is in the middle of one of the most audacious and ambitious experiments a major
industrial economy has ever attempted: To swear off nuclear power and run
Europe’s largest economy essentially on wind and solar power.
There’s just one problem — it’s not really
The energy transformation, known as
“Energiewende,” was meant to give Germany an energy sector that would
be cleaner and more competitive, fueling an export-driven economy and helping
to slash greenhouse-gas emissions. On that count, the policy has floundered:
German emissions are rising, not falling, because
the country is burning increasing amounts of dirty coal. And electricity costs,
already high, have kept rising, making life difficult
for small and medium-sized businesses that compete against rivals with cheaper
Less than three years after Berlin embraced
its new energy policy, a shifting global energy landscape is causing a rethink of the Energiewende
inside and outside Germany. Business groups representing small and medium firms wring their hands over Germany’s high energy costs while
Brussels frets that Berlin is subsidizing big German industry with rebates on
inflated energy bills. Foreign leaders, and plenty of pundits, blame the Energiewende
for Europe’s inability to answer Russia’s invasion of Ukraine. Utilities, meanwhile, are
bleeding money, slashing investments, and shutting down power plants.
German politicians, meanwhile, can only
look across the Atlantic and shake their heads. Washington has no formal or
comprehensive energy or climate policy, but the United States’ natural gas
bonanza has led to cheaper power prices and falling greenhouse-gas emissions
in recent years. Berlin has reams of pro-renewable energy policies, but prices
and emissions are climbing. Germany’s energy dilemma is particularly important
now, because the European Union is trying to sort out its own climate and
energy policies through 2030. The choice, essentially, is whether the Europe
wants to be more like Germany, or less.
Dieter Helm, an energy economist at Oxford
University who has advised the European Commission, said German leaders assumed
that oil and gas prices were going to continue to increase, which meant that
developing cheap supplies of renewable energy would give their companies a
competitive advantage over the United States. That assumption has turned out to
be almost entirely wrong. Flat oil prices, America’s shale gas revolution, and
the stubbornly high cost of renewable energy have instead left German firms
reliant on more expensive forms of energy than their U.S.-based competitors.
“Now it’s Europe who has expensive energy
and America which has cheaper energy,” Helm said.
Germany launched the Energiewende project
in earnest in the summer of 2011, a few months after the disaster at Japan’s
Fukushima nuclear power station sealed the fate of Germany’s fleet of nuclear
reactors, which were providing about one-quarter of the country’s total
electricity. The German government decided to close down all the nuclear power
plants by 2022 and replace them with renewable energy facilities. The official
goal is the most ambitious among big countries: to have renewables provide 80 percent
of the country’s energy by 2050. Germany’s green push has been building for
decades, fueled by the continued electoral strength of its environmentalist
political parties. Even today, Energiewende enjoys broad popular support in
Germany: Over the weekend, tens of thousands of people took to the streets
across the country to demonstrate in favor of renewable
“I think it is going to continue somehow,
because it has a long-standing tradition,” said Kirsten Westphal, an
energy expert at the German Institute for International and Security Affairs.
She said that Russia’s energy bullying of Europe could even provide more
support for Germany’s embrace of renewable energy, which would give Berlin a
way of reducing the country’s dependence on imported Russian natural gas.
By some measures, Germany’s green energy
push has actually been quite successful. It has more solar power capacity
installed than any other country, and the third-most wind power capacity in the
world, even though it’s not a particularly sunny or windy country. Renewable
energy so far this year has provided more than one-quarter
of Germany’s electricity, compared with about 13 percent for the United States,
and is the only source of power with year-on-year growth. Champions of
Energiewende also point to the hundreds of
thousands of jobs they say that the renewable-energy push has created,
contrasting Germany’s healthy growth and employment record since the financial
crisis with blighted neighbors.
