Germany's Green Revolution Falls Short But Cost More

German policy at times seems born from a national sense of noblesse oblige among a people who still carry a burden of guilt for the sins of their grandparents. As such, the powerful nation feels a near manic responsibility to be the enlightened leader of the EU. This progressive mentality has spilled over into energy policy. Lost in the noise of the migrant crisis has been Chancellor Angela Merkel’s other landmark transformational initiative: the charge to move Germany’s power grid off of fossil fuels and nuclear power toward green energy. Frau Merkel sees Germany’s Energiewende, or energy revolution, as her signature economic legacy. And at first glance, it appears to be moving along successfully. The New York Times’ Thomas Friedman has gone so far as to hail it as “a great contribution to the stability of our planet and our climate.”

It would be nice if Mr. Friedman’s hosannas were true. But a closer look at the accumulated data shows that Germany’s green transformation has fallen short of its idealistic goals. More to the point, the missing of key targets comes at an exorbitant cost to the German consumer, with negligible impact on CO2 emissions.

First some genuine Energiewende achievements are worth noting. Between 1994 and 2015 Germany increased its number of wind turbines over 12-fold from 2,000 to over 26,700. This puts the total capacity for wind-generated electricity at an impressive 35,000 megawatts. The expansion into solar has been even more laudable. In 2000 solar power capacity was just 114 megawatts. By 2015 that number increased an eye-popping 320-fold to over 44,000 megawatts.

But installed capacity and actual output are not the same, especially when it comes to green energy which, by its very design, is subject to the whims of nature. Scan headlines and one will find cheerful stories of Germany getting north of 70 percent of its power from renewables on this day or that. Though useful as proof-of-concept anecdotes, such events are anomalies. The reality of output versus capacity is less encouraging.

Power generation from renewables fluctuates. The winds do not always blow nor does the sun always shine. The unpleasant reality for green advocates is that output consistently falls well short of capacity. Taken as a whole, in 2014 for example, Germany’s wind and solar installations operated below 20% of total capacity 75% of the time, creating instabilities in the power grid requiring diligent monitoring and interventions to maintain the grid’s enviable reliability. In 2016 renewables did account for an impressive 32% of electricity consumption. Though this puts Germany as the leader of green energy pioneers, it still means that 68% of electricity comes from traditional, and thus dirtier sources, like lignite-burning coal plants.

After the 2011 Fukushima accident, Frau Merkel threw a major obstacle in the way of green energy expansion shutting down eight nuclear reactors, removing an important piece to the power puzzle. Germany hopes for a complete phase-out of nuclear power by 2022. Therefore, renewables shortfalls need to be covered by hundreds of interventions each year using more traditional fossil fuel-powered generation—coal, oil, and natural gas—to keep the power supply stable. In fact, Germany has opened over 10 Gigawatts of new coal-fired power plants in the last five years.

The German renewables industry is propped up by massive government subsidies established by the 1991 Electricity Feed-In Act and in force until 2020. The law mandates the grid must first draw its power from renewable sources (when available) and those green providers, many of them private citizens with solar panels on the roofs of residences, barns, etc., must be compensated in order to earn a favorable return, regardless of the going rate on the power exchange. Utilities are often compelled to buy power at above market prices, passing this enforced premium on to the consumer. These contracts to buy power from so-called “prosumers” at well above the prevailing rate are twenty-year binding commitments, meaning they will not reach expiration until the 2030s. As such, the cost of electricity is so high that many Germans call their energy bill their “second mortgage.” In 2004 residential electricity was about 23 cents (U.S.) per kilowatt-hour; by 2015 it was 35 cents. A significant portion of this cost increase stems from a “renewable energy surcharge” added to electricity bills to cover the price tag of those key green subsidies. Given the whimsical nature of power generation as dictated by weather, utilities are sometimes faced with too much prosumer flow which they must turn away or overload the grid—yet they still must pay for it. The green energy surcharge alone is nearly 70% of the average total electricity bill in the United States. This has real impact. Every year for the past six years some 300,000 Germans have had their electricity shut off because they were delinquent on their bills.

It’s not just German consumers who suffer. Electricity costs for commercial use have risen 60% over the past five years. In a nation in which one fourth of its economy is driven by a power-thirsty heavy industry, the impact profitability is self-evident.

And yet Germany’s average CO2 emissions have remained the same for the past decade as the loss of cleaner nuclear output must be made up in dirtier coal-powered plants when renewables fail to provide the power needed. In fact, in 2015 and again in 2016 greenhouse gas emissions increased. Yet, wasn’t lowering Germany’s carbon footprint the whole goal of Energiewende to begin with? That seems like an awful lot of moving the puzzle pieces around to arrive at the same picture.

No nation in the EU is better positioned than Germany to lead a green energy revolution. But the data shows that many years of aggressive government activism has not yet led it into the green promised land that Messrs Friedman and others have touted. Renewable power generation continues to be hit-and-miss depending on natural conditions, and German consumers pay the highest utility bills in the developed world to finance a green agenda that so far has had more impact on unemployment and utility bills than CO2 levels. The world may eventually achieve the self-evidently admirable reality of affordable, safe, and environmentally friendly renewable energy that Frau Merkel and progressive editorial pages envision. And Germany has clearly made remarkable strides in that direction. But the numbers tell us that there is still a long way to go before we see impactful realization beyond the enrichment of green entrepreneurs and Chinese solar panel manufacturers. Fossil fuels, as Germany confirms, are still the cheapest, most reliable, and abundant sources of energy and will be for the foreseeable future. Before the United States, a nation awash in proven reserves of 35 billion bbls. and 324 tcf. of cheap oil and natural gas respectively, embarks on its own version of Energiewende as many progressives here would like, perhaps the full measure of the German experience, especially the high cost and economic upheaval in exchange for negligible environmental impact, should be examined more closely.

Brad Schaeffer is an energy trader and author. His World War II novel "Of Another Time And Place" (Post Hill Press) will be published in spring 2018.


What's Your Reaction?