Green Germany is a blog in English about the German Energiewende, or Energy Transition.

Energy Security and the Energiewende

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For some time, the big electricity firms in Germany have been in trouble. In 2013, RWE wrote its first losses in 60 years. E.on has cut staff by a third. They have been the losers of Germany's “Energiewende”, the energy transition that aims to generate 50 percent of Germany's electricity needs from renewable sources by 2030. To drive the transition, Germany is using a feed-in tariff (the “EEG”) that guarantees a fixed price payment to renewable energy generators. The result has been a significant accumulation of distributed solar and wind electricity-generating capacity.

This increase in renewable electricity generation has resulted in a drop in the wholesale price of electricity, and has squeezed the profit margins of the big traditional electricity producers. The wholesale price has dropped so much that it provoked an investigation by the European Commission's competition unit, that the feed-in tariff payments were in some way a form of state-aid. Many of Germany's high-tech flexible gas-fired plants have become no longer economical to run, and baseload generators such as coal are also becoming less profitable. As demand has remained constant, this has provoked the question of whether energy security can be guaranteed under the current system.

The Merit-order effect

The tendency of renewables to lower wholesale electricity costs is known as the "merit-order effect", a term that comes from the way that electricity is bought and sold on the “spot market”, which in Germany is at the EPEX exchange in Leipzig:
At 12 noon each day, an auction each for the 24 hours of the following day takes place... The spot market price for each hour is then determined by the marginal plant that is needed to satisfy electricity demand in that respective hour. (The Merit Order Effect of Wind and Photovoltaic Electricity Generation in Germany p. 7)
The day is divided up into hourly chunks, as demand and supply can vary greatly over one day. The key part of the spot-market is that it is the power-generator with the lowest marginal costs that is the first to meet the supply, so that customers can get the lowest price for their electricity. This is the “merit order” and it is the renewables who are first in line. When renewables are producing electricity, they are the ones to receive the payment on the spot market, while the rest of the power plants are left to stand idle, increasingly unable to recoup their operating costs.

The story is made more complex, however, as the market is not entirely determined by supply and demand, as the EEG guarantees small-scale electricity generators a fixed-in tariff rate for their electricity. This rate is the same, whether the spot market price is higher or lower than the tariff amount. There has been some talk of encouraging renewable electricity generators to be more responsive to market demand, such as moving to a TGC (tradable green certificate) model, but it is difficult to image such an uptake of small-scale electricity production under such schemes. For smaller investors, there would no longer be the security in knowing that they can calculate that their investment is guaranteed a return under the feed-in tariff.


If you want ensure energy security, then there has to be some way of ensuring that conventional generators are still available when you need them. This has brought about discussion of a “capacity market”, which is different from the current “energy-only” market, as power plants would be paid based on how much electricity they produce, but also their electricity-generating capacity. However due to the way that renewables have flattened-out the spot-market price, the capacity market would want to focus on baseload generators, rather than high-tech generators such as gas-fired powerstations. As renewable generators are based around environmental factors, there are correlations that mean demand and supply cancel each-other out, such as on hot days when photovoltaics generate more power, which is then met with more demand as people turn on the air conditioning.

There may be a need for some flexible power generators, but RWE's experience with their gas-fired stations is that they are no longer to take advantage of peaks and troughs in the electricity market in order to generate a profit. RWE's gas-fired station in Emsland can deliver 1,800 megawatts of electricity within ten minutes, which could power a whole city, but despite using the “most modern of technologies there is no way for it to earn its fixed costs in the current energy market.” It is a similar story for RWE's gas station at Gersteinwerk, which in 2011 only came on for a short period during the winter months. The flattening of the spot price suggests that a capacity market will be needed to support constant baseload power, rather than flexible generators.

Renewable transportation and storage

It is uneasy to think that the Energy Transition has lead to the prospect of paying for baseload fossil fuel power stations when they are turned off, so that they remain economical to run after renewables have eaten into their profit margins. The alternative, however, is that the lights go out.

If using power generated by renewables is to remain the goal, the challenge now for the Energy Transition is to find ways of storing renewable energy, so that it can be released more predictably over the course of a day (or many days). In the UK we already do this by using pumped storage, however these facilities are used more to earn money over a shorter period of time. This is done by pumping water into a reservoir using cheap electricity during the night time, to release it when there is a demand and a higher price for electricity during the day. (Sustainable Energy Without the Hot Air p. 186) However these projects only generate a profit over a short period of time. A system designed to function over a longer period of time may well require either a new market that compensates for the time it is not in operation, or require funding from the government.

