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Energiewende

IMG_1005Energiewende (the name given to Germany’s energy transition) has become the latest German word to enter the English language. There are a host of reasons for languages to “loan” words to one another: to plug a specific lexical gap; to convey a concept that originated in one language and has since become relevant to a wider audience; to retain an association with the birthplace of an idea or innovation, or simply because a single “loanword” is less clumsy. Some of the loanwords English has naturalised from German, in many cases with slight modifications, have gone on to enter everyday usage, such as rucksack and kindergarten. Many, such as blitzkrieg or schadenfreude, are widely understood, but as a result of their specificity are not exactly among the most frequently used lexical items. Now a new term has successfully crossed over from German to English: Energiewende.

Read on to find out more.

  • What is the Energiewende?
  • What progress has been made?
  • How much will it cost?
  • Who is paying?
  • What are the benefits?

What is the Energiewende?

The term Energiewende is used to describe the switch in Germany’s energy economy from nuclear power and fossil fuels to renewable energy sources, combined with a simultaneous programme to drive down demand and dramatically improve energy efficiency. The Renewable Energy Act (Erneuerbare-Energien-Gesetz, or EEG for short) was passed in 2000 and signalled the start of a boom in renewables which has seen generation leap from under 40 terawatt hours in 2000 to around 160 terawatt hours in 2014. The Energiewende takes a three-pronged approach:

  • increase the share of renewables in the energy mix
  • phase out nuclear power and decrease reliance on fossil fuels
  • drive down demand for energy

 

What progress has been made?

In 2014, roughly 26% of Germany’s energy was supplied by renewables. The renewable sources that make up an ever-increasing portion of Germany’s energy mix are wind, both off- and onshore, ground- and roof-based solar, geothermal, biomass, bio-waste and hydropower. Germany had more installed solar capacity in 2014 than any other country in the world (approaching 40 gigawatts). As far as installed wind power capacity is concerned, Germany was ranked third in 2014, behind China and the United States, with just over 40 Gigawatts of capacity. Today’s wind turbines, measuring in at more than 100 metres high, are able to generate 40 times the power of the earliest turbines in the 1990s. Installed solar capacity is also approaching the 40 Gigawatt mark, enough to meet more than half of peak demand at the height of summer. Solar installations have benefitted greatly from a 74% fall in prices for solar modules in less than a decade.

At the same time as the installed capacity of renewables is being ramped up, nuclear power is being phased out completely by 2022. Germany has had a difficult relationship with nuclear power for many years now and this decision was as much political as it was economic. A large section of the population has never been convinced by the nuclear industry’s claims and are sceptical regarding the true, long-term costs associated with generating electricity in this way. The country’s reliance on coal, which is in plentiful supply in Germany, is set to be diminished in the second stage of energy transition (from 2020-2050).

Parallel to the measures taken within the power generation sector there is an equally concerted effort to drive down energy demand, especially in the transport and housing sectors. After all, about 80% of the energy consumed in Germany goes to heating and transportation. Expect to see sharp increases in district heating networks supplied with waste heat energy from power stations, and continued investments in public transportation, rail and e-mobility.

How much will it cost?

Unsurprisingly, it is difficult to put an exact figure on the total cost of the Energiewende, particularly as technologies develop, capacity increases and prices change. Any discussion of cost also has to factor in the overall economic benefits associated with the energy transition process (new jobs, profits from exporting newly developed or more efficient renewable technologies, business attracted to Germany as a result of its improved international standing, etc.) It also has to be remembered that the subsidies provided to renewables (e.g. feed-in tariffs), whilst sizeable, are lower than the subsidies provided to the nuclear and fossil fuel industries over the last thirty years. Nevertheless, a figure of €200 billion over the next ten years has been put forward by the Institute for Economic Research (IW) in Cologne and is generally accepted as realistic.

Who is paying?

One of the knock-on benefits of installing a greater generating capacity from renewable sources has been an effective democratisation of energy production. Local communities and SMEs have been leading the charge so far, with smaller-scale cooperatives and citizen groups owning a little under half of the installed capacity. Institutional and strategic investors are the next largest group, owning around 40%. The smallest group by far are the large energy suppliers, with an ownership share of roughly 12%. Large power stations are very expensive and only a few entities can afford to develop them. In contrast, wind turbines and solar panels are within the economic reach of villages, towns and mid-sized businesses, all of whom value their future energy independence almost as much as they value the returns on their initial investments.

Still, despite the price of renewable electricity falling (solar and wind are cheaper than the latest generation of nuclear) and investment from a variety of sources remaining strong, a programme on this scale needs considerable central government funding if an energy distribution and storage infrastructure capable of underpinning the Energiewende is to be delivered. Germany’s federal government introduced a renewable energy levy (EEG-Umlage) for exactly this reason, to ensure that although energy generation may become more and more decentralised, energy distribution should become more efficient (e.g. via smart grids and improved storage technologies).

What are the benefits?

Apart from becoming more energy independent, increasing net energy exports to neighbouring countries and hitting carbon dioxide emission reduction targets, the Energiewende is hoped to provide Germany with a sizeable economic boost. As early as 2011, the 150,000 jobs in the country’s coal mining and conventional fuel sectors stood in contrast to the 370,000 jobs in the renewables sector. As technologies improve, Germany is positioned to take advantage of its position as a world leader. Germany may have paid high prices as a pioneering early-adopter, but what were once identified as future economic benefits are now materialising as today’s economic benefits. Taking solar as an example: the relatively high feed-in tariffs required to kick-start the Energiewende are due to start tapering off from 2020, while the earliest solar plants will continue to generate electricity, creating a benefit of free legacy solar power. The feed-in tariffs were reduced with each subsequent wave of installations, so this cost element is set to decrease over time.

 

What do you think? Let us know in the comments section below!
 

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