The German Energy Gamble

More than a hundred years ago, Berlin was known as Elektropolis. A rival to Edison’s amazing demonstrations in Chicago, Berlin led the world in adventurous electrification. 

It was thanks largely to Werner von Siemens and Emil Rathenau, who became famous in 1884 when he managed to bring electric lights to one of the best-known bars in Berlin, the Café Bauer.

The company he set up on the back of this adventure would eventually be known as AEG, while his rival would set up Siemens; the two companies would grow into two of the largest in the world, with Siemens today worth more than €73bn, and a worldwide symbol of brilliant German engineering. The gamble on electricity had more than paid off. 

Now, over a century later, the Germans are trying once again to do things with electricity that no one else has dared to. A few policies that started out more or less ad hoc are slowly coalescing into something quite new and the Energiewende, or Energy Transformation, has become world famous. The world’s policy makers are watching closely.  

But the stakes are far higher than they were a century ago. Germany is taking a huge political gamble; the transformation is already causing political rows between states, and protest over power lines, while Chancellor Angela Merkel’s own position is increasingly on the line. 

In 1983, the Germans had been one of the first countries to elect a member of the newly forming Green party to government. Around the country a few cities began experimenting with something called a “feed-in tariff” where prices were set that subsidised renewable technologies.

By 1990, according to Daniel Yergin’s The Quest,  the Greens had formed an “unlikely alliance with conservative members of the Bundestag who represented small hydropower generators in Bavaria that were frustrated they could not sell their power into the grid.” 

The alliance took advantage of the national preoccupation with reunification (the Berlin wall had come down just a few months earlier) to get a feed-in law through. Hermann Scheer, a leading Social Democrat and renewable supporter at the time, said; “The German utilities were totally concentrated on East Germany. They could not imagine how our programme could succeed and they did not take it seriously. They began to organise, but they were too late.” The law would be the very last law of the West German parliament, before the final act of reunification. 

The international renewables industry at this point was only just clinging to life. The 70s had been a time of enormous development as governments around the world reeled from the rising prices caused by two oil shocks. Politicians in both the US and Europe had begun to investigate other fuel possibilities, and for a while it had looked as if solar, wind and wave powers would be the energies of the future, with US president Jimmy Carter famously installing solar panels on the roof of the White House. But as oil prices had dropped in the 80s so had interest; by the time Ronald Reagan took the panels back off the roof governmental money had stopped flowing into renewable research and other investors were scarce.

With the 1990 feed-in law, Germany created a brand new market for renewable technology – renewable manufacturs around the world had been thrown a life ring. And a few years later in 2000 another, even stronger law went through; the Renewable Energy Act, known in Germany as the EEG.

In his study of the Energiewende, journalist Osha Gray Davidson sums up the aim of the EEG as being “to replace coal and nuclear generated electricity with power from clean, renewable sources of energy; wind, biomass, solar, geothermal and small hydropower facilities.

The target set by the law was one of the most ambitious in the world: By 2050 Germany would rely on renewable energy sources for 80% of its electricity.” Davidson adds; “There was a more immediate social goal behind the EEG as well: the democratization and decentralisation of energy production”. 

The population responded with enthusiasm, flocking to set up community energy generation centres. Davidson lovingly describes some of the generators he met, such as Eva Stegen, the director of Germany’s first clean energy co-operative, who told Davidson; “Einstein said that the way that leads into a catastrophe cannot be the way that leads out. Centralised energy was the problem. So we needed to find a new way. And that is what the EEG gave us.”

Now, as is often quoted, well over 50% of Germany’s renewable energy provision is owned by communities and individuals, rather than one of the Big Four energy companies. That has brought more money into the market – finance for renewables that might not otherwise have been available.

Explosive growth, as hoped, was the result. In 1990 renewables accounted for just over 3% of all electricity consumption in Germany. By 2000, according to figures produced by the German government, that had climbed to 6.8%. But the years since have seen that climb faster and further than ever, and in 2011 renewables accounted for an amazing 20.3% of all electricity consumption.

Their carbon emissions seem to be falling rapidly – figures from the US’s Energy Information Administration last year showed a 7% drop in one year. And this, the government says, is just the beginning. They have set themselves a target of 35% of electricity from renewables by 2020, and at least 80 by 2050. 

There is an air of excitement, even evangelism over the mission the country has set itself. “This transformation is the most important post-war project for innovation. The future success of Germany as an industrial location will depend on the success of this project.

Moreover, it is a project of and for the citizens – and that is why it will succeed,” proclaims the Federal minister for the environment. As one energy journalist recently wrote: “Whatever the case, Germans aren’t the only ones waiting for a more pro-active policy. The world is watching Germany’s Energiewende.”