Whichever the economic arrangements, there remain physical challenges to creating such large storage facilities. Pumped storage depends a lot on suitable geography, so a development in pump storage would also require the ever-recurring need to invest in the European electricity grid infrastructure. Although a capacity market paying fossil fuels to keep the lights on in the short term, it is in storing and transferring where more money, and new ideas are further needed.

David Attenborough in the Smog

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David Attenborough
Earlier this month, a smog fell over Europe. Media attention, however, was focused on the latest International Panel on Climate Change report on Climate Change. Given that large numbers of the public are sceptical or indifferent to Climate Change, perhaps environmentalists should ensure that media attention is directed to local environmental degradation that people experience today.

When the smog came to my city it looked like a cloud had drifted down from the sky. It was not, however, made out of water vapour, but by pollution carried over by the wind with sand from the Sahara. While walking to work in the morning, I saw two joggers jogging past. Perhaps they thought the smog was early morning mist and stuck to their routine, but a little way in the distance they stopped, no longer able to run in the thick air. I walked past the traffic-jam of cars with people on their morning commute into work. Usually you can't see the fumes expelled from the exhausts, but today the fumes joined the thick air and looked like your breath on a cold winter's day. It was Beijing in South Yorkshire.

The smog came at around the same time as the April meeting of the IPCC. Listening to the news reports, it seemed that climate change was now unavoidable and now the focus was on mitigating the effects of climate change, rather than preventing it from happening, for example, by building more flood defences. "Let's have climate change," said many letters pages in the popular media, "if it will improve the awful UK weather."

It is arguable that however accurate, the IPCC's projections of doom and gloom are not enough to motivate the UK public. This is not altogether surprising. People want to be inspired rather than cajoled, and the Climate Change debate in itself does not point to any clear action: do we build more wind turbines? Insulate more homes? Use the car less? Eat less meat? Climate Change does not provide the answers, and the UK government's approach seems to jettison any policy at the first suggestion of unpopularity.

The problem is worsened as the idea of Climate Change arguably does not enjoy a wide acceptance amongst the general public. This has been caused not only by a campaign of doubt by those who have a vested interest in preserving the status quo, but also by the way the Climate Change debate has been covered by usually respected media, such as the BBC. Here, the media misguidedly creates a Climate Change debate, where in reality none exist.

Dearing examined this tendency back in 1995, and found that as journalists are trained to cover both sides of the debate, they give a voice to "maverick" scientists who have a minority belief in scientific theories. Even though these journalists may doubt the credibility of these "maverick" sources, the message doesn't get through to the public, with the effect that the mavericks are "lent
credibility in mass media stories" (Dearing, Newspaper coverage of maverick science: creating controversy through balancing).

If the Climate Change debate is uninspiring and tarnished in the media, then what can we do? Well, for one we could stop talking about Climate Change. Energy that is wasted on the generated controversy around Climate Change could be better spent by focusing on the local environmental issues. No one can say that they breathed deeply in the smog. No one can overlook the rubbish at the local duck pond. No one can calculate that green investment (not only wind and solar, but the much ignored biomass) doesn't create jobs. No one can say that they lost money through better insulation.

In order to make people care about the environment and Climate Change, it is necessary to inspire at a grass-roots level. Perhaps one day the grand Climate Change debate will be won, but it will be a hollow victory if met with indifference. Environmentalists therefore need to start capitalising on what people feel today, rather than focusing on the measurements taken over decades from a mountain top in Hawaii.

Controversy over Germany's renewable energy industry exemptions

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The driving force behind Germany's Energy Transition is the Renewable Energy Law (Erneuerbare-Energien-Gesetz). This adds a levy on top of consumers' electricity bill to support renewable energies. It has been seen by some, such as Fritz Scharpf as a success story for "positive" EU integration, paving the way for other countries to implement similar schemes, without receiving reprisals by the Commission. The law's legitimacy was proved in 2001, when the subsidy aspect of the levy attracted the attention of the EU Commission under competition law. The political scientist Fritz Scharpf said that the law, in the Commission's eyes, was about as "bad as it could be", as it "amount[ed] to a restraint to trade... [and] discriminates against foreign suppliers", but despite this, the ECJ ruled in its favour (C-379/98). Germany's Renewable Energy Law showed that the EU's environmental commitments could take priority over competition concerns.

Industry exemption

One aspect of the Renewable Energy Law, however, has remained controversial. This is Section 41, which allows certain companies to apply for an exemption from the green levies. The industry argument is that that the high electricity price would drive up manufacturing costs and threaten the competitiveness of Germany's exports.

In 2013, 1,716 firms received exemptions. The German Greens brought the exemptions into public debate, as not only the "traditional" heavy industries received exemptions, but also slaughterhouses and stocking manufacturers. There were many Germans who supported the Energy Transition, but didn't like the idea that they were subsidising companies, especially when it conflicted with their other environmental or ethical commitments.

