Germany shows a thriving green economy is possible

Germany shows a thriving green economy is possible


Germany shows a thriving green economy is possible

When Prime Minister Harper is challenged on his environmental record, one of his standard replies is that between economic development and sustainable development, he must give priority to the economy.  While it suits Harper’s ideological agenda to imply that economic and environmental objectives are opposing forces, the facts suggest otherwise.

[quote]In 2011, there were 372,000 people working in the nation’s clean energy sectors and the projections are such that these numbers are expected to be in the 400,000 to 500,000 range by 2020.[/quote]

Canada falling far behing world leaders like Germany

Indeed, as indicated in my previous Common Sense Canadian articles, the clean technology sectors are among the world’s fastest-growing and highest job-creating sectors of our times.  Unfortunately, each year of Conservative rule represents a rapidly expanding green jobs gap between Canada and its competitors.

Among nation-specific models that disprove the Harper economic paradigm – to the effect that a natural resource-based economy is the best vehicle for prosperity – Germany is a case in point.  That is, Germany, while rising to become one of the globe’s strongest national economies, reduced its emissions by 25% below 1990 levels by 2012, thus exceeding its Kyoto Protocol commitment to reduce its emissions by 21% below 1990 levels for the 2008 to 2012 period.

This is an especially remarkable achievement in light of the economic troubles in much of Europe and in the world at-large.

Components of the German Success Story

This German success story is a result of numerous factors – one might say a holistic approach.

One of the important pillars of this success story is the 2001 German Renewable Energy Act, which introduced the concept of a Feed-in-tariff (FIT) and right to connect (RTC) formula to the world – a concept entailing: 1) the paying of above-market rates for renewable energy sources over a specified time period, combined with 2) a requirement that all sources of renewable energy production within a given utility’s region must be connected to, and given priority within, the network.

This concept makes sense economically in that all new sources of energy cost more than existing sources that were developed some time ago and may be fully paid for.  Over time, the plan calls for a reduction of FIT rates for new renewable power entries to the grid, thus providing incentives for manufactures to invest in innovation to lower costs.

Attesting to the success of the formula is the fact that the German model has since been emulated by 19 of the 27 EU states and 40 jurisdictions around the globe, including China.  Up until recently, Ontario offered such a system.

Community ownership of renewable energy

The success synergies resulting from the aforementioned FIT/RTC model and the rapid uptake of renewables also comprise attractive terms of engagement for community and individual ownership of renewable energy production.  To this effect, in 2013, 50% of the entire Germany production of renewables is owned by individuals, communities and cooperatives – with the sources ranging from home rooftop solar panels to wind power and biogas production on agricultural land.   With regard to the latter point, farmers account for 11% of total German renewable production.

In effect, the individual homeowner uptake has been so successful that a March, 2013 survey showed 60% of homeowners are considering adding rooftop solar for heating or electricity generation.

An equally significant symptom of success is the fact that in May, 2013, a €50m ($66.5M) program was introduced for power-storage systems for owners of small and medium-sized PV solar installations in order to kick-start the storage sector and take pressure off grids.  This has become necessary because grids are increasingly struggling with rising amounts of homemade renewable energy flooding the system at midday, creating an imbalance in supply and demand and having a distorting effect on the market.

As for the role of the utilities in the clean energy high-local-ownership landscape, only 13.5% of the nation’s renewable power is produced by Germany’s 4 major utilities and regional and municipal utilities.

Few countries have outdone Germany on this score, other than Denmark, where 83% of the renewable power sources are owned by individuals and communities.

Perhaps the most significant bottom line success of the German approach is the job numbers – once more demonstrating that the Harper economic paradigm is dated.  In 2011, there were 372,000 people working in the nation’s clean energy sectors and the projections are such that these numbers are expected to be in the 400,000 to 500,000 range by 2020.

Fukushima accelerates migration to renewables

A major acceleration force for the German migration to a green economy was the Fukushima meltdown in 2011, the German Energiewende (the energy transition). The program saw 8 of its oldest nuclear power plants shut down immediately after the disaster struck and includes plans for the shutting down of the remaining 9 plants by 2022.

As for filling the gaps left by the remaining planned shutdowns, a study by engineering form BEW concluded that onshore wind could replace all nuclear plants, with backup from other renewable sources.

