Germany's 'Energiewende' Is Picking Up Steam

Whenever we write about ambitious goals to shift to renewable energy, naysayers are quick to point out the problems:

"Renewables are too intermittent. They cost too much. They'll never power our economy. Just look at Germany!"

Indeed, since a government announcement in 2010 (six months before the Fukushima nuclear disaster in Japan), Germany has been engaged in a radical, ambitious and perhaps risky mission to slash its fossil fuel use. Known as the Energiewende or energy transition, the plan includes a goal of 80-95 percent greenhouse gas reductions by 2050; 60 percent of the nation's energy mix to come from renewables by the same date, and electricity efficiency to increase by 50 percent.

Huge growth in renewables
Among environmentalists, the plan was lauded as a bold step toward a low carbon future, and the early signs were positive. Renewable energy generation records were repeatedly smashed, solar power spread like wildfire and, crucially, a growing portion of the country's renewable energy capacity was owned by private citizens, ensuring broadscale buy-in from people who benefit from the economics, not just the emissions cuts.

But it hasn't all been plain sailing.

Turbulence and price hikes
Utilities have complained that they are struggling to incorporate so many intermittent sources of power into the grid, and costs have gone up as a result. In 2013, Germany had some of the highest electricity costs in Europe, while its neighbor, nuclear-dependent France, had some of the lowest. And because Germany also committed to phasing out nuclear power after Fukushima, critics pointed to upticks in coal consumption as proof positive that the Energiewende was a naive utopian dream. In June 2013, The Economist published a scathing piece entitled "Tilting at windmills." Here's just a taste:

Businessmen say the Energiewende will kill German industry. Power experts worry about blackouts. Voters are furious about ever higher fuel bills. The chaos undermines Germany’s claim to efficiency, threatens its vaunted competitiveness and unnecessarily burdens households. It also demonstrates Germany’s curious refusal to think about Europe strategically.

But a transition of this scale was never going to be easy.

A breakthrough year?
Despite some rocky patches in the first years, there are extremely promising signs that the Energiewende may be beginning to pay off. In fact, some have been lauding 2014 as a breakthrough year.

Energy demand fell by 5 percent in 2014, and coal use fell by 7.9 percent, while the economy continued to grow. Greenhouse gas emissions fell to their lowest level since the German reunification (in 1990), renewable energy became the nation's top source of electricity (replacing lignite) for the first time ever and, crucially for the long-term political viability of the scheme, the trend of rising power bills came to an end. Some analysts are now predicting a drop in energy bills for residential and industrial consumers alike in 2015. In a sure sign of where they see the future going, Germany's largest utility, E.On, announced late in 2014 that it was selling off its coal, nuclear and natural gas assets to focus its efforts on renewables.

Energy storage and EVs the coming focus
There are, of course, many aspects that still need to be addressed for the Energiewende to succeed, but here too there are signs of progress. While initial electric vehicle (EV) sales have been slower than expected, the government has now significantly boosted incentives, recommitting itself to a goal of 1 million EVs on the road by 2020. And while the intermittency of renewable energy sources may cause headaches in the short-term, prices for residential energy storage systems fell 25 percent in 2014 alone, prompting an uptick in adoption. Several utility-scale energy storage projects are also in the works, suggesting intermittency will become less of a talking point as the next piece of the clean energy puzzle falls into place.

Given the depth of our economies' reliance on fossil fuels and our seemingly insatiable demand for energy (Germany was no exception!), it should be no surprise that the Energiewende has not been painless. Perhaps the biggest surprise should be that it is happening at all, and that these game-changing investments are already beginning to pay off.

Exactly where the Energiewende will be a decade from now remains to be seen. Low oil prices, for example, may prove a temporary disincentive to invest in alternatives. But with the government signaling it is staying the course, and with renewables proving cost competitive in countries across the Globe, it does appear that the naysayers may be eating their words.

The Energiewende is here to stay. And it is just getting started.