Even among those with no particular ethical stance, there was still the idea that the burden of Germany's Energy Transition was falling unfairly on private citizens. Currently, private citizens contribute 7,2 billion euros to the Energy Transition, compared to the 6,1 billion contributed by industry. The Süddeutsche Zeitung has called this imbalance "unfair", as industries are seen as benefitting from the new sources of green energy paid for by the public. The German Association of Energy and Water Industries calculated that without industry-exemptions, the total cost of the Energy Transition would fall by 1,3 billion euros.

The exemptions become even more unfair considering the additional fact of lowering wholesale electricity prices. The increase in renewable electricity sources has lowered and levelled out the spot-market price for electricity in Germany. This means that industries with levy exemptions receive a net gain for the Energy Transition in the form of lower electricity prices. It is easy, therefore, to see how the industry exemption could be seen as unfair, but also as an indirect state subsidy.

Investigation by the EU Commission

The combination of exemptions and cheaper energy has meant that the Renewable Energy Law has once again attracted the attention of the Commission. There is a big difference between honouring environmental commitments and giving Germany's industry a free ride. The Süddeutsche Zeitung, however, suggests that the Commission and the German government have been in cahoots over the industry exemptions.

According to an inside source, the "Commission wanted to wait until the government had released the exemptions at least for 2014", which has allowed German industry another full year of exemptions. The Süddeutsche Zeitung says also that the Commission originally wanted to investigate the exemptions in summer, but proceedings were shunted back, thanks to Angela Merkel leaning on Commission President José Manuel Barroso.

This apparently explains why it has taken until December 2013 for the EU Competition minister, Joaquin Almunia, to open an investigation. Angela Merkel has already responded with concerns of a "dramatic effects on German industry", even though any outcome is likely to be quite far away.

Are industry exemptions necessary?

In the meantime, other Member States perhaps wouldn't mind seeing German industry work a little harder to keep their standing in terms of international competitiveness. However in the long-run, both private consumers and German industry are likely to benefit from the Energy Transition.

The reason is that much of the present cost of the Energy Transition is servicing the generous 20-year contracts, which were offered to encourage new green technologies such as solar. As these technologies have become cheaper, the cost of the Energy Transition should decrease as the 20-year contracts run out. This may possibly eliminate the rationale for industry exemptions in the first place, perhaps even before the Commission makes a ruling against the German exemptions policy.

The case for a European Supergrid

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Power lines in East Anglia
The modern day European Union evolved from an industrial energy project. In 1951, Robert Schuman proposed that the coal and steel of the Ruhr district should come under a common European control, so that the resources could no longer be used by one country to wage war. As intermittent renewable energy technologies supply an ever-increasing part of Europe's energy demands, the EU must once again coordinate efforts to ensure future energy security.

In 2007, the leaders of the European Member States agreed a target of 20 percent of the EU's energy consumption as a whole should come from renewable sources. These commitments were made binding in Directive 2009/28/EC, which requires each Member State to create an action-plan, on how they are going to contribute to the EU's overall target. This means more use of geothermal heating (RES-Heating & Cooling), an increase in electricity generated from solar, wind and hydroelectric and biomass plants (RES-Electricity) and the increasing use of biofuels (RES-Transport).

The problem of intermittency

Solar and wind electricity generation are going to be big players in the future of RES-E(lectricity) generation, but suffer from intermittency. When the sun shines and the wind blows, they can generate enough electricity to supply a country, but when there is a lull in the wind, or the clouds come over, less electricity is generated, or generation stops altogether. This problem has to be solved to ensure that Member States are able to ensure energy security, while meeting their 2020 targets.

Already, the problem of intermittency can be seen in Germany. Germany has achieved an impressive increase in capacity of solar and wind power through its generous feed-in tariff system. These two technologies have now overtaken fossil fuels in terms of capacity, as shown in the bar chart below.

Germany's electricity capacity (simplified) (Bundesnetzagentur: 12)

However the fact that solar and wind are intermittent, means that they only generate around 21 percent of Germany's yearly energy supply:

German electricity sources by percentage composition, 2012. (BDEW: 15)

Twenty percent of electricity generated through renewables is impressive, but Germany has set itself the even greater target of 50 percent generated through renewables by 2050. The problem of intermittency will only get worse, as an ever increasing amount of renewable electricity needs to be backed up.

Pumped water storage

Pumped water storage offers one way to overcome intermittent renewable electricity sources. In sunny, windy times, where there is an abundance of renewable electricity, water is pumped into a high reservoir. When there is a lull in renewable electricity output, this water is then released to power generators. The book Sustainable Energy without the Hot Air has done some number crunching to see how such a scheme would work in the UK. It concludes that it would be tough to meet a long lull in renewable production with pumped water storage alone.