Offshore wind a key component of Germany’s energy future

Accordingly, among other things, the new Energiewende package comprised: 1) an increase in the Feed-in-Tariff (FIT)  for offshore wind; 2) a commitment from kfw, the state development bank, for $7.2B of investments in offshore wind development, and 3) a plan to cut electricity consumption by 10% by 2020.

To be eligible for the premium for offshore wind, originally, Energiewende projects were to be completed by 2017, but given delays in the construction of the underwater offshore TenneT cable and 30 year project lifecycles, the offshore wind industry’s lobbying efforts were rewarded by the newly re-elected Merkel-led government with a November 2013 decision to extend the completion date requirement to the end of 2019.

Germany aims for 80% emissions reduction by 2050

On longer-term Energiewende objectives, the 2050 goal is ambitious, calling for a reduction of emissions by 80% with 80% of its electricity derived from renewable sources by then. Not bad considering that only 23% of the nation’s electricity was attributable to renewables in 2012. Interim renewable electricity targets are set at 35% by 2020 and 50% by 2030.

With there being a strong renewables lobby in the country – unlike Canada, where the fossil fuel industry plays a dominant role – the German renewable industry is exercising its clout to suggest a 47% renewables target for 2020.

In this regard, the results of the September, 2013 German federal elections may in fact mean that the interim goals could become more stringent because: 1) Merkel’s Christian Democrats (CDU) are forming a coalition with the Social Democrats (SPD); and 2) the SPD had campaigned for a 40-45% target for renewable electricity sources by 2020 and 75% for 2030. The SPD campaign also included a 25% target by 2020 for co-generation, the combining of heat and power generation.

Clearly, the Energiewende will be high on the political agenda because it was a component of the Merkel election platform.

Shift away from Nuclear still not fast enough, most Germans say

Notwithstanding the impressive speed of the energy transition away from nuclear, for much of the German public, the abandoning of nuclear power is not going fast enough.  A March, 2013 poll by Infratest Dimap showed that 57% of Germans believe the shift away from nuclear is going too slowly, while only 30% feel it’s advancing too fast.

This same poll also illustrated another big difference between the energy and climate change debates in Germany versus Canada.  The poll had 39% indicating that environmental protection should be among the main criteria for political decisions.

Lastly, consistent with the Energiewende goals, Germany will be building 4,400km of new transmission lines by 2022, the year of the shutdown of all of the remaining nuclear plants.  This includes connecting offshore wind resources in the North and Baltic Seas.

Clean Energy vs. Fossil Fuels for electrical power: the economics

Contrary to appearances, the premium rate for renewables does not involve subsidies, as the costs are passed on to consumers. As one would expect, the German fossil fuel industry has complained that the surcharge to consumers for renewables gives renewables an unfair competitive advantage in the marketplace.

But a Greenpeace study showed that the exact opposite is true. Specifically, while renewables received €17B ($22.7B) in aid via the surcharge in 2012, the fossil and nuclear sectors actually represented a staggering €40B ($54B) in hidden costs.  The hidden costs are composed of direct state aid and tax breaks, as well as external damage costs associated with climate change impacts and costs resulting from nuclear accidents – all of which are borne by taxpayers. But – unlike the renewables surcharge – these costs don’t appear on electricity bills and aren’t transparent. If these hidden costs were slapped on electricity bills, consumers would be burdened with a surcharge of €0.102/kWh (14₵/kWh).

Wind, solar now close to on par with fossil fuel costs

Based on these calculations, currently wind, solar and hydro are the cheapest sources of electrical supply. According to a Nov, 2013 Fraunhofer ISE study, with innovation driving down production costs, actual costs for wind are now lower than coal and gas. Solar production costs are still higher than fossil sources but the ratio is expected to favour solar by 2030.

More generally, the impact of the German energy model on the country’s electricity mix has been that of pushing of gas-fired plants out of the market, and the lowering of load factors for both coal and gas-fired plants, expected to decline to 33% by 2015.

Taking into account the popularity of the German model throughout Europe and the influence of the European cap-and-trade scheme – The European Trading System (ETS – cap and trade system) – E.ON, one of Germany’s largest utilities, indicated it may close 11 gigawatts (GW) of fossil fuel capacity across Europe by 2015.  In July 2013, EnBW, another German utility, announced plans to mothball 668 megawatts (MW) of fossil fuel production, involving 4 power facilities.

