By Anna Leidreiter
The German Energy Transition – a Blueprint for Other Countries?
The German Energy Transition – a Blueprint for Other Countries?
Germany has undoubtedly raised the bar in terms of strategising energy sourcing, and setting the pace for renewable energy policies. By going renewable, Germany has created more than 380,000 jobs, built up a world leading green technology sector, and has reduced the dependency on fossil fuel imports. Today renewable energy (25%) provides more electricity than nuclear power (18%). On sunny and windy days, half the country is powered by renewable energies. Over the last years, Germany has created the largest solar PV market in the world and thus driven down costs by more than 65%.
But how was the German energy transition perceived internationally? Have other countries learnt from Germany? Are there other best practices for an energy transition?
In order to answer these questions we need to look at what the German Energy Transition means. Internationally it is often perceived synonymously with nuclear phase out and the implementation of political renewable energy (RE) targets. But there are other countries like Ireland, Denmark, Austria, and Norway that dismissed the nuclear option years ago. Sweden, Switzerland, the Netherlands, and Belgium are also in the process of phasing out nuclear power, and Spain has banned the construction of new reactors. Another remarkable national decision is observed recently in Japan where the government declared a nuclear phase out by the end of the 2030.
Looking at the RE targets, there are countries in the world with much more ambitious plans. Denmark can defiantly be seen as the frontrunner with its 100% RE target by 2050 in the power, heating, and transportation sector, while Scotland wants to reach 100% RE in its power sector already by 2020.
Having said this one may wonder what makes Germany unique. There are five key elements to be identified that are fundamental to its success and that are often dismissed in the international debate.
1) The nuclear phase out has a long history in Germany. The decision was first made by the Social Democrats/Green coalition in 2000, retracted by the Conservative/Liberal government in 2010, and again phased out after Fukushima disaster last year. It has been strongly pushed by civil society for decades and can therefore be understood as a bottom-up process. Germany’s anti-nuclear energy movement would prove one of the most enduring and successful mass movements in contemporary Europe (Paul Hockenos 2012).
2) Political RE targets were already implemented before Fukushima and foresaw a 60% renewable energies share in total energy consumption, and 80% renewable energies share in the electricity sector by 2050. The key is that parties across the political spectrum support these goals. The Environment Minister even raised the 2020 goal of 35% RE to 40% lately as the progress was more rapidly than expected.
3) The German Energy Transition succeeded because more actors entered the market and took action. The energy production and distribution is no longer monopolised. In 2010 over 50% of RE capacity was invested in and owned by individuals or farmers (trend:research). The big four energy utilities that have the oligopoly in the German energy market had a share just 6.5% of the total installed RE capacity. This diversification of the energy market was essential for the accelerated boost of RE installations.
4) The secret of why an industrialised country with a huge energy demand can phase out nuclear power and rely on renewable energies in times of financial crisis is simple: taking a decentralised approach and engaging a critical mass of citizens the energy transition results in regional value creation and therefore in socio-economic benefits across the country. In Germany there are 800 energy cooperatives that are the driver of the energy transition. Taking a decentralised approach by implementing RE therefore does not only include geographical decentralisation but also means a distribution of benefits by sharing ownership. This is very much in line with the diversification of the energy market. Across the country there are bottom up initiatives that attempt to end dependency on the four big power companies that dominate the market. Municipal utility companies boost their share of electricity production from a tenth to at least a fifth by 2020. More than 100 regions that comprise a quarter of the German population want to be “100% renewable” in order to benefit from the energy transition by making use of local resources and creating jobs locally.
5) With the Energy Transition Germany reverses the conventional energy system in which the energy source is brought to the plant. A system based on RE changes from a vertical to a horizontal supply chain in which the plant is built where the resources are in order to maximise harvest. This results in challenges including conflicts with other land use interests. However, there is a great potential for regional value creation and new business models. This is mainly true for the agriculture sector where organic waste becomes a source of energy. Resource flows can thus be closed to create efficient circular systems.
Looking at how the German energy transition was perceived internationally one can say that the key underlying success factors are often overlooked. The most common reactions are: Can a heavily industrialised country power its economy with wind turbines and solar panels? Who should pay for this in times of financial crisis?
The German answer is the decentralised approach which allows new actors to enter the market and participate in the transformation. The regulatory framework feed-in tariffs (FiTs) is evidently key and acts as a connecting policy – linking people, policy, energy and economy.
Analyses show that mainly the following elements of the feed-in tariff result in a meaningful uptake of RE:
• Purchase obligation of generated electricity: Utilities are obliged to buy the electricity from the producer.
• Money against performance: Incentives are only paid if electricity is generated.
• Calculation of tariffs: The calculation of tariffs is cost-oriented and technology specific. It is regularly reviewed and adapted to the current market situation. Incentive policies are therefore distinct from subsidies.
• Duration of tariffs: Long term contracts reduce the risks for investors and allow a secure return of investment.
If we look at other countries and see whether they have learnt from Germany, we can see that the German feed-in tariff policy has already became a blueprint for more than 80 countries and states worldwide. The most common type of support policy are renewable power generation policies like feed-in-tariffs and renewable portfolio standards (RPS). Generally 118 countries – more than half of which are developing countries – have implemented targets for renewable energies (Global Status Report 2012). The UK and the province Ontario, Canada are but two cases which prove that the right regulatory framework can trigger investments and result in enormous socio-economic development if the policy design is right and ensure investment security. The debates in the UK parliament particularly show how a lack of long-term policy certainty and stability results in setbacks and job losses. Ontario is a good example of a robust regime for encouraging renewable electricity generation while maximising the local economic benefits of this new power generation. The domestic content provision ensures that projects using local products receive a bonus to encourage more renewable energy industries to locate and hire in Ontario. Further, the community project price adders also increases the job and economic impact of the renewable energy industry, by encouraging the development of projects that provide more jobs and more economic impact per MW than absentee owned projects. The French Ministry of Ecology and Energy has copied this instrument for the European context.
To conclude, Germany is a living example from which other countries can learn. The key lesson is that the national government needs to implement a regulatory framework that enables investors to put their money towards future-just and sustainable energy systems. Because the people are ready.
Details about the author:
Anna Leidreiter works as a Policy Officer in the Climate and Energy Department for the World Future Council, Hamburg. In her studies in International Development Studies at the University of Amsterdam, Anna focused on environment and development from a social science perspective. She gained some practical experiences in a forestation project in Ecuador as well as in the renewable energy industry, working for the photovoltaic company Solarteam Nord. As academic assistant she further worked at the German Institute for Global and Area Studies (GIGA Hamburg) on the topic of climate change and resource management in Africa. Writing her thesis on „Community Participation in Natural Resource Management”, Anna carried out her fieldwork in rural Ethiopia. She authored and coauthored various publications on climate change and energy politics.
Details about the World Future Council:
The World Future Council brings the interests of future generations to the centre of policy making. Its up to 50 eminent members from around the globe have already successfully promoted change. The Council addresses challenges to our common future and provides decision-makers with effective policy solutions. In-depth research underpins advocacy work for international agreements, regional policy frameworks and national lawmaking and thus produces practical and tangible results. For further information please visit our website: www.worldfuturecouncil.org.