Home / Mint-lounge / Mint-on-sunday /  The Energiewende paradox

Driving through the German countryside often feels like virtually navigating through the 3D rendering of a renewable energy company’s marketing brochure. Everywhere there are rural homes in tiny hamlets spread out in lush green meadows, solar panels on all of them. Elegant windmills – some small and some awesome– emerge from the earth, cattle grazing around them. Indeed, renewable energy seems to seamlessly integrate into the surroundings. 

Many of these windmills and the rooftop solar infrastructure is in fact owned by common people. Germany happens to be the world leader in ‘energy cooperatives’, where citizens themselves pool resources to generate their own energy. There happen to be over 1,000 such energy cooperatives in place today involving over 150,000 citizens—or rather citizen-owners of energy production enterprises. The energy sources usually owned by such cooperative are solar, wind, small hydropower plants, and biomass. The citizen ownership of energy can be of various types—from private ownership to cooperative ownership and even shareholdings of energy sources. In 2013, 55% of the installed renewable energy capacity in Germany was owned by citizens. In fact, around 20 million of the 82 million citizens of Germany today live in 100% renewable power communities (both owned by citizens and companies). 

The roots of citizen participation in energy goes back several decades. Farmers began to use small scale windmills for various farm activities from the early 20th century. Wind power generators continued to be in use even in the 1970s, by which time the central electricity grid had expanded to even far off communities in rural Germany. One such pioneering wind power owner was Dietrich Koch who wanted to become independent of the monopoly that was the local utility company. 

Germany’s energy utilities were structured as monopolies in 1935, when a law codified it. These power supplying companies operate without competition in the regions allocated to them in order to ensure financial health. This was partly done to minimize fiscal burden, as Germany was then under the rule of a Nazi party that was preparing for total war. The structuring of these utilities as monopolies led to perverse outcomes such as the lack of options for consumers, and therefore little pressure on energy prices. 

The utilities continued to be monopolies for decades after the world wars ended. Dietrich Koch wanted to not only become independent of these power monopolies, but also supply excess power back to the grid. For this, Koch wished to import a large wind turbine unlike anything that existed in Germany at that time. This turbine did not fit into any category and he could not get permits for it. In fact, there was active resistance from the utility as it did not want its consumers to go independent. He eventually found loopholes and managed to set up Germany’s first ever citizen-owned wind generator that was hooked to the central grid. 

The utility monopolies, however, continued to resist such attempts by citizens to supply power to the grid. For instance, one power company fixed steep costs on anyone wishing to connect their wind turbines to the grid. However, Koch and other wind pioneers took the matter to court and in 1983, won the case. The court ruled that citizens could install their own wind turbines and earn fair compensation by supplying to the grid. 

Today, the German public can get compensated for supply power to the local power company if a “feed in tariff" is in place. This tariff governs how much money a supplier earns for feeding power back to the grid. This idea that consumers need to be compensated by power companies were initially resisted by the monopolies, but is commonplace now. 

Power utilities lobbied against renewable energy during the infancy of this industry. Trajectories of disruptive technologies are often difficult to predict, and renewable energy is a case in point. This means predictions have often more to do with vested interests than accurate projections. In the late 1980s, the power industry put out advertisements claiming that renewable energy will not cross 4% of the energy mix even in the long run. Today, three decades later, it constitutes 38% of Germany’s energy mix. 

While the government has been actively incentivising the adoption of renewable energy in Germany, that was not always the case. The legislation that brought feed-in tariffs to Germany, thereby accelerating the citizen energy movement, was sneaked in in an inconspicuous manner in 1990. 

At this time, there were far graver issues to be dealt with as East Germany and West Germany were under the process of being united into one state. A retiring backbencher Member of Parliament—who had thus far no bills to his name – from a Christian conservative party, asked for a personal favour from fellow parliamentarians. Could they please pass this feed-in tariff law so that he didn’t have to retire without anything to show for hife life in politics? 

The Green Party’s name was removed from the bill to make it more acceptable to the conservative parties. This bill was introduced so unexpectedly, without any public debate, that it caught everyone by surprise. The utilities—usually quite vocal about their interests—had not bothered lobbying over this issue. 

The bill was ultimately passed as a personal favour to him. In fact, a colleague of the sponsor of the feed-in tariff bill had said, “your bill is garbage, but because it’s yours, I’ll put it to vote."

One interesting fact about the citizen energy revolution in rural Germany is that it took roots and succeeded by the active involvement of predominantly conservative communities, with the active support of local churches. The protestant church has not only promoted solar and wind energy over the past several decades, church groups have even contributed to anti-nuclear protests in the past. 