Lessons for Canada from Germany, European Cap and Trade

Germany’s achievements mean that it will be one of the most, if not the most, important contributor to achieving the EU-wide aggregated goal for a 20% reduction in GHG’s by 2020. (Note: to achieve the EU goal, member states have also taken on nation-specific targets related to national wealth for GHGs not covered by the EU ETS, such as the housing, agriculture, waste and transport sectors – sectors representing 60% of total EU emissions).

As Canadians contemplate the possibility of adopting some cap-and-trade scheme like Europe’s ETS, it is worth considering: 1) The degree to which the ETS has helped put EU nations on track for meeting their respective Kyoto targets; 2) the fact that it has become less influential in reducing carbon as the price of carbon has dropped considerably in recent years. Indeed the price of carbon declined from €13.09/tonne in 2010 to a new record low of €2.63/tonne in April 2013.

The European Commission has recommended backloading 900 carbon credits – that is temporarily removing them from the market. In July 2013, the European Parliament approved the measure, which now must be ratified by the European Energy Ministers.

For Germany’s part, the backloading details will largely be a funtion of the outcome of coalition government negotiations. The CDU wants backloading to be an integral part of a long term plan, while the SPD wants a onetime one-of solution.

Accordingly, the lesson for Canada here is that any cap and trade system that Canada sets up should include a mechanism for annual reviews of the supply and demand for emission credits to ensure no oversupply occurs that can drive down the price of credits.

As well, for select sectors which may have difficulty in complying with Canada’s cap-and-trade scheme, a loan guarantee program – with a maximum of one-loan/firm – may be in order.­­­­­­­­­­­


About Will Dubitsky

Will Dubitsky worked for the Government of Canada on sustainable development policies, legislation, programs and clean tech innovation projects/consortia. He lives in Quebec.

19 thoughts on “Germany shows a thriving green economy is possible

  1. It was a long, cold night in Germany…
    Germany has more than 46 billion watts (GW) of installed “wind power” … and for 16 hours, just this last week, it generated a pittance, less than 1 GW. Why would Canada follow such a foolish move? Solar could not bail them out, it was night time, and it was cold. The next day’s sunshine was meager; Solar pooped out at less than 3GW, yet they have more than 28GW of solar “capacity” installed. The demand was 50GW, peaking higher than 75GW. Can you live without power for sixteen hours?

  2. The sources for the article are primarily multiple daily electronic bulletins from around the globe. For Europe, Recharge News is one of my best sources, a source that churns out 15 articles/day. The cost of a subscription is around $500/year, Canadian dollars.
    Regarding your remark on an increase in fossil fuel production, coal and ignite consumption increased by 1.6% in 2011 but that is considered a blip rather than a trend.

  3. All I hear from you is “money, money, money” its quite sickening that you guys aren’t looking at the whole picture, people are fed up with oil spills and leaks destroying homes, jobs, ecosystems, food chains, displacing of people cause of fossil fuels, true fact!
    If we take money put of the picture, would all of you do the right, moral choice for going green? I would go green cause I care about jobs, people’s homes, tourist attractions, animal who lives in the ocean (have died from oil spills), fossil fuel cause more harm than good.
    Only if people doesn’t waste money on crap they don’t need or over spending on expensive cloths that are over priced etc, they would save a whole lot of money for multiple of solar panels at home, that is a more, logical, forethought right there, but hey, soo many “people knows the price of everything and no value for anything”, that their, is a quote I see all the time and when I see stuff like this, it also reminds me of that quote and it is true fact.

    1. I fully agree that the majority are caught up in our excessive consumption mode of life, preferring to follow home renovation trends and purchasing SUVs to prove one is successful and so on.
      That said, the strongest opponents to a migration to a green economy — whether they be Conservatives, Bay Street types and/or simply incapable of imagining an energy economy not based on maximum exploitation of natural resources — basically the economic establishment — continues to claim that economic development and sustainable development are in conflict. Some of the more conciliatory suggest we should make economic concessions in the name of environmental concerns.
      What this article and several of my proceeding green economy articles are attempting to articulate is that the critics of a green economy are wrong when they suggest that a green economy is incompatible with economic development. Specifically, a migration to a green economy offers a way to stimulate job creation while doing the right things for the environment. Indeed, even with the economic troubles in much of Europe, there is a 7000 position labour shortage in the European wind energy sector.
      Note the BlueGreen Alliance has calculated that the $1.3B spent on fossil fuel industry subsidies supports 2300 jobs while the same amount of subsidies, if transferred to renewable energy would support 18,000 to 20,000 jobs.
      Harper’s policies are costing Canada thousands of lost job opportunities every year.