The European Supergrid

An alternative solution is developing a European "Supergrid". This would involve a series of grid infrastructure projects to enable renewable electricity to flow from where it is in large supply, to where it is in demand. The idea is that "somewhere" the wind is always blowing, or the sun is always shining. A supergrid would also be able to take advantage of existing controllable hydroelectric power in Scandinavia.

The German think-tank Agora Energiewende (14) say that the grid can act as an "indirect storage facility" that is a lot cheaper than building physical energy storage systems:
Transmission grids reduce overall system costs since they reduce the need for flexibility and at the same time permit the use of the most cost-effective flexibility options

Towards 2030

This year, the Commission consulted on a climate and renewables framework for 2030. The campaign group Friends of the Supergrid advised that making investments in the grid infrastructure is necessary to capture fluctuations in renewable energy production that are currently being lost. The Commission writes in its green paper, that the 2030 framework has to take into account the "on-going economic crisis" and the associated concerns of household energy prices. Developing the grid can satisfy both these concerns. Infrastructure projects will act as an economic stimulus, while an improved grid would be able to transport electricity from where it can be generated cheaply, taking into account the geographic advantages of Europe, such as solar in the south, and wind in the north.

The 2020 targets have already resulted in an increase in renewable generation. 2030 targets should ensure this electricity supply can reach demand.

The German Energy Transition

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Power lines in East Anglia
In September 2010, Germany committed itself to renewable energy legislation called the Energy Concept, which set targets for 2050, in comparison to 1990 levels. Greenhouse gases should be reduced by 40 percent in 2020 and 80 percent in 2050. The use of renewable energy sources should increase to 30 percent in 2030, 45 percent in 2040, 60 percent in 2050 and renewable energy involved in generating electricity should increase to 50 percent in 2030 and 80 percent in 2050. To meet these goals, there is also a target to reduce energy consumption by 50 percent to 2050 in comparison to levels in 2008. This was announced by the former Environmental Minister Norbert Röttgen in the Bundestag to praise from his own party, but also with criticism from the opposing SDP/Grünen coalition that nuclear power would continue to be used as part of the Energy Concept.

Anti-nuclear history

Germany has a long history of anti-nuclear demonstrations, which were seen again against Angela Merkel’s government in 2010 after the the moratorium on Gorleben was lifted (a spent nuclear waste dump). However it was the Fukushima disaster in March 2011 that swayed the opinion of Merkel’s coalition against the continuing use of nuclear power. An ethics commission on the safety of nuclear energy advised that the use of nuclear energy in Germany should be phased out, as Fukushima showed that even a highly developed nation such as Japan could not provide adequate protection against known risks. Germany is not at risk from tsunamis, but it was suggested in the Bundestag that atomic power plants could become targets of other known risks, such as a hijacked plane being crashed into a reactor. After a lengthy seven hour CDU/CSU/FDP coalition meeting on the 29th May 2011, Röttgen emerged into the night with the news that the coalition found agreement with the ethic committee’s recommendations and would start a programme phasing out nuclear power, finally ending in 2022.

Not only had Germany set ambitious renewable energy targets with the ‘Energy Concept’, but they would stay as part of the new ‘Energiewende’ or ‘Energy Transition’ announced by Merkel to the Bundestag on the 9th June 2011, which included the phasing out of nuclear power. Germany is therefore faced with big challenges, such as the development of a national grid that can sustain the fluctuations of renewable energy production and transfer wind energy from the north and photovoltaic energy from the south. Germany’s Energy Transition makes it arguably the most interesting case study for the application of renewable energy sources, though coal power plants already in production are quickly being completed to provide energy security in the short term, which will provide ‘10 gigawatts into 2013 on grounds of production security and grid stability with at least a further 10 gigawatts, preferably 20 to be added in the next ten years.’ Renewable energy sources and the national grid still need extensive development for the Energy Transition to be a success.

Accelerating the grid infrastructure project

Recently Angela Merkel met with the with German National Grid Commission to see how the important changes to the national grid can be accelerated, and it is clear that the German energy policy has become an important topic connected with the success of her coalition. This can be seen further by the chancellor’s decision to fire environment minister Röttgen, after he made a series of gaffes in his unsuccessful campaign for the minister presidency of Nordrhein-Westfalen, the most populous federal state in Germany. Finally Röttgen's demise came with his suggestion that the election result of NRW would indirectly be a referendum of Merkel’s austerity policy in handling the European financial crisis. He has since been replaced by Peter Altmaier, who will now oversee the big develops in Germany's energy policy.