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The German Energy Gamble

The Ecologist’s political writer, Bibi van der Zee, asks whether the German’s energy policy is a crazy punt, or an example to be followed by other states.

There is an air of excitement, even evangelism over the mission the country has set itself

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.
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