  4. For another, probably far more realistic assessment of Germany’s energy transition, see this.

    “I was shocked to find out how useless, costly, and counter-productive their world-renowned energy policy has turned out. This is a serious problem for Germany, but an even greater problem for the rest of the world, who hope to follow in their footsteps. The first grand experiment in renewable energy is a catastrophe! The vast scale of the failure has only started to become clear over the past year or so. So I can forgive renewables advocates for not realizing it yet — but it’s time for the green movement to do a 180 on this.”

    1. This is the kind of article one can expect from Forbes which like other mainstream establishment media is running a strong campaign against modifying the longstanding natural resource based energy economy. If the economic model changes, these experts would not know how to analyse it. This is why the article is full of half truths
      For the US held up as a model here, half of all electrical power is wasted.
      On variability, over the course of a year, there is greater variability in energy production from a hydro-electric power facility than from wind.
      Equally important, the costs of extreme climate events, which are becoming more frequent and more intense, are presently not factored into the costs of conventional sources. The Stern report in the UK has documented the facts to the effect that it is cheaper to invest in addressing climate change than to continue with the current resource-based economic model.
      As for the cost of nuclear energy, the industry is so heavily subsidized that the true cost is hard to determine. Canadians should recall that the cost of refurbishing nuclear power plants in Ontario made Ontario Hydro go belly up. The cost of refurbishing the Pointe Lepreau plant in New Brunswick is way over budget and they have stopped trying to predict when the plant will become operational. Unlike other sources of energy in Canada, the history of nuclear power in Canada is one of one major bad investment after another by the Government of Canada.. AECL was sold to the private sector at a fire sale price.
      On energy storage the article says Germany now has a program to finance energy storage, a key to massive integration of intermittent renewable sources. China also recognizes the fact that energy storage is a key to optimizing the use of energy derived from renewable sources in that the Chinese Development Bank has committed $45B over 5 year to smart grid development and deployment.
      Finally, the nice thing about renewable economics is that the prices of the technologies are coming down rather quickly while the cost of the source of energy is constant at zero.
      Also, there are opportunities for local supplies for local needs without all of the expensive infrastructure. This is definitely a plus for isolated communities in the less developed parts of the world.

      1. You state that hydro power is more variable that wind. I don’t know what kind of creative accounting you used to come up with that, but in a hydro dam, the energy is stored behind the dam in the form of potential energy. Water is released to turn the turbines. As long as the water level in the dam remains sufficient, then hydro power is super reliable and consistent. Wind is not.

        Contrary to popular belief, there has been no increase in extreme weather.

        “General statements about extremes are almost nowhere to be found in the literature but seem to abound in the popular media,” climate scientist Gavin Schmidt of the NASA Goddard Institute for Space Studies said last month. “It’s this popular perception that global warming means all extremes have to increase all the time, even though if anyone thinks about that for 10 seconds they realize that’s nonsense.”

        Nuclear energy is subsidized far less than wind or solar. Again, Germany provides an example to NOT follow. Germany has invested 130 billion dollars into solar and gets about 3 or 4% of its total electricity for that. For that amount of money, Germany could have built a fleet of new nuclear power plants, a deep geological repository for the spent fuel, and eliminated coal power completely. Instead, Germany flushed the money down the solar toilet and the coal keeps burning. As for nuclear, the German government invented a tax specifically designed to make nuclear power uneconomic. For which they are quite rightly being taken to court.

        “The ruling comes as a welcome relief for battered German utilities, which are cutting thousands of jobs in response to falling profits as increased competition from subsidized renewable energies has eroded power prices. ”

        In Canada, it is not nuclear power that makes Ontario’s electricity expensive. It is really poorly thought out green subsidies. It is only because of nuclear power that Ontario can phase out coal.

        “By the end of 2013, Ontario household power rates will be the second-highest in North America (after PEI), and they will continue to accelerate while they level off in most other jurisdictions. Even more alarming for Ontario’s economic competitiveness, businesses and industrial customers will be hit by almost $12-billion in additional costs over the same period.

