6 september 2013

[4C note: This is the third part of a long article on Germany's environmental transition by two fascinated Indian environmentalists. It was accompanied by graphs and photos that we were unable to reproduce here. Please consulte the original web publication at the Down To Earth site.]

Germany in transition (Part III)

Germany has crossed the hump

Renewable is real in Germany


I heard about Energiewende about two years ago when a German friend told me about the ambitious goal that his country had announced for renewable energy, energy efficiency and greenhouse gas (GHG) emissions reduction. It did not excite me much mainly because till then the outcomes were modest: the share of renewable energy in the electricity mix was only 15-16 per cent, which was similar to India’s, and there was a question mark on achievements in sectors like transport and industry. Although Germany had reduced its GHG emissions more than it had to under the Kyoto protocol, it could do so because of the reunification wherein a number of inefficient industrial units in the erstwhile East Germany were closed down. For me, then, Energiewende was no different from what many developed countries had put out as their emissions reductions targets for 2050 under the Cancun agreement­big numbers, but little to show.

As the noise around Energiewende grew louder, so did my interest. The turning point for me was a newspaper article that reported how power companies were threatening to shut down their coal and gas plants because renewable energy was making them unviable. We decided to go and see for ourselves what this energy transition was all about. For 10 days we criss-crossed Germany ­from Heidelberg and Frankfurt in the centre to Breklum in the north to Feldheim and Schenkenberg in the east. The more we travelled the more excited we got. Germany’s Energiewende was opening our eyes to a new energy future. Sure we found problems and challenges; but we also saw commitment, achievements and innovation. Most importantly, across the political and economic spectrum, we found people supporting this transition.

In the past 10 years, Germany has done remarkably well in the renewable electricity sector. Today its installed capacity of renewable electricity is almost equal to that of fossil fuels­about 80 gigawatts each.

In the first seven months of 2013, 15.5 per cent of the electricity generated in Germany came from just solar photovoltaics and wind power. This is a record in the world. In June this year, when the weather was moderately windy but the sun was shining bright, a record 7.7 Terawatt hour or 22.5 per cent of the total electricity was produced by wind and solar plants­, again a record. On July 7, when the mercury crossed 35°C in most parts of Germany, between 10 am and 4 pm, the 1.3 million solar power plants, installed on houses, commercial buildings and farms, collectively met half the electricity demand­, yet another record. Renewable power is, therefore, real in Germany.

But not all is well with Energiewende. There are major challenges in sustaining and upscaling renewable power in coming years without disrupting the electricity supply. The current market design, though favourable for renewable energy that is enjoying assured feed-in-tariff, is creating major problems for the conventional power plants who have to either shut down or sell their power free during peak solar and wind periods. It is also not sustainable for the solar and wind energy producers in the long run.

During peak wind and solar period, so much electricity is produced at nearzero cost that the wholesale price of electricity dips significantly. As a consequence, wind and PV destroy their own prices at the wholesale spot market.

Without feed-in-tariff they will not be able to earn enough revenue because the price will always be lower than the market price average whenever they will produce electricity. Thus, Germany will need major reforms in pricing electricity from renewables.

There are proposals on the table that advocate moving from “energy only market” to “energy, investment and storage” market. In the proposed market, the electricity producers will not only be paid for electricity, but also for capacity­for conventional power plants to remain available when required and for wind and solar plants to recover their investments. Businesses will also be paid to store electricity and feed it to the grid when required. But electricity in this market will not be cheap. And the future market will have to be far more regulated than today.

Energiewende also suffers from skewed focus. Discussions are largely focussed on electricity and supply side management, not on heat energy and demand side management.

In a typical German household 75 per cent of the energy is consumed for heating and 25 per cent is used in the form of electricity. The heating energy is largely supplied by natural gas and fuel oil. So the spotlight on renewable power is actually taking away the focus from reducing heating energy.

There is a lot of criticism within Germany on the energy efficiency front. In January last year, around 30 energy economists of Germany wrote an open letter to Chancellor Angela Merkel and Parliament, complaining that the country is not doing enough to increase energy efficiency of buildings and industry. Some experts even believe that Germany is likely to miss its energy efficiency targets for 2020 because of its lopsided focus of Energiewende on renewable power.

Germany faces challenges in the mobility sector as well. It has one of the highest car ownership rates in the world. Fossil fuel consumption in cars, which the Germans love to drive, is not reducing and the targets that Germany has set to have one million electric vehicles and 20 per cent biofuels mixed in its automobile fuels by 2020, are not likely to be met in the current scenario.

At present, only 5.25 per cent of the auto fuels used in Germany are biofuels, mainly ethanol and biodiesel. Considering immense pressure on land and conflicts with food production, Germany is now importing palm oil from Malaysia and Indonesia to make biofuels. But certifying imported palm oil’s carbon emissions savings is an elaborate process that experts are questioning. They are asking for more money to be put on third-generation biofuels, based on algae, and on public transport.

Electric vehicles are finding very few takers. At present, Germany has only 7,000 registered electric vehicles and many experts believe that meeting 1 million vehicles target will not be possible unless the driving range of these vehicles are improved and Germany offers more incentives.

There is also an element of social inequality in Energiewende, which is now being voiced by the left political parties and some Green party politicians. In the coming elections this is going to be an important issue.

Even with all the challenges and problems, German Energiewende is the most ambitious venture to decarbonise an economy. No other country even comes closer. Germany is showing to the world that a completely new energy system based largely on renewables is possible.

In this energy system, the majority of energy demand­ electricity, heating and for mobility ­will be met from renewable sources. The “base load” fossil fuel power plants that dominate our lives will disappear. What we will have instead is flexible fossil fuel plants that will operate only when required. To maximise on renewable potentials in different countries, we will have regional grids to import and export renewable power. Renewable energy will be stored in pump storage dams and in the form of electricity and hydrogen. The stored energy will supplement the peak demand.

The German model also fosters a new energy market dynamics in which the small players win. Germany’s wind and solar transition is not being propelled by large utilities and big companies. It is being led, owned and operated by citizens, small utilities and energy cooperatives. This points towards a decentralised energy future in which millions of people, small businesses and cooperatives will produce electricity, consume it locally and feed the surplus to the grid. With a little more advancement in grid and energy storage technology, this future is possible, too.

It is important to understand that Germany gets far less sun compare to countries like the US, Australia, India, China and most parts of Latin America and Africa. If Germany can produce such large amounts of solar power with so little sun, then we need not worry about the renewable electricity future. But Germany has been able to do all this because it could afford it. For developing countries like India, financing such a massive venture on their own would not be possible. This is why a global mechanism is required to share the burden of transition to the renewable energy future.

Will Germany be able to solve all problems and meet challenges that Energiewende has thrown up? Can it meet all its targets?

I believe, it can and it will. The exciting thing about Energiewende is not how much renewable energy Germany has installed so far, but how the German government, businesses and civil society are thinking about the energy transition. I believe the German society has crossed the hump.

We would like to thank Thomas Hirsch and Anja Esch of Brot für die Welt for making this trip successful

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