate new technologies and experience. Jobs in renewable energy have grown 129 percent since 2004, employing over 370,000 people.
5. Greater public participation
In addition to the broad public support for clean energy, German energy policy is explicitly encouraging citizen investment in renewables. Over half of renewable energy projects are owned by individuals and farmers, amounting to over $100 billion of investment. The share of generation owned by utilities has fallen by 20 percent, creating a major form of competition. (German power markets have been deregulated since 1998.) Citizen ownership has the benefits of greater competition, economic development (especially in rural areas), and greater consensus over renewable energy development, leading to less controversy over siting new projects.
And considering that Germany was reunited less than 25 years ago, the energy transition can mend the fabric of the nation. “It is a chance for our society to come together in a unique joint action," writes Altmaier. "It is a major joint national project.”
Learn more
Germany’s New Energy Policy, Federal Ministry of Economics and Technology, April 2012, www.bmwi.de.
Transforming our Energy System, Federal Ministry for Environment, Nature Conservation and Nuclear Safety, May 2012, www.bmu.de.
Clean Break: The story ofGermany’s Energy Transition and What We Can Learn From It, Osha Gray Davidson, 2012.