        Such is the legacy of the provincial government’s 2009 decision to establish feed-in rates, ranging from 44.5 cents to 80.2 cents per kilowatt-hour (kWh) for solar power, and 13.5 cents/kWh for wind power. These solar feed-in rates average 11 times the 5.6 cents/kWh paid for nuclear-generated power, and 18 times the 3.5 cents/kWh for hydro-generated power. The wind-power rates are more than twice as high as nuclear, and four times those of hydro.”

        You mention China. China has, by far, the world’s most ambitious nuclear energy program and is emphasizing nuclear and hydro at the expense of wind and solar.

        “The country intends to develop more nuclear power, starting this year, actively develop hydroelectric power, tackle key problems more quickly in the exploration and development of shale gas, and increase the share of new energy and renewable energy in total energy consumption. Analysts believe that the development of the solar and wind power industries will stabilise, while hydropower will have the top priority in renewable energy development.”

        The Chinese have learned what works and what doesn’t. There are 3 ways to get reliable, affordable, base load power. Fossil fuels, hydro-electric and nuclear. That’s it. China, like other developing nations, will develop what works and avoid expensive, boutique power sources like wind and especially solar.

  5. Germany is in the top 5 or so most expensive places in the world for energy… about 3 times higher than Canada…

    Having family trying to develop alternatives in British Columbia it’s almost impossible. BC buys most of it’s power from the USA (nuclear and coal), even though we have huge amounts of hydro power, then sell our hydro power to California, during peak periods, making a net profit.

    Coal and Natural gas are also BC’s #2 or #1 exports/year, depending on the year, as energy sales behind lumber.

    I mean we are talking a resource based economy vs a manufacturing based economy.

    1. The fact that the Government of Canada no longer supports the development of clean technologies today means that the situation you describe will continue to worsen.
      At this very moment, there are over 550 wind technology manufacturing plants in the US. In 2012, wind was the number one source of new electrical power generation in the US.
      Equally important, the key to being a part of the green economy is innovation because innovation gives rise to the products of tomorrow along with the manufacturing jobs.
      Sustainable Development Technology Canada used to engage in leveraged investments to the tune of $56M/year. For the current fiscal year, its budget is just $1M, just enough to cover milestone payments for projects approved in previous years. For practical purposes, the current federal government investment in clean tech innovation is zero, a first in the last 40 or so years.
      The world is moving from a model where natural resources were the energy commodity to a model where technologies are the energy commodity. But in Canada, both Stephen Harper and Justin Trudeau are pinning Canada’s economic future on KeystoneXL and the selling of unprocessed tar sands derived resources to the rest of the world.

    1. Clearly, Germany has made some mistakjes with their energy system. No green energy policy should see lower-income citizens suffer under unwieldily rates.

      The rate Germany is paying for feed-in-tariffs and certain practices like paying for “phantom power” when wind farms need to go offline seem to go overboard.

      Hopefully Germany can sort out these issues and finad a reasonable balance between the very real need for a transition to renewable energy and keeping electricity costs within reach for its citizens…

      Germany is in many ways the trailblazer for the world on this front, so the lessons it learns are critical for everyone’s future.

  6. Where are these figures coming from? Everything I’ve read indicates Germany’s carbon emissions have risen in the past two years and coal fired plants are replacing the nuclear capacity shut ins, not renewables.

    Also, consumer prices for electricity are extremely high in Germany. To the point where it is approaching a luxury item for even the middle class.

    This article is very confusing.

    1. Chris, overall, Germany’s emissions have indeed been in sharp decline.

      Here is data from the World Bank showing a 26% decline in Germany’s 1991 carbon emissions by 2009:

      It is true that Germany saw a small uptick in emissions in 2011-2012.

      That said, the overall trend is decidedly downward – and their ambitious policies suggest that trend will continue well into the future. The levelling out of Germany’s carbon cuts may be attributable to the problems with the ETS which the author addresses here – an oversupply of credits leading to a major decline in carbon prices. But the EU is moving to address this by pulling back credits to stabilize prices. Germany’s success story hangs on much more than the ETS though, and I think we can expect to see continued climate progress well into the future.

      To your other point, yes, increases in energy prices are a key driver in energy conservation – and that always requires the balancing of social costs vs. conservation objectives. That balance appears to be getting out of whack for some middle class and lower-income citizens.

      Germany needs to ensure that its green energy policies don’t disproportionately and adversely affect those who are least able to afford higher energy costs.

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