What's Going On in Germany?

What's Going On in Germany?

If you try to read about what’s going on with Germany’s Energiewende, it sometimes seems as if you’re reading about two different countries.

Read the report from Greenpeace, for instance, and the headline says “Germany’s Energy Revolution Goes from Strength to Strength.” If you go over to The Daily Caller, on the other hand, the headline is “Germany’s on the Brink of an Energy Crisis.”

Most articles will tell you that Germans are paying a higher price for electricity than anyone else in the world – three times the rate of the United States. Yet other articles will tell you that solar and wind energy are now so cheap that they’re driving coal and gas plants out of business.

Finally, if you read Jim Conca in Forbes, he will tell you that Germany is importing 61 percent of its energy. But any number of other articles say that Germany is Europe’s largest energy exporter. Is there any way to make sense of all this? Well, strangely enough, most of the above observations seem to be true in some respect.

It all depends on how you interpret things and what you leave out in making the claim. Let’s start with the Greenpeace claim that Energiewende is going “from strength to strength.” The full headline reads, “Germany’s Energy Revolution goes from strength to strength as the Grafenheinfeld nuclear reactor closes.” It is true that the Germans were recently able to close down the 33-year-old reactor without causing any shortages on the electrical grid. This is in preparation for closing down the nation’s eight remaining nuclear reactors by 2022.

It will be a little harder to fill the hole created by that shutdown, which will cost Germany 18 percent of its electrical generating power. But what the article does not mention is that Germany has been filling the hole created by the nuclear shutdown mainly with coal. Remember, the original purpose of the Energiewende was simply to shut down the nation’s nuclear complex, not deal with climate change. That has been tacked on afterwards.

So one aspect of the effort has been the construction of eight new coal plants. And they’re not just any kind of coal plant. Germany has been relying more heavily on its abundant lignite coal resources, which just happens to be the dirtiest coal on the planet. As a result, Germany’s carbon emissions have actually climbed since it first undertook the Energiewende in 2011. Germany now gets 28 percent of its electricity from renewables, which includes wind (10 percent), biomass (9.5 percent) and solar (6.4 percent). These figures are up markedly from 2011. But it still gets 46 percent of its electricity from coal, which is only down from 53 percent in 2000.

Coal still provides as much electricity as nuclear and renewables put together. Germany’s carbon emissions did come down again for the first time in 2014. Whether this represents a trend or was just the result of a decline in industrial production has not yet been determined. But one thing that is certain is the country is preparing for the complete shutdown of its nuclear fleet with the construction of more coal. What about natural gas? The United States has been able to back out of coal and reduce its emissions level by substituting combined-cycle natural gas plants, which operate very efficiently – 60 percent energy conversion as opposed to 30 percent in most thermal plants - and much less carbon than coal because of its chemical structure.

So why don’t the Germans go for natural gas? Mainly because they don’t have any. Like the rest of Europe, they have refused to adopt the fracking technology that has led to the gas boom in the United States. Without any domestic supplies, their only alternative is to import from Russia, which is even more perilous than fracking. The Germans are already extremely dependent on Russian gas for home heating and have elected not to import any more gas for electricity. Now how about that business of electricity prices being both high or low? Well, the strange thing is that both appear to be true.

Wind and solar installations are expensive to build so the government has elected to encourage them by offering a “feed-in tariff,” which is just a fancy name for a price support. Providers of wind- and solar-generated electricity are guaranteed an above-market price whether the utility company wants the electricity or not. The subsidy now comes to $23 billion Euros annually. In order to cover this huge cost, the government has tacked a “renewables tax” onto consumers’ electrical bills. As a result, more than half of what Germans pay for electricity is to cover the renewables tax, giving them the highest electrical bills in Europe. But the feed-in tariff has another effect as well.

Because they are guaranteed a price, suppliers of wind and solar flood the market with their electricity, driving down the wholesale price to the operators of gas, coal and nuclear plants. In addition, the utilities are required to give preference to renewable energy whenever it is available. The result is that coal, gas and nuclear plants can only get a very low price for their electricity whenever renewables are available. Coal and gas plants sit idle half the time and the government has also imposed a special tax on nuclear fuel. It was this combination that put the Grafenheinfeld reactor out of business.

