Germany Energy Transition Confounds Critics

At the first session of the Wharton Green Business Forum on December 3, (2014), Dr. Georg Maue, First Secretary of the Embassy of the Federal Republic of Germany for Energy and the Environment and formerly an official of the Ministry of the Environment, described the genesis and the progress to date of Germany’s Energiewende, the ambitious program launched in the early 2000s to increase the percentage of renewable energy consumption.  There in substantial support in Germany for green measures such as conservation and renewable energy.  Nevertheless, the Energiewende had numerous domestic criticis and has attracted criticism from outside, as well, as the costs of electricity from renewable sources has driven electricity rates higher.  Critics point out that high Feed In Tariffs in Germany overstimulated the market for wind and solar, which have been installed at a fast clip to take advantage of these policies, which are now being modified.  Nevertheless, Dr. Maue pointed out, the fact of high demand in Germany is one of the factors which had led to the sharp decrease in the unit cost of solar panels worldwide, from which all countries are now benefiting.  Also, he pointed out that while per kilowatt charges are high in Germany for most ratepayers (with certain types of businesses exempt for competitiveness reasons), Germans spend roughly the same percentage of their income (about 2%) on electricity as consumers in the US.  This is because per capita  electricity consumption in Germany is lower, partly due to ambitious programs to improve the efficiency of buildings.

Efficient buildings and a growing installation of renewable energy sources are two parts of the three-part Energiewende.  The third is building flexible and powerful grids which make possible the full integration of energy from renewable sources.  This is a key element missing in the US, where in most places, developers of renewable energy sources are in some kind of conflict with local utilities over how to integrate these power sources.  It’s another instance where investing in infrastructure is key to progress.

Contrary to predictions before it’s launch, in its first year, Germany’s Energiewende did not a) increase spot market electricity prices (they dropped 30%), b) increase CO2 prices (they dropped 60%), c) cause an increase in greenhouse gas emissions, or d) impact Germany’s status as a net energy exporter.  As of 2013, the country is on track to achieve by 2020 a) a reduction of fossil fuel imports by about Euros 22 billion, b) creation of approximately 500,000 new jobs, c) creation of a surplus of CO2 allowance, and d) reduction in the projected national debt by Euros 180 billion over what it would have been without climate protection measures.

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