But will it work out? Or is the German government in danger of putting an unbearable financial burden on its citizens, and ending up with a malfunctioning system and even higher carbon emissions? 

Let’s look at the money first. Germany’s renewables are subsidised directly by their citizens, while industry has been carefully shielded from the extra costs. The result is that German citizens pay among the highest prices in Europe for electricity (according to EU figures only the Slovakians, Austrians, Italians and Maltese pay more – the UK’s bills are actually below average).

In October the big four energy companies announced that they would be hiking the renewables surcharge still further from 3.6c per kilowatt hour to 5.5c, a change which will obviously hit the poorest hardest. “Electricity poverty” is becoming a serious political issue, and welfare organisations have estimated that about 200,000 people had their power cut off in 2011 because they could not pay the bills. As the bills continue to rise, so will resentment. 

But the fact is that this was always going to be expensive, and perhaps the German experience mirrors the experience that we will all soon have to have, as our bills mirror more clearly the cost of trying to decarbonise our energy sources. Of far more concern in the long term is the direction of the strategy itself.

There are disagreements between the federal government and the states about the direction of travel; the national government, for example, has expensive plans to build powerlines from offshore wind farms in the north right down to the south of the country but the governor there has his own plans.

There are disagreements about the infrastructure; polls so far show that Germans are almost as nervous about new power lines as they are about nuclear, with a government poll revealing that nearly 60% of the population would not accept them. There is already a backlog of powerlines that should have been built, so ambitious plans for yet more look tricky, to say the least. 

Vital plans to increase efficiency by insulating and green-fitting homes are also progressing far more slowly than they should be, at approximately 1% of homes a year rather than the target 3%, despite the fact that this is a crucial aspect of the transformation.

According to one Der Spiegel journalist: “The sad truth is that Germany spends billions on wind turbines and solar panels, only to see a significant portion of the energy lost through poorly insulated windows”. Instead billions are being spent on solar photovoltaics – far more expensive and far less efficient.  

There also controversy around another aspect. In September 2010 Angela Merkel had announced plans to extend the lives of the country’s nuclear plants, but the following year after the Fukushima disaster the German government swung a sharp u-turn and announced a rapid acceleration in the nuclear wind-down. The last nuclear power plant, they have announced, will be disconnected from the grid in 2022. 

How will this affect the Energiewende? The government says that they will speed up the deployment of renewables and that this will not be a problem. According to the Energiewende information service, set up by a German environmental charity, the nuclear phaseout didn’t increase carbon emissions in 2011, “when carbon emissions went down even further. And going forward, carbon emissions from the power sector can only go down, not up, because of the ceiling imposed by emissions trading. Germany has emissions trading, so its carbon emissions from the power sector cannot increase.”

This answer is not, however, satisfying some. As most German politicians maintain optimism about the issue some commentators ask if this can possibly work.  "Did anyone calculate how much it will cost to dismantle the nuclear power stations in Germany and build them back up again in the UK?" asks the editor of the European Energy Review. And an editorial in the Washington Post last spring asked if the world can fight global warming without nuclear power, and studied the situations in Germany and Japan.

“Perhaps, a Japanese government report claimed, Japan could still reduce carbon emissions by 25 percent of its 1990 levels by 2030 without nuclear power. Yet even if that’s true, it’s hardly a reason to let all of that existing nuclear infrastructure and know-how go to waste. The report also notes that the country could cut emissions by 33 percent if nuclear accounted for a fifth of the country’s generation, or even as much as 39 percent if Japan continued to derive a third of its electricity from nuclear.”  

Fatih Birol, head of the International Energy Agency, says, “We are worried about what happens to nuclear energy, because in the absence of nuclear energy the 2°C [climate change trajectory] will be completely impossible."

But if determination and political bloody mindedness can get this to work, then, just as a hundred years ago, there is plenty to be found here in Germany. When asked about the problem of energy storage, Hans-Josef Fell, the ‘chief architect’ of the Energiewende, told one journalist, energy storage is “not a problem… It is a task”. That is the attitude that the country brings to the whole plan – and by creating a huge chunk of community buy-in the government has cunningly ensured far more popular support than would be the case in the UK. 

Whatever the outcome, it is impossible not to feel huge admiration for the wholehearted way the Germans have plunged into this risky national adventure. Such pioneering spirit! Such a Can-do attitude! They out-American the Americans, they make the rest of us look timorous and dull. As one blogger wrote with shattering breeziness: “We probably could have it cheaper, yeah…but there is no example on how to do an Energiewende yet, so let´s provide one.”

Bibi van der Zee is the Ecologist's Political Correspondent; @bibivanderzee