Said one head of a citizen energy project, “Saving the planet was not the main objective. Saving the community was." Consequently, several 100% renewable energy communities have developed around Germany, where residential electricity and heating is entirely provided for by local citizens themselves. Many of these communities generate more energy than they can consume, so this is exported to nearby towns for profit. 

This adoption of energy production by communities and citizens is referred to as ‘bürgerenergie’ in German, which translates to citizen energy. In their book ‘Energy Democracy’, Craig Morris and Arne Jungjohann explain that there is a principle in Germany’s constitution called ‘Eigentum verpflichtet’, which translates to “with property comes responsibility". The idea is that citizens feel greater responsibility and involvement when they have some skin in the game. Further, unlike shareholders of company stocks, in German energy collectives, every individual has the same voting power regardless of her investment. Unsurprisingly, the ‘Not In My Backyard’ phenomenon that is observed in countries around the world—where residents do not want power plants in their neighbourhoods—is much less in the case of citizen energy projects because of community involvement and ownership. 

The Energiewende paradox

Germany’s adoption of renewable energy has truly been revolutionary in many ways. Progressing from the scepticism of the 1980s, when government and power companies did not believe renewable power production would surpass 4% even in the long run, to a 38% share today is certainly no mean feat. 

As a result of this, and energy efficiency policies, greenhouse gas emissions have also fallen over the years. In 2016, greenhouse gas emissions—which cause climate change—had fallen by 27% in Germany compared to 1990 levels. In other words, even as Germany’s economy grew more prosperous and continued to produce high technology products, its greenhouse gas emissions continued to fall over the years. However, Germany’s targets under the Energiewende programme is a reduction of 40% by 2020 compared to 1990 levels. A longer term target is a reduction by 55% by 2030 and 80% by 2050. 

As things stand, Germany is unlikely to reduce greenhouse gas emissions by 17% in merely three years, thereby missing its target. Germany’s 2020 CO2 emissions could end up nearly 120 million tonnes above their climate protection target, which is significant for a country taking a big leap towards clean energy and expecting other countries to do so too. 

The last decade has particularly not seen significant gains on the emissions front. Greenhouse gas emissions have reduced by only 9% in the past ten years, and by only 2% in the past five years. In these very same time periods, renewable power generation capacity has increased by 215% and 61% respectively. 

This expected failure to meet the 2020 targets has had political repercussions. When the Green Party was negotiating entry into a coalition government in September 2017, after national polls, the prospect of these missed targets became a major issue. After all if the Green Party got control of the environment and energy ministries, it could be blamed for missing the target in 2020. 

The roots of these impending missed targets are, in fact, structural. These low and slow reductions in greenhouse gas emissions in spite of aggressive expansions of renewable energy is the Energiewende Paradox. Why is this so? There are three reasons.

Firstly, even though renewable energy has expanded, electricity production from coal has not changed much over the past several years. In fact, coal based electricity generation is actually marginally higher in 2017 compared to 2002.

Secondly, due to cheap renewable energy, overall prices of energy have fallen. This has led to a slow uptake of natural gas, which is more expensive than coal. Cheap coal has thrived in such a market environment in the absence of carbon taxes. Natural gas is a far cleaner fuel than coal, emitting only half as much greenhouse as coal. 

Thirdly, even as renewable energy capacity has increased, Germany’s Energiewende has involved the decline in nuclear power capacity by 52% since 2002. The generation of power using nuclear energy leads to the lowest amount of greenhouse gas emissions, even lower than solar and wind when life-cycle emissions are considered (i.e. when emissions from the production of solar panels and other such activities are considered). 

It is thus a foregone conclusion that the 2020 emissions target will be missed. While this battle may be lost, it does not necessarily imply that the war has been lost too. Now that the nuclear phaseout decision is unlikely to be reversed or slowed down, it comes down to a new hard deadline for the phasing out of coal, and a further expansion of renewable energy such that it can provide electricity around the clock. This is easier said than done.

The usual refrain in debates about renewable energy is that the sun does not shine at night. In other words, renewable energy such as solar and wind depend on sunshine and the vagaries of the wind, both of which are not in human control. However, both sunshine and wind can, in fact, be predicted to very good accuracy, thereby making it possible to plan for periods of lean supply. The challenge that utilities have is to meet fluctuating demand with a supply that itself fluctuates along with this demand. 

