What is the energiewende?
Germany is pioneering an epochal transformation called the Energiewende - an energy revolution that scientists say all nations must one day complete if a climate disaster is to be averted. Among large industrial nations, Germany is a leader. This change was accelerated after the 2011 meltdown at Japan’s Fukushima nuclear power plant. Germany agreed that an electricity production by renewable energy sources is the way to not only avoid atomic energy, but also CO2 emissions by replacing former atomic power plants and fossil fuel power plants by plants producing energy from renewable sources.
Preliminary Gross electricity generation in Germany in 2015
Preliminary Gross electricity generation in Germany in 2015
Source: Working Group on Energy Balances, status: December 2015
what are some of germany's tools?
Germany's energy turnaround to a renewable energy supply is characterized by a strong and differentiated promotion system. The following examples present some of Germany's main policies for clean energy.
1. nuclear phase-out
The nuclear phase-out is a central part of Germany's Energiewende. Germans view nuclear as unnecessarily risky, too expensive, and incompatible with renewables. In 2022, the last nuclear plant in Germany is to be shut down; at the beginning of 2011, 17 were in operation; in early 2016, nine were still online.
A nuclear reactor at Kalkar was finished just before the 1986 explosion at Chernobyl, Ukraine—and never used. It’s now an amusement park with a ride in what would have been the cooling tower. Fear of nuclear power spurred Germany’s transition.
2. the renewable energy sources act (eeg)
The main basis of the implementation of a mix of renewable energies in Germany is the Renewable Energy Sources Act, Erneuerbare-Energien-Gesetz (EEG). The EEG is now in force since 1 April 2000 and was last revised in 2014. Since the adoption of the EEG, the proportion of power generation accounted for by renewable energy has risen from 6% in 2000 to 32.5% in the first half of 2015. Germany wants to tap more of its potential to boost electricity generation from solar and wind energy and to substantially expand the use of renewable energy. The EEG sets very ambitious targets. For instance, Germany plans to get at least 40 to 45 percent of its power from renewables by 2025, and at least 80 percent of its power from renewables by 2050.
The EEG provides certain regulations which enable the installation of decentralized power plants by private and professional operators at a reduced risk:
The EEG provides certain regulations which enable the installation of decentralized power plants by private and professional operators at a reduced risk:
1. Renewables have priority on the grid: The runners of electric grids are obliged to connect new EEG-power plants to the net, to use their electricity as a matter of priority, and to reimburse their electricity according to the law. Grid operators are required by law to purchase renewable power, with the (intended) result being that conventional power plants have to be ramped down – in the process, renewable power directly offsets conventional power production.
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2. Fixed tariffs for operators for electricity feed-in for 20 years: Feed-in tariffs (FiTs) are a policy mechanism designed to accelerate investment in renewable energy technologies by providing them a fee (a "tariff") above the retail rate of electricity. In other words, investors in renewables receive sufficient compensation to provide a return on their investment irrespective of electricity prices on the power exchange
hence FiTs guarantee long-term price contracts. |
How are FiTs calculated?
First, to get the cost of a particular system per kilowatt-hour, the costs are divided by the number of kilowatt-hours the system can reasonably be expected to generate over its service life (generally 20 years). Then, whatever the wanted return on investment (ROI) is gets added. This is the feed-in tariff. In Germany, the target ROI is generally around 5-7%.
FiTs are intended to be reduced over time as renewables become more cost competitive with traditional energy sources. A reduction in feed-in tariff rates has already begun in Germany.
FiTs are flexible
This approach allows distinctions to be made between:
a) technologies (such as solar, wind, and biomass)
b) system sizes
A giant ground-mounted photo voltaic array on a brownfield will produce electricity that is cheaper than power from a large number of distributed solar rooftops on homes. By offering different feed-in tariffs for different system sizes, the economic viability of the various applications can be ensured, thereby preventing disproportionately high profits for large projects.
Those taking advantage of FiTs need not be companies. For example, homeowners who install solar panels could sell any excess energy back to their utility at a set price.
FiTs provide long-term reliability for investors
This approach increases investment certainty as a feed-in tariff is usually guaranteed for 20 years.
The EEG revision of 2014
The Renewable Energy Sources Act built a platform for the expansion of renewables, enabling them to emerge from a niche to become one of the mainstays of Germany's power supply, generating more than 30% of its electricity. However, the rapid expansion also resulted in a rise in the surcharge imposed under the Renewable Energy Sources Act (EEG surcharge). This means that the energy prices for consumers were steadily increasing as they had to compensate for the FiTs. Now with the revision, the financial burden is distributed fairly. A third of the EEG surcharge is financed by
First, to get the cost of a particular system per kilowatt-hour, the costs are divided by the number of kilowatt-hours the system can reasonably be expected to generate over its service life (generally 20 years). Then, whatever the wanted return on investment (ROI) is gets added. This is the feed-in tariff. In Germany, the target ROI is generally around 5-7%.
FiTs are intended to be reduced over time as renewables become more cost competitive with traditional energy sources. A reduction in feed-in tariff rates has already begun in Germany.
FiTs are flexible
This approach allows distinctions to be made between:
a) technologies (such as solar, wind, and biomass)
b) system sizes
A giant ground-mounted photo voltaic array on a brownfield will produce electricity that is cheaper than power from a large number of distributed solar rooftops on homes. By offering different feed-in tariffs for different system sizes, the economic viability of the various applications can be ensured, thereby preventing disproportionately high profits for large projects.
