A Bumpy Ride for Germany’s Green Energy

The aim of the German Energiewende (also known as Germany’s Energy Transition) is to decarbonize the energy supply by increasing access to renewable energy and improving energy efficiency. A key part of the Energiewende is the outright rejection of nuclear power as an alternative to fossil fuels and the complete shutdown of nuclear facilities by 2022. The German government has also taken a stand against carbon capture and storage, calling it expensive and unsafe. The strategy focuses instead on wind, biomass (using landfill gas and agricultural waste products), hydropower, solar power, geothermal and ocean power.

So, how does Germany expect to transition to renewable energy so quickly?

  • Germany has been focusing on increasing wind power generation since the early 1990s. In 2014, onshore wind power provided 8.6 percent of the country’s power supply.
  • By 2020, Germany plans to triple the amount of energy produced by wind (both onshore and offshore).
  • Germany is aiming to have 6.5 gigawatts of installed offshore wind power by 2020.
  • Germany expects to increase citizen ownership of renewable sources, limiting the influence of large corporations, through the use of feed-in tariffs.
  • Increase “energy cooperatives” ― community-owned renewable projects, which have already garnered more than 1.2 billion euros in investment from more than 130,000 private citizens.

One of the most key impacts of Germany’s energy transition has been the democratization of energy resources. Turning traditional consumers into additional producers of energy has meant enacting generous support subsidies for renewables. This method seemed effective and by 2012 citizens and co-ops owned 47 percent of renewables, while energy suppliers controlled 12 percent and institutional and strategic investors owned 41 percent. In Freiburg, Germany, for example, citizens of the town of about 220,000 people funded a third of the investment cost for four turbines, with the rest coming from banks loans.

In 2014, the plan seemed to be on the right track and electricity from fossil fuels (including natural gas) hit a 35-year low. However, the German energy transition has hit a few bumpy spots along the way. Offshore wind has not taken off as it was supposed to and most Germans see it as a big business scheme. At the end of 2014, only 1 gigawatt of the total 6.5 gigawatts desired had been installed, with only 923 additional megawatts under construction.

The rush into renewables was also poorly timed and coincided with increased investments into traditional energy production by utility companies. The increased generation from both renewables and fossil-fuel power plants has overwhelmed demand causing prices to fall and hurt profits. Additionally, Germany had guaranteed above-market prices for newly installed renewable energy, to incentivize investment. The surge of renewables on the market are subsidized directly by a surcharge on customers, which increases in parallel with the addition of more renewable kilowatt hours. In the end, utilities have been forced to return to coal-powered plants due to the squeeze on profits.

Lauren Aragon is a research associate at the National Center for Policy Analysis

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