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on Jul 9, 14 • posted by rhoggett •

Blog from Berlin: Part Eins

Blog from Berlin – Part Eins

Caroline Kuzemko, IGov Team, 9th July, 2014

About Caroline: http://geography.exeter.ac.uk/staff/index.php?web_id=Caroline_Kuzemko

Twitter: https://twitter.com/CarolineKuzemko

Have you ever noticed how things can appear relatively straightforward from afar, but the nearer you get to a situation the more complex it seems? I have just spent two weeks in Berlin interviewing analysts from think tanks, academic institutions and government advisors in an attempt to better understand governance and sustainable innovations in Germany – this blog is largely informed by these interviews. What has been revealed is that the Energiewende is both more complex but also simpler than had seemed from afar.

The German sustainable energy transition is simpler in that it is essentially all about renewables. Germany is arguably in ‘Phase II’ of renewable expansion and there has been plenty of learning useful for all other countries seeking to develop renewable technologies. Sure there are also energy efficiency programmes – especially based around buildings refurbishment – but at the core of the transition has been support for and steady growth in the supply of renewable energy. Renewables have grown from 6.1% of electricity in 2001 to 27% in 1Q14 and since the start of the Energiewende all nuclear that has been shut down (8MW) has already been replaced by renewables (mainly PV). At the heart of this renewable success story is undoubtedly the risk free FiT as well as decisions to allow priority access for renewables to grids. It has also arguably been possible due to cultural and institutional factors – spare distribution capacity, popular and cross party support for climate change mitigation and a (relative to other countries) strong Environment Ministry that had responsibility for renewables.

This has done three things: created broad new constituencies in favour of more renewables – there are now over 1m rooftops with PV panels, most renewables are local and not produced by the Big 4 and there are nearly 400,000 people employed in renewables industries. The second is that in both generation and supply terms there is genuine competition for large energy companies. Germany’s ‘Big 4’ (RWE, E.ON, EnBW and Vattenfall) now face substantial commercial difficulties given that they did not participate in renewables sector growth and given the impact of renewables on wholesale prices, and all four must re-think their business models. The third point, however, is that the speed of growth has surprised many and there is some deep thinking going on now about how to accommodate this rapid growth in terms (especially) of grids and electricity markets. What is also clear is that prices are increasingly an issue – or, more precisely, how costs are distributed and who bears the brunt of them.

This leads me to observations about how it is also more complex and this has largely to do with the emerging politics of renewables expansion. There has been popular opposition to the need for grid expansion (overhead power lines in particular), growing concern about how FiT costs are distributed (i.e. big industry avoids surcharge payments) and some objection to the notion that Southern farmers ‘get rich’ on renewable subsidies whilst ordinary citizens pay the costs. Some of these arguments are exacerbated by the fact that electricity prices have gone up substantially for domestic customers over the past decade or so – partly because of FiT surcharges but suppliers also stand accused of not passing on more recent reductions in wholesales prices. Meanwhile, although paying far less than domestic consumers for electricity, heavy industry is concerned about international competitiveness with some large firms threatening to leave. These voices are significant in a country where industry remains a larger proportion of GDP. There have also been interventions from Brussels regarding the German FiT system and levels of subsidies. Together these factors have tended to repoliticise the question of how renewable transition is managed and have produced significant drivers for change.

As a result some alterations have been made. The Ministry of Economics, which did have responsibility for energy security, has now been passed responsibility for renewable energy policy. The new institution is now entitled the Ministry for Economics and Energy (Bundesministerium für Wirtschaft und Energie). The Environment Ministry has, therefore, lost responsibility for renewable energy policy but does maintain responsibility for energy efficiency policy in buildings. Some of those that I interviewed believe that this will lead to more ‘market’ oriented approaches to renewable policy, one example being the decision to shift to auctions for FiTs as from 2017. There have been other changes to the German Renewable Energy Law (EEG): progressively lower FiT levels (to reflect shrinking onshore wind and PV costs) for new renewables projects and small generators will now have to pay FiT and grid surcharges. Priority access for renewables, however, remains in place.

Now that the FiT changes have been decided the next area of change being considered is electricity market redesign along the lines of the basic Phase II model recently outlined in an IGov working paper. The driver for change here is, again, the rate of growth in renewables and the need to make markets more flexible to account for this and to improve balancing. There are still about 10 different market models being considered, from conservative capacity markets to more innovative options, but demand side response is being considered specifically in terms of better enabling renewables. There is also a new National Action Plan for Energy Efficiency being discussed, with energy efficiency targets in mind, but this is at a reasonably early stage still.

The biggest single outstanding issue remains coal – certainly a more coordinated and holistic approach to sustainable energy transition would by now have plans in place to phase out coal too. But, partly as a result of the shale gas ‘revolution’ in the US, there has been a greater quantity of coal available and prices have dropped. Production of electricity from coal has, therefore, grown in Germany and CO2 emissions have been rising. In fact it appears that politicians are increasingly aware that Germany may miss its EU 2020 emissions reduction target (but this is also because not enough is being done in transport and other sectors). The politics of coal has become more complex given that the current Economics and Energy Minister (and Vice Chancellor), Siegmar Gabriel, is both central to the politics of the Energiewende and more favourable towards coal- partly because his constituency is Lower Saxony with a voter base that supports traditional fuel/coal. He is currently using security fears (about gas supplies from Russia) to argue for the continued role of domestic (lignite) coal within the German energy mix.

Despite this worsening political situation we in the UK can still learn a lot from Germany. The Germans are, in many ways, at the forefront of incremental learning about what kinds of policy and regulation are needed at different phases in an energy transition (or in particular in a process of renewables expansion). They have, in addition, been important to learning about technology development and system design. They may miss their emissions target for 2020 but they have a reputation at stake, embedded renewable interests, widespread popular support for climate change, a relatively more disbursed and active energy industry and a range of long-term (2050) emissions, renewables and efficiency targets that they still remain committed to meeting.