Renewable policies in Germany
A year after the Fukushima disaster, clean energy pioneer Germany is slowing its shift to renewables. Other countries are increasing their use of fossil fuels and nuclear power
The solar power industry is ailing in Germany. Four important domestic producers of photovoltaic technology have filed for bankruptcy in the last few months. And in mid-April, the US company First Solar announced that it was ceasing production in Frankfurt (Oder), on the German-Polish border.
What is going on? Didn’t Chancellor Angela Merkel announce just a year ago, after the Fukushima nuclear meltdown, that all German nuclear power plants would be shut down over the next ten years?
At the time, Environment Minister Norbert Röttgen (CDU) announced the immediate closure of eight nuclear plants. Under his and Merkel’s leadership, the federal government also unveiled a visionary plan to generate practically all electricity in the country from renewable sources like wind, sun and biogas by 2050.
The energy turnaround also aims to transform the transportation sector. In a few decades, millions of cars could be powered by green electricity rather than gasoline. In the US, President Barack Obama is aware of Germany’s pioneering role in the global shift in energy generation. During Merkel’s visit in June 2011, he announced he wanted to take Germany’s energy policy as a model.
News about problems among German photovoltaic manufacturers doesn’t fit with these developments. German energy policy appears stuck in a conflict between theory and practice, future and present. The question is why?
First, world markets are creating problems for German manufacturers of photovoltaics. Chinese firms have now learned how to make solar cells as well as iPhones. And they are cheaper than the German ones. As a result, German firms are losing market share. Given the falling prices, they are struggling to remain profitable – a problem bedeviling the entire solar industry in both Europe and in the US.
The political framework is also changing, particularly in globally significant sub-markets like Spain and Germany. In response to both falling prices and the European debt crisis, Spain essentially removed public subsidies for new solar power plants, while Italy sharply reduced them. The German government has also capped its financial support.
A crucial factor here is the power struggle between those who benefit from the old and those who profit from the new energy-generating system. Four large companies – E.ON, RWE, Vattenfall and EnBW – used to dominate the production and distribution of electricity in Germany, and they continue to run a substantial number of the big coal, gas and nuclear power plants.
But because, owing to political priorities, more and more green electricity is flowing through the grid, the big four are selling less energy. The fat profits they made for years are being transformed into losses. As a result, these companies have set in motion all the political levers at their disposal to slow the expansion of alternative energy generation.
A key argument they like to make in public debates is the overly high cost of shifting to green energy production. Around 15 percent of the electric bill paid by every private household in Germany goes to the producers of green energy.
The levy is set by law and covers the difference between the cost of generating electricity from wind and solar sources, which remains high, and the comparatively low cost of producing electricity from coal or nuclear power plants. The subsidy is the pivotal reason why the worldwide market for green energy has developed so quickly.
But as clean energy increases, this kind of cost-sharing means higher utility bills for private households. Environment Minister Röttgen is currently on the hustings as the CDU’s main candidate for state elections in North Rhine-Westphalia. Federal elections are due in 2013, and for now, Merkel and Röttgen’s party has no majority in opinion polls.
For this reason, the minister for the environment does not want to spoil his chances with the powerful old energy industry and its tens of thousands of employees. In a recent justification for drastically reducing government subsidies for the solar power industry, he said “we have to keep the costs in mind.” The reduction is the main cause of the current problems in the solar energy industry.
Germany, the leading market, is not the only one that is shrinking. The Fukushima shock is waning in other countries as well. France, Great Britain, the Czech Republic and Poland have all lobbied the EU to be allowed to promote nuclear power plants in the same way as renewable energy generation.
Two motives play a role here. One is that these countries are far behind in developing a green energy industry, so they have to import the relevant technology. Their domestic industry does not profit from the switchover. Another, is that changing their national energy-generating systems calls for costly investments. Given the public debt crisis in Europe, these governments may be of the opinion that they simply cannot afford it.
President Obama also recently signaled a shift in US policy by approving construction of the first new nuclear power station since the partial meltdown at the Three Mile Island reactor in 1979. The overall picture in the US is mixed. In a recent study entitled “Who is Winning the Clean Energy Race?” the Pew Charitable Trust noted that the US invested more in renewable energy in 2011 – $48 billion (€36.7 billion) – than any other country in the world. China and Germany placed second and third.
Washington is promoting green energy to reduce dependence on expensive oil imports. But on the other hand, it also relies on every other available source, as Arne Jungjohann of the Heinrich Böll Foundation in Washington notes. That includes using unconventional and controversial methods such as “fracking” to exploit untapped oil and gas reserves locked into rock formations in the American heartland.
In his new book “The American Patient,” Josef Braml criticizes the US for its strategy of trying to achieve energy independence. Given that 60 percent of the oil used in the US in 2010 was imported, it is illusory to believe the country can be genuinely autonomous in energy, he argues. Braml, along with many other experts, recommends turning away from fossil fuel power generation.
The German government continues to pursue this goal as well – though the current cutbacks in solar power subsidies are a setback. The most significant economic argument for the shift in energy generation is clear enough to the German political elite: the current high costs will pay off in the future. Germany will then have less need to import expensive raw materials – and its domestic companies will be able to export innovative and desired renewable energy products.