But it hasn’t come cheaply. Renewable
energy has been pushed so relentlessly, in a country not blessed with renewable
resources, that the bill is getting enormous. This year, German consumers will
spend about 23 billion euros propping up solar and wind power, up from 13
billion euros just two years ago. That comes through a government-mandated
surcharge on electricity bills for residential consumers and small and
medium-sized businesses. While the government once said the surcharge would
never exceed 35 euros per megawatt hour, this year it will top 60 euros per
megawatt hour. Big, energy-intensive firms are exempt from the renewables
surcharge, which is the reason that European Union competition officials are
looking into the question of unfair state aid for those firms. Meanwhile,
regular households and small and medium sized businesses have little choice but
to pay the higher bills.
That, in turn, appears to have taken its toll on
an economy that lives and dies by exports. IHS, the energy consultancy, said in
a recent report that German energy
policies have cost the German economy 52 billion euros since 2008 because of
the impact higher electricity prices have had on smaller firms. Sigmar Gabriel,
Germany’s energy minister, and the man in charge of making the Energiewende
happen, raised eyebrows earlier this year when he warned of the risk of
“de-industrialization” if Germany continues on its current path.
So what can Germany do? In the near term, the
country is trying to rein in the runaway cost of renewable energy by scaling back subsidies and focusing
on the most cost-effective forms of renewable energy. That means forgetting
grandiose dreams of offshore wind farms in the Baltic powering industry in the
“It’s not a make or break moment, but it’s
certainly an issue of slowing things down,” said Westphal.
Germany is expected to present the detailed
proposals for the new renewable-support scheme in April. At the same time,
Berlin is trying to figure out how to spread the cost of the Energiewende more
fairly among consumers and businesses, without kneecapping the industries that
drive the economy.
“Policymakers are trying to find a balance:
They don’t want to make industry uncompetitive, but on the other hand, the cost
and the speed of the renewable-energy deployment exceeded everybody’s
expectations,” said Anna Czajkowska, a European policy specialist at
Bloomberg New Energy Finance, an energy consultancy.
But more broadly, calls to jettison or
fundamentally change the German energy transformation are falling on deaf ears.
Some, such as energy guru Daniel Yergin and IHS, call for Germany to embrace
domestic natural gas, as in the United States, as a way to curb emissions,
shave energy costs, and bolster economic growth and employment. But Germany,
unlike some Eastern European countries such as Romania, Poland, and Ukraine,
has been loath to seriously consider hydraulic fracturing as part of its energy
policy. Indeed, for more than a decade, natural gas has been an afterthought in German energy
policy, despite evidence that coal is becoming the biggest beneficiary of the
current German energy mix. Even the prospect of U.S. natural gas exports to
Europe only summoned a lukewarm response this month from German Chancellor Angela Merkel.
Others, including Dieter Helm, wonder if nuclear power will
regain favor, given both the cost of the current energy transition and
Germany’s dependence on imported Russian gas (and coal). But unlike Japan,
which is on course to restart some of its nuclear reactors just three years
after Fukushima, there appears to be little political appetite in Germany for
“Most of German society supports the
phase-out of nuclear power, and deciding to change course would really be
against the will of the majority of the population,” said Czajkowska.
Instead, there are other options on the table.
They run the gamut from reforming the electricity market to make it worthwhile
for Germany’s big power companies such as RWE and EON to keep running the power
plants that provide base load power, to improving energy connections between
One of the biggest props to German hopes,
though, is the one least likely to materialize: wholesale reform of the
European emissions-trading scheme, which slaps a price tag on emissions of
carbon dioxide, and which is meant to make dirty energy (like coal) less
attractive than cleaner energy (like gas and wind). Since its inception, the
European carbon market has been plagued by over supply: simply put, polluting
pays. And that means that, for now, dirty coal is becoming
more important in Germany, and makes more economic sense than natural gas.
“From a climate change
point of view, Germany is perceived as the ‘green man’ of Europe, but it’s actually
the ‘dirty man’ of Europe,” Helm said.
Carsten Koall – Getty