Germany in transition

From an economy addicted to coal and nuclear energy, Germany is fast transforming into one driven by renewables. Its aim is to demonstrate to the world that growth and decarbonisation can go hand in hand. Chandra Bhushan and Ankur Paliwal travel to Germany to understand how it is doing so and what it will take to achieve this vision

 
By Ankur Paliwal, Chandra Bhushan
Published: Thursday 11 June 2015

Germany in transition

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“Noise from wind farms is actually music to our ears. We earn more money.” This is how Christian Carstensen, a resident of Ellhöft village on the northern tip of Germany, explains people’s tolerance of the wind turbines set up next to their houses. He himself has invested in wind farms and a solar plant. Ellhöft is in Schleswig-Holstein state that has the highest density of wind turbines in Europe. Wherever one goes in the state, wide plains dotted with wind turbines dominate the view. In most villages and towns the common sight is glittering rooftops, covered with solar panels. People in Germany are pooling in money and setting up wind farms, especially in the windswept north, or solar panels and selling electricity to utilities because the government guarantees them premium tariffs for 20 years.

More than half the renewable energy capacity in Germany is today installed and owned by individuals and farmers’ cooperatives, not big power companies. Close to 1.3 million households are producing energy using solar photovoltaic panels. In the south, where the sun is relatively stronger, the state of Bavaria alone has more installed solar photovoltaic (PV) capacity than the US. Germany is expanding its renewable energy capacity at a staggering pace. In wind installation capacity it now beats all countries other than China and the US.

Germany, the most populous country of the European Union, is carrying out the biggest and the fastest transformation in the world from coal and nuclear energy to clean energy. The official word for this transition is “energiewende”, which in English means energy transition. It is the buzzword in the country.

In the capital city Berlin, energiewende can be seen written on hoardings close to bus stops and train station. Newspapers, TV channels and radio stations are excitedly debating energiewende. People are largely aware of the word. Bernhard Elias publishes works of artists but knows that energiewende is about rethinking the supply and use of energy.

“It is about renewable energy, efficient transport and energy efficiency,” says Elias. He cycles to work and is planning to have energy-efficient lighting in his office on Berlin’s Brunnen Street. Energiewende is also a popular agenda in the general elections scheduled for September 22.

Germany’s targets for 2050
What started this energy transition in Germany? The term “energiewende” was coined in 1980 in a study by the Institute for Applied Ecology in Germany. The groundbreaking study was perhaps the first one to argue that economic growth is possible with lower energy consumption. In fact, Germany was the first country to introduce the concept of feed-in-tariff (FIT) in 1991, even before the Rio Earth summit.

FIT is the high price paid for per unit of electricity generated through renewable energy sources. But it was not before 2000 that FIT was formally introduced in legislation with the passage of Renewable Energy Act, popularly known as EEG. The law specifies that renewables have priority on the grid and that investors in renewables must receive sufficient compensation to provide a return on their investment irrespective of electricity prices on the power exchange.

Then in 2001, the combined majority of the Social Democratic Party and Green Party decided to phase out nuclear power by 2022. The country introduced another piece of legislation to propel energy transition, Renewable Heat Act, in 2009. Its aim is to increase the share of heat generated through renewable sources to 14 per cent by 2020.

Installed capacity of renewableThe next year in 2010, Germany set ambitious targets to have 80 per cent share of renewable energy in the total electricity mix by 2050; to reduce power consumption by 25 per cent below the 2008 level by 2050; to reduce primary energy consumption by 50 per cent below 2008 levels; and to have a carbon-neutral economy by 2050.

But by then Chancellor Angela Merkel-led Christian Democratic Union government developed cold feet over phasing out nuclear power. It passed a law to prolong the life of nuclear plants till 2040. In a few months, though, it had to roll back its decision due to public outcry after the Fukushima disaster in March 2011.

In June that year the phase-out plan was passed with 85 per cent majority in Parliament and immediately eight nuclear power plants were shut down. At present, only nine plants are in operation; they will be shut down in phases by 2022. Reaffirming its targets, the German Parliament unanimously voted to transform its energy sector from nuclear and coal to renewable within next four decades. Energiewende was back into the political system and this time with full force.

The successful FIT scheme has led to the tremendous growth of renewables. Its share in electricity has jumped from 7 per cent in 2000 to the current 23 per cent—among the highest in the world. Unlike other countries where hydropower constitutes the bulk of renewables, in Germany it is solar and wind power.

Germany has onethird of all the solar PV installed in the world. For the past 10 years it has been a net exporter of electricity. This holds true even after eight nuclear power plants were shut down in 2011.

Share of electricity from renewables is rising

The FIT regime has also led to an enormous decline in the cost of key renewable energy technologies, solar PV and wind turbines. The cost of power generated by wind and solar energy has decreased by 50 per cent and 80 per cent respectively since 1990.

And it continues to decrease. According to an estimate by Agora Energie wende, a Berlin-based policy think tank working on Germany’s energy transition, by 2015 it would be possible to generate electricity by newly built wind and PV plants at a cost of 7-10 euro cents per kilowatt-hour (kWh).

Then, it would be on a par with power from new gas and coal plants. “In good locations like Bavaria in south Germany FIT for solar PV has fallen to about 10 cents per kWh.

Electricity from wind in north Germany is possible at about 7 cents per kWh,” says Patrick Graichen, senior associate with Agora Energiewende. EEG, however, ensures that onshore wind farms will continue to get 7-10 cents for every unit of electricity sold and solar PV plants 12-18 cents for 20 years.

Wind and solar have emerged as clear winners among the renewable energy technologies. Wind alone accounts for 8.5 per cent of the total energy produced in the country and solar, 4.5 per cent. “Other renewable sources are either more expensive or have limited potential for expansion,” says Graichen. For example, biomass energy cannot have a big share because agriculture and forest are limited in Germany and the use of biomass for energy competes with other potential uses such as food and paper production. Besides, biomass is an expensive source of energy. Unlike solar and wind, its cost has only increased over the years.

Wind and PV power will be generating 70 per cent of the renewable energy in Germany by 2022, according to the Federal Network Agency, the regulatory authority on the electricity, gas, telecommunication, post and railway networks. But that would be possible only if Germany meets the emerging challenges. Rising cost of electricity has begun to pinch citizens, who are footing the bill for this transition by paying renewable surcharge. Besides, Germany is yet to have enough transmission lines and storage to absorb its increased capacity.

The great energiewende experiment has entered a crucial phase.

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