In order to do so, first, the “baseload" of electricity demand is met, which is the minimum constant energy demand through the day. For example, let us assume that the minimum electricity demanded in any 24 hour period is at 3am and it is 80 units, while the maximum at 2pm and it is 100 units. In this case, the minimum consistent electricity that is needed to be supplied through the day is 80 units, and the utility will have to supply an extra 20 units at 2pm, and whenever else the demand exceeds 80 units. 

People sceptical of renewable energy have argued that renewable energy cannot meet this “baseload" as supply is inconsistent through the day. They may have a point, as coal continues to provide much of the “baseload" of electricity in Germany to fill in the shortfall. Nuclear energy too was to play this role as a stable provider of consistent energy through the day, however, as we already know, it is being phased out. 

In the absence of these conventional sources which can be controlled, there has to be something else that provides electricity when the sun does not shine and wind does not blow. This is where “energy storage" comes into the picture. There are various energy storage technologies that are being tested and implemented, however, none of these have yet been able to provide affordable electricity at a large scale. 

To understand the cost economics of energy, there is a concept called LCOE, which stands for “levelized cost of energy". LCOE is the cost per unit of electricity generated from any source, when all costs (such as infrastructure, labour, land, raw material, and maintenance) and total expected electricity generation through the lifetime of the plant are factored in. This value lets us compare energy costs across different sources. 

As an illustration of energy costs, consider LCOE of various energy sources in the United States. In the U.S., the levelized costs of electricity from coal ranges between $60 and $143 and nuclear between $97 and $136 per unit (MWh). Compared to this, electricity from community solar projects costs between $78 and $135, while that from wind costs between $32 and $118 per unit. 

Clearly, insofar costs are concerned, renewable energy today rivals coal and nuclear energy in being able to provide affordable electricity to consumers. This was not always so: only until a few years ago, solar and wind power was significantly costlier than coal, which made countries commit to excessive coal in their economies to meet the demand for affordable electricity. 

Now that renewable sources are nearly as affordable as coal, to truly succeed at the market place, it should prove to be cheaper even after energy storage is included in order to meet demand smoothly without the intervention of conventional sources. Currently, energy storage technologies are expensive for various reasons – including lack of scale, early stages of technology development, and energy efficiency losses. 

There are two ways in which energy storage can be deployed: one, at the central level catering to a town or city, and two, at a distributed level. Distributed energy storage can be either at the level of neighbourhoods, hamlets or even households. Further, stored energy can be supplied in the form of electricity or heating/cooling, depending on the technology being used. 

Currently, most of the global energy storage capacity uses Pumped Storage Hydropower (PSH). The idea is disarmingly simple: when there is excess electricity production, water is pumped into a reservoir at a certain height. Then, at times when electricity production is lean – such as the night when no solar power is being generated – then the water is allowed to flow downstream and energy is generated using turbines. 

Then there are other technologies that have been deployed, but they constitute a miniscule fraction of the total storage capacity. One of them is the Compressed Air Energy Storage (CAES), which uses excessive energy to compress air, which can be used later to turn a turbine and generate electricity during lean periods. 

These two technologies are mechanical in nature. There also exist electrochemical technologies such as rechargeable battery storage. These work no differently than your phone batteries, and can be deployed both at utility scale or in a distributed manner. While crude batteries have been available for homes for several years, recently, companies such as Tesla in the U.S. have come out with elegantly designed batteries for homes in an effort to make them go mainstream. Tesla offers these along with solar modules for rooftops, giving homes the possibility of going off-grid entirely. 

Energy can also be stored in the thermal (heat/cold) form. Underground thermal energy storage (UTES) pumps heated or cooled water underground for later use. There are also several other technologies under research and development and early deployment, such as molten salts, which are solid at room temperature but undergo a change in phase when heated. These can be heated using solar energy and the heat can be used later to turn turbines and generate electricity

It remains to be seen, however, which technology—or which cocktail of technologies—wins at the marketplace. Of course, a mix of various renewable technologies can help reduce the need for energy storage. For instance, if solar, wind, offshore wind, hydropower dams and other sources are on the grid together, then it is unlikely that all sources will stop producing energy at the same time. 

Yet another measure is to ensure that people use energy at the times when production is high. For instance, in the day when solar intensity is the highest, the utility companies can incentivise energy usage for water heating, charging electric cars, and so on. Ultimately, it will involve a synchronisation of policy, technology and cultural practices to ensure that renewable energy succeeds without the stabilising “baseload" of coal and nuclear on the grid. 

Siddharth Singh, a researcher of energy and the economy, wrote this series of articles as a German Chancellor fellow and a visiting fellow at the Wuppertal Institute in Berlin. His Twitter handle is @siddharth3

Read Siddharth's previous Mint on Sunday essays here.

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