Germany’s renewable energy strategy pays off

As world leaders prepared to discuss a major climate change treaty in Paris, Germany had several especially windy days, which drove the share of wind energy in the German grid above 50% and the spot price of electricity to zero, or so close to it as to make no difference.

All that’s missing to make 100% renewable energy feasible is cheap and ample storage that would help to smooth supply. That requirement no longer looks impossible.

Few countries have the political will and resources for something like Germany’s ambitious, painful and expensive energy transition programme, known as Energiewende. But, by going through with it, Germany has helped to spur the development of technology that may soon work for others without massive subsidies.

On Sunday night November 29, Germany’s wind farms produced 35.25 gigawatts of energy, an all-time record; for most of the weekend, more than half of Germany’s electricity came from wind, and it was so cheap as to be almost free:

Germany is depressing in late November: the sky is a super-efficient cloud factory in overdrive. Little solar energy is produced. In sunnier July, though, solar can combine with wind for more than three-quarters of Germany’s power. On July 25, a new record was set: a combined 78% of consumed power was provided by renewables, including hydro and biomass.

These are, of course, only temporary peaks. There are quiet, gray days when very little wind and solar energy is produced. For the year, however, Germany was on track for a 33% renewable share even before last weekend’s wind surge. The jump from 27.4% last year shows that Germany’s 2020 goal of 40% may be achieved earlier than planned.

Only a year ago, critics of Energie­wende said it had failed, claiming that Chancellor Angela Merkel had derailed it by pledging to give up nuclear power in the wake of the Fukushima disaster.

Phasing out “clean” nuclear energy drove up the use of Germany’s primary source of traditional energy – the dirtiest one, coal – and, for a few years, the country’s carbon emissions actually increased. The trend ended last year, however, as emissions dropped almost to the 2009 level, the lowest since 1990. Constantly increasing solar and wind installations – Germany now has about 45% of Europe’s total wind generation – were the main reason for that.

That growth was fuelled by massive subsidies. Last year, German households paid €23-billion, about €572 a family, in feed-in tariffs, or surcharges on energy bills that guarantee “clean power” producers can cover their costs.

The results were, in the sceptics’ eyes, less than optimal. Though solar generation accounts for 19% of Ger­many’s total capacity, it produces just 5% of the country’s electricity. For wind, these shares are 18% and 8%, respectively. By contrast, lignite (so-called brown coal, which has high carbon dioxide emissions when burned) accounts for 12% installed capacity but 25% of electricity output.

Cost and the unreliable supply are Energiewende sceptics’ biggest problems with wind and solar as replacements for coal- and gas-fuelled power plants.

In Italy and Spain, the development of wind and solar has almost completely stopped after reaching about 25% of total supply: these countries cannot afford to subsidise further expansion and power companies cannot see these sources replacing efficient, reliable traditional production. The United Kingdom, too, appears poised to curb wind and solar with subsidy cuts.

In Germany, there’s continued public and political support for the subsidies. They were slightly reduced in 2015, but they will increase next year as wholesale energy prices fall (the total energy bill for the typical family will thus remain the same).

There’s a good reason the Ger­man government feels confident about pushing on with renewables. Energy storage may soon be able to level out the weather-related supply jumps at prices that will make it attractive to energy companies.

Europe’s first commercial battery storage system went online in Germany a little over a year ago and more projects have since joined it. It’s a hot market. Earlier this month, investment bank Lazard published its first analysis of the costs of various storage technologies, and it showed that for some of them costs were rapidly declining. The bank said the energy storage industry was at an “infection point” similar to the one renewable energy saw eight years ago.

Even without subsidies, some storage technologies are already cost competitive with some conventional alternatives (for example, lithium-ion batteries for some power-grid support applications). Other storage technologies are close to being cost competitive in other applications, and costs are expected to decline in coming years.

Germany has an incentive scheme for households that want to install storage systems combined with solar panels (millions of homes have them). The government planned to scrap the support starting next year, but has apparently decided against it. There’s also a research and development initiative for energy storage.

Energiewende has been a brave move. The German government started out with a lot of unknowns, and the decision to close down nuclear plants reshuffled the deck in unpredictable ways.

Energy companies have suffered; last year, E.ON, the country’s biggest power supplier, posted a net loss of €3.2-billion, the biggest in its history, and decided to split in two, one part focusing on renewables and the other on fossil fuels. But it’s clear now that the programme has been a success and that, as long as there is a well-defined goal and a determined effort to reach it, the necessary technology will present itself.

The most heated arguments at the COP21 climate change conference in Paris, which got under way on Monday, will be about how to split the cost of reducing emissions among richer and poorer countries.

Germans have already answered the question by unilaterally shouldering the energy transition burden. It’s a matter of resolve, and the degree of resolve required goes down each year as technological advances make renewable energy an economically viable alternative to fossil fuel. – © Bloomberg

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