Catherine Mitchell, IGov Team, 11th March 2013
In the middle of 2011, Germany announced its new energy policy: the energiewende or energy transformation. This is a 40 year programme with aspirational targets along the way including for renewable energy to provide 35% of electricity and 18% of energy by 2020 rising to greater than 80% of electricity and 60% of energy by 2050; with total energy demand to be cut by 50% by 2050; total carbon emissions to be cut by 80-90% by 205 with the targets for renewables seen as co-dependent on energy demand reduction. There are also various other requirements to enable this to occur such as changing infrastructure and altering markets in order to provide value for flexibility.
As can be understood, such a transformation is not without detractors, and those detractors have become increasingly shrill in the last few months. It is almost common place to hear statements like ‘Germany is in trouble’; or that ‘the energiewende is going to have to be significantly cut back’. This is, however, wishful thinking on the part of those who fear an energy transformation and would be much more comfortable with business as usual energy policies.
Britain has a similar target to Germany of cutting carbon emissions by 80% by 2050, albeit enshrined enshrined in law, but beyond this there is little similarity between the two countries energy policies on the ground. The energiwende is transforming energy system practices from a centralised top down to interlinked system, whether between Germany and other countries or between transmission, regional and local networks; as well as dispersing energy providers geographically, by scale and by users. Moreover, individuals and communities are seen as vital investors; and the energiewende is also seen as a key component in Germany’s next generation manufacturing capability. The British version, centering on nuclear power, is not transforming practices but entrenching the old ones.
Both British and German energy policies are threatening in their own way to their energy system incumbents, and both have strong lobbies determined to maintain the ‘old’ energy systems and to hang on to what they have got for as long as possible, as well as co-ordinated, but largely exaggerated, campaigns against the costs of ‘future’ energy systems. However, how the German fight plays out has far greater implications for the rate of energy change – not just in Europe but globally – than does the UK squabbles. This is largely because whilst British and German energy systems started off in the same place in 1990, Germany has been much more effective in integrating sustainable energy policies throughout German life, including into manufacturing for exports. Germany already has credibility from its first phase of its energy policy and so this second phase is being taken much more seriously by those who are hoping it will fail. If Germany really can pull off the energiewende then it will transform its energy system and provide a role model for other countries, and this sends a very worrying message to some.
Because of this, the politics of energy in Germany have become pivotal in the run up to the general election in September 2013. The energiewende is the biggest domestic policy of Angela Merkel’s Christian Democratic Union (CDU) party, which has about 190 MPs. One of her close coalition partners is the Christian Social Union of Bavaria (CSU, about 40 MPs). One of their major constituents are farmers who are supportive of renewable energy. However, the ruling CDU have problems with their economically liberal coalition partners, the Free Democratic Party (FDP, about 90 MPs) which want to reduce the budget in support of renewable energy and to incorporate more market risk in to the support mechanism, mirroring the large incumbent energy company preferences. On the other hand, the Social Democratic Party (SDP, about 145 MPs) are very supportive of the energiewende – in fact want even stronger targets and bigger budgets – as is the Green Party with a very useful 70 MPs. This view is also supported by the branch of the German Economy gaining from the sustainable energy sectors. Other smaller political parties have a broad range of views towards energy, but the left party, again about 70 MPs, tends to vote with the SDP. In this sense, there is overall support of the energiewende.
It is the dispute between the Ministry of Economics (the equivalent of the Treasury) and the BMU (the equivalent of DECC) which is providing the greatest uncertainty of outcome. The Ministry of Economics is run by Minister Rosler – head of the FDP – and responsible for energy efficiency while the BMU is responsible for renewable energy and run by Minister Altmaier, a CDU MP. Although renewable energy is only one dimension of the energiewende, its costs have become very contentious. As a result of this, much of the debate about the future of the energiewende has been about the future level and type of support for renewable energy, and this is now coming to a head. While Angela Merkel is in support of the energiewende and renewable energy, she also does not want to be portrayed as not caring about energy prices or as being supportive of policies which undermine the economy. A meeting on 21 March between Merkel and the various Ministries and Ministers is to decide what changes, if any, are to occur to the renewable energy support mechanism, as well as the other all important dimensions of markets and networks.
In the run up to this meeting, and then the election, we can expect more and more intense arguments about the energiewende. Overall though my money is on its continuing momentum.
Firstly, the September election is primarily between the CDU and the SDP – and the latter are more pro-environment than the CDU so the CDU cannot back down too much on the environment if they hope to retain the middle ground.
Secondly, Germany makes far more money out of the sustainable energy sector than Britain does, employs far more people, and has far more investors involved in it. As such it is politically difficult to make changes which are too fundamental. Moreover, while newspapers have made much of the wasted costs to the German consumers of supporting photovoltaics (PV) because some German PV panel manufacturers went bankrupt as a result of imported, cheaper Chinese PV panels, the reality is that Germany is still ahead in terms of next generation PV, PV building materials, and the manufacturing equipment needed to make the panels.
Thirdly, the fight back against the negative, and often fabricated, reports of the costs and impacts of the energiewende has begun. There are far more people working in energy research or think tanks in Germany (estimated to be around a 1000 people) than in Britain and primarily in support of the energiewende. In addition, a new energy research forum in support of the energiewende has just been formed by the German research councils made up of 180 universities and 120 research institutions. Together, it seems likely that they can counter ill-informed reports, even if not stopped, and practical operational and design issues can find positive solutions.
Finally, Germany is confident in its ability to make ‘big’ transformative changes following on from the re-joining of east and west Germany in 1990, and also has a very large chunk of society which actively wants it to happen.
Sustainable energy policy and its operation has come of age. Real fights for energy system dominance between the ‘old’ and the ‘new’; between the ‘past’ and the ‘future’ are happening and becoming tougher. Some countries are more sustainable than others. Setbacks to flexible, smart sustainable energy systems may happen in some countries – such as is happening currently in the UK – and lobbies and incumbents may do their best to keep the old system going. Slowly, incrementally but surely the ‘new’ system is winning around the world. Germany’s energiewende – mistakes, scope and all – is unlocking the next stage of the sustainable energy transition. We cannot know what that ‘new’ system will be but all the evidence points to smaller, nimbler, more integrated approach to energy provision. It may take a decade. It may take 40 years but without doubt the future is some system more related to the German energiewende than it is to that of Britain’s electricity market reform.