Energy Musings - July 19, 2024

Germany has been hailed for the success of its Energiewende renewable energy push and decarbonizing its economy. The progress has come at a cost and now Germany needs to change its subsidies.

Renewables Subsidies Meet Budget Constraints

Germany is leading the European green energy transition.  The transition is known as Energiewende (German for “energy turnaround”).  While the effort is thought to have started at the end of the last century, a review of the green movement’s history in Germany shows it dates from the energy crisis of 1973.  That year’s Arab oil embargo inflicted significant pain on Germans.  In response, the nation embraced shifting its energy system to nuclear power and away from a dependence on hydrocarbons. 

By the time the 1980s opened, environmental concerns emerged as a powerful political movement across Europe.  A book, Energie-Wende: Wachstum und Wohlstand ohne Erdől und Uran (Energie-Wende: Growth and Prosperity Without Oil and Uranium, written by three Freiburg-based activists who had worked with America’s Amory Lovins, a renewable energy pioneer, coined the term that would eventually become the mantra for Germany’s Green Party and left-wing groups.  Energiewende became the guiding philosophy behind Germany’s energy policy. 

The green movement dovetailed with growing public opposition to nuclear power.  Nuclear power had been seen in the 1970s as the next energy source after hydrocarbons.  In Europe, in response to that era’s energy crises, Denmark began experimenting with wind energy.  France turned to nuclear power.  And Germany adopted the mantra “out of oil and into nuclear.” 

Lutz Mez, a political scientist at the Free University Berlin, told Clean Energy Wire that the push to develop nuclear power and renewable energies had a perverse impact on Germany’s energy future.  “It caused a lot of Germany’s best energy specialists to leave the conventional energy sector where they had worked in gas and oil,” said Mez.  “They opted to try their luck experimenting with renewables.  This is how a lot of important innovation in solar PV and onshore wind happened in Germany.” 

The loss of those oil and gas specialists may have hurt Germany’s ability to develop cleaner and more efficient hydrocarbon options.  Such an evolution might have produced a German energy system with a different cost structure for the country’s citizens and businesses.  It could have also created a cleaner environment. 

What it did was lead to Germany dominating the global technology for solar PV starting in the 1990s.  It assumed the leadership role of the U.S. which had invented and perfected the early solar PV technology during 1960-1990.  Germany was the global leader until about 2015 when China could produce less costly solar panels and rapidly capture the global market with its cheap labor, energy, and raw materials.  The key to China’s success was its ability to steal U.S., Japanese, and German solar technologies and marry that with cheap labor and energy. 

Germany’s Renewable Energy History

In 1991, with the unification of East Germany and West Germany, the Christian Democratic Party, which Helmut Kohl headed, was elected to lead the new government.  The center-right government enacted the country’s first feed-in tariffs to encourage the development of renewable energies.  By 1998, Khol was out as citizens voted in a coalition government of Social Democrats and the Green Party.  The new leaders prioritized “ecological modernization” focusing on climate protection, renewable energy expansion, energy efficiency, and sustainability measures.  This focus resulted in policies promoting the phase-out of nuclear energy and the promotion of investment in renewables. 

The chart below shows Germany’s per capita carbon emissions from 1800 to 2022.  Per capita emissions peaked in 1979 at 14.3 tons and fell to 11.0 tons by 2000.  Over the past 22 years, those emissions fell by an additional three tons to eight tons per capita.  Like many industrialized countries, Germany’s carbon emissions are lower because of the switch from coal to natural gas for generating power and a steady improvement in vehicle emissions. 

Germany has successfully reduced its carbon emissions but not at a faster rate than the U.S. but at a higher cost.

In 2020, Vaclav Smil, emeritus professor at the University of Manitoba, authored an article examining the progress and cost of Germany’s decarbonization effort compared to the United States during Energiewende’s first 20 years.  Smil concluded that Germany had not achieved greater decarbonization than the United States but the effort cost German citizens much more. 

Smil’s data showed that in 2000, 84% of Germany’s primary energy came from hydrocarbons and 3% from renewable sources.  Twenty years later, the split was 78% to 15%.  At that rate of progress, Smil noted, hydrocarbons would still provide Germany with 70% of its primary energy in 2050.  For the United States, primary energy data for 2000 showed an 86/6% split between hydrocarbons and renewables.  The split moved to 80/12% by 2019.  Both the U.S. and Germany experienced similar six percentage point reductions in hydrocarbon’s contribution to the countries’ primary energy. 

When Smil reviewed the data for electricity generation, Germany fared better.  Between 2000 and 2019, the hydrocarbon shares of generation fell from 60% to 47% while renewables’ share rose from 7% to 41%.  The United States did not do as well.  Its hydrocarbon shares of generation only declined from 71% to 63% over 2000-2019.  The renewables’ share doubled from 9% to 18%. 

Several points emerge from Smil’s analysis.  First, Germany was quite successful in cutting its hydrocarbon use in generating its electricity.  Secondly, Germany’s progress in reducing emissions from generating electricity had very little impact on the nation’s primary energy split between hydrocarbons and renewables.  Finally, Smil pointed out that between 2000 and 2019, Germany’s electricity prices doubled.  He also noted Germany’s power price in 2019 was 34 cents per kilowatt-hour (ȼ/kWh).  It was 50% higher than the power price in France (22ȼ/kWh), and nearly three times the U.S. price (13ȼ/kWh).