New Thinking: Managed disruption – the push and pull of policy in Germany

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New Thinking: Managed disruption – the push and pull of policy in Germany

CM cropped medManaged disruption – the push and pull of policy in Germany

Catherine Mitchell, IGov Team, 22nd April 2015

A recent series by Thomas Elmar Schuppe (see Part 1, Part 2 and Part 3) about the energiewende in Germany illuminates the complexity of energy transformation.

As he shows, it is not just that decision-makers have had to be constantly vigilant about the unforeseen impacts of the policy – and then they must be prepared to make changes to counter those unforeseen effects. BUT also the German energy industry is continuously forced to react and adapt their businesses to these policy changes and market impacts. Part 3 powerfully illuminates just what problems have arisen for companies (RWE, E.on, Vattenfall and EnBW (the big 4)) because they did not take the right strategic decisions at the right time.

Schuppe’s series also illuminates the push and pull of policy. For example, a combination of events led to an increase in the use of lignite and hard coal in Germany from 2009, the opposite of what the energiewende intended. This then led to a determined policy push from the German government to get the energiewende back on track by resetting the policy base (Part 2). Initial estimation for 2014 is that lignite use is down 3% and hard coal down 12%. As a result of that policy resetting, and the potential forced early closure of coal plants , the fight between the ‘old’ and ‘new’ energy system in Germany has become focused on coal.

German renewable energy policy has also been changed many times, the latest suggestion being a move to an auction for renewable contracts from 2016. Given GB’s disastrous auction policy in the 1990’s, one can understand the scepticism of this from the German renewable energy industry. Again, this may have unforeseen impacts. Denmark had been the leader of wind expansion in Europe but a change in Government and policy around 2000 led to domestic stagnation. The Danish wind industry survived because of international orders. Only a change of policy has redeemed it to some extent domestically in Denmark[1]

In Germany, current Government policy seems determined to shut coal plants so that the mothballed gas plants become economic again but no-one should underestimate the policy determination required to follow this through, and even then, no doubt, this will lead to other unforeseen impacts which will require more policy resetting. This is managed disruption: the transition of the German economy from one industrial base to another, with ups and downs, but, as yet, no fundamental crises.

So policy (and their details) matter. All countries / States can expect to have a resistance to change – because the ‘old’ incumbents and technologies are the losers and naturally would prefer to neither give up ‘their’ energy markets nor change their roles.

However, Governments have to show their ‘metal’. As Schuppe’s series shows, it is not just getting a policy through (which has to be legitimate etc etc) but the Government has to continuously support the ‘new’ system by close monitoring and action through re-setting it back on course, and in the case of Germany – this has already been going on for decades. This does not mean maintaining support in some static way but support in a dynamic, knowledgeable way to incorporate unforeseen but beneficial changes as well as to exclude negative reactions.

What is happening in Germany has been forewarned since 1990, as has European energy policy in general. The overall direction of travel in Germany is what is wanted. Even so, resistance is fierce. Germany just so happens to have all sorts of issues working in its favour. Other countries are less fortunate.

Transforming our energy system implies bit by bit change – bricolage, two steps forward, one step back. But there has to be a strategic, legitimate framework which gives confidence to the overall direction of travel. So far, we lack this in the UK. What we in Britain have to hope for coming out of the 2015 General Election is an alliance of political parties which understands both how easy a transformational energy policy is on the one hand (ie just do it – there is good experience out there to model ourselves on) but also how hard it is. Either way doing nothing is not an option.

[1] Sovacool,B. Energy policymaking in Denmark: Implications for global energy security and sustainability, Energy Policy, Volume 61, October 2013, Pages 829-839.


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