It is also closing older coal plants and even putting pressure on some new combined-cycle natural gas plants, which can’t make money operating on a stop-and-go basis. Two years ago paying for the feed-in tariff became so expensive that the government decided to cut it back. But effort have proved half-hearted and the tariff was reduced only 0.25 percent in recent months. The prospect of losing the price support, however, has discouraged new renewable construction and the country installed only 1.9 gigwatts of solar panels in 2014 after building 3.3 GW in 2013 and 7.6 GW in 2012.

So The Daily Caller is correct in saying that Germany appears to be on the brink of an energy crisis, since all forms of new generation are being discouraged under the current regime. There has been talk of paying a “capacity fee” to coal and gas plants to reward them for operating in a back-up mode to wind and solar even though they are not selling electricity. But Energiewende orthodoxy says that we are headed for a world where the intermittencies of wind and solar will be the norm and old-fashioned baseload plants will become outmoded precisely because they can’t make money while in a back-up mode.

A recent report from a government environmental panel stated that under the new regime there will be “no room for baseload power plants like nuclear and coal-fired power plants that have to be run at full power for technical or economic reasons.” In other words, if you can’t compete in this new topsy-turvy world where reliability has no value, you’re out of luck.

So now let’s look at that question of whether Germany is an exporter or importer of energy. Once again, the answer seems to lie in the vagaries of wind and solar energy. Power generated by a coal, gas, nuclear or hydroelectric plant is called “dispatchable.” This means it can be summoned any time it is needed. Hydroelectric dams can be dispatched instantly. Gas plants can also be fired up in a very short time. Coal usually takes about 45 minutes to get to full capacity and nuclear is so difficult to turn on and off that it’s best operated all the time. Wind and solar, on the other hand, are completely at the mercy of the elements and can disappear in an instant if the wind stops blowing or clouds hide the sun.

As a result, Germany’s electrical output is much more volatile than an ordinary power grid. Complicating the situation is that most of the wind power is being generated in the north – more now offshore in the Baltic – while the industrial demand for electricity is in the south. The Germans have not yet constructed the transmission cables necessary to balance out supply and demand. In the interim, Germany has been routing power through Poland and the Czech Republic.

Yet there is always the problem of maintaining grid balance. Supply and demand for electricity must remain within about 3 percent of each other or the grid starts to malfunction. A lack of supply causes brownouts and blackouts. A surge of supply can damage electrical equipment. In order to avoid oversupply, Germany has been “dumping” huge surges of wind power into Poland and the Czech Republic, disrupting their grids. Both countries have started building barriers in order to avoid these intrusions of excess power.

These power surges are probably what contribute to making Germany an “exporter” of electricity. But the surges are by no means manageable or predictable. Some of this excess power may eventually be routed into the elaborate pumped storage facilities that have been constructed in the fiords of Scandinavia. But for the present, the question will be how much the ups and downs of renewable energy production will spread to other countries. France is moving in the same direction, vowing under Socialist President Francois Hollande to cut its reliance on nuclear from 75 percent to 50 percent.

There is talk that France and Germany may be able to participate in an elaborate minuet in which France accepts excess German wind power in order to satisfy its self-imposed quotas for renewable energy while Germany accepts some of France’s nuclear energy in order to maintain the stability of its grid.

In any case, there seem to be a few lessons that can be drawn from Germany’s Energiewende experience:

1) Renewable energy is expensive. Any country that attempts to raise its contribution from renewable resources is going to end up paying higher prices. This is also visible in California, which has the highest percentage of renewables in the continental United States and also pays the highest electrical bills west of New Jersey.

2) Advancing renewables will require a series of regulatory rules that give special consideration to renewables while failing to reward the reliability of other generating sources.

3) At a certain point, the intermittency of renewable sources will threaten the dependability of the grid. Special measures will be required to prevent the problem from spreading to other regions.

Other than that, Germany’s Energiewende seems to be doing just fine.

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