Those taking advantage of FiTs need not be companies. For example, homeowners who install solar panels could sell any excess energy back to their utility at a set price.
FiTs provide long-term reliability for investors
This approach increases investment certainty as a feed-in tariff is usually guaranteed for 20 years.
The EEG revision of 2014
The Renewable Energy Sources Act built a platform for the expansion of renewables, enabling them to emerge from a niche to become one of the mainstays of Germany's power supply, generating more than 30% of its electricity. However, the rapid expansion also resulted in a rise in the surcharge imposed under the Renewable Energy Sources Act (EEG surcharge). This means that the energy prices for consumers were steadily increasing as they had to compensate for the FiTs. Now with the revision, the financial burden is distributed fairly. A third of the EEG surcharge is financed by
- private households,
- a third by commerce, trade, and services,
- and a further third by industry.
3. environmental taxation
What is a carbon tax?
"Tax the bads, not the goods" - an environmental taxation raises taxes on environmentally unfriendly activities (such as fossil fuel consumption). Additionally a carbon tax is also revenue-neutral as the tax revenue can be used to lower the costs of something society considers good. Germany introduced a set of eco-taxes in 1999.
"Tax the bads, not the goods" - an environmental taxation raises taxes on environmentally unfriendly activities (such as fossil fuel consumption). Additionally a carbon tax is also revenue-neutral as the tax revenue can be used to lower the costs of something society considers good. Germany introduced a set of eco-taxes in 1999.
What are main characteristics of the German eco-tax?
As of 2007 (the last time it was changed), 65.45 cents was charged per liter of gasoline, for example, roughly equivalent to around 2.50 euros (more than three dollars) per US gallon. In other words, Germany’s petroleum tax alone costs roughly the same as gasoline itself does in the United States, for instance, and we still need to add on sales tax!
This illustration below shows how Germany uses the eco-tax for funding renewables and lowering payroll taxes.
- Revenue neutral
- Using the tax revenue: a) some of the revenue went to a budget that funded renewables and b) most of the revenue was used to lower payroll taxes
- Broad tax base (gasoline, electricity, oil, gas)
- Step wise introduction (5 steps between 1999 and 2003)
- Win-win situation: incentives for reducing conventional energy consumption and job creation
As of 2007 (the last time it was changed), 65.45 cents was charged per liter of gasoline, for example, roughly equivalent to around 2.50 euros (more than three dollars) per US gallon. In other words, Germany’s petroleum tax alone costs roughly the same as gasoline itself does in the United States, for instance, and we still need to add on sales tax!
This illustration below shows how Germany uses the eco-tax for funding renewables and lowering payroll taxes.
Was it successful in Germany?
According to Green Budget Germany, which lobbied for the eco-tax, fuel consumption dropped each year during the implementation of the eco-tax, and the number of people using public transportation increased every year. Likewise, sales of efficient cars also increased each year. In addition, payroll taxes dropped by 1.7 percent, and less expensive labor is estimated to have led to the creation of 250,000 new jobs.
According to Green Budget Germany, which lobbied for the eco-tax, fuel consumption dropped each year during the implementation of the eco-tax, and the number of people using public transportation increased every year. Likewise, sales of efficient cars also increased each year. In addition, payroll taxes dropped by 1.7 percent, and less expensive labor is estimated to have led to the creation of 250,000 new jobs.
4. Renewable Energy Heating Act and Market Incentive Program (MAP)
What is the Renewable Energy Heating Act?
Passed in 2009, this act aims to increase the share of renewable heat to 14 percent by 2020. New building owners – private persons, firms, and the public sector, even if the building is to be rented – are required to get a certain share of their heat from renewable energy systems (such as solar collectors, a heat pump, or a wood-fired boiler). The owners can choose how to meet these obligations at their discretion. Those who do not wish to use renewables can use more insulation or get heat from district heating networks or cogeneration units. The Renewable Energy Heating Act only applies to the construction of new buildings as a renewable heating system can be planned from the outset. |
What is the Market Incentive Program (MAP)?
The MAP was originally instituted in 2000. It primarily supports renovations of heating systems of existing buildings. Homeowners, small and midsize businesses, freelancers, and municipalities can apply for special funding for the following types of systems:
Potential Problem For 2015, the MAP has a budget of more than 300 million euros. Because it is a budget, the MAP is vulnerable to the mood of politicians, who may want to discontinue it if they suddenly need to cut spending. |
Renewable energy and employment
It is widely known that the positive impacts of an increasing share of renewable energy on the mitigation of climate change as well as on the decrease of the dependency of energy imports are indisputable. However, any policy strategy also needs to be measured by its net impact on the labor market. Unemployment rates at the beginning of the 2000s of around 10% shifted Germany's focus on labor market effects.
The graph below shows shrinking unemployment in Germany. Some experts attribute this positive development of net employment to the effects of renewable energy sources and sustainable usage of energy.
The graph below shows shrinking unemployment in Germany. Some experts attribute this positive development of net employment to the effects of renewable energy sources and sustainable usage of energy.
source: tradingeconomics.com
prospect
Since the adoption of the Renewable Energy Sources Act, the proportion of power generation accounted for by renewable energy has risen from 6% in 2000 to 32.5% in the first half of 2015. However, changing to a regenerative energy supply, many problems concerning different times of energy production and energy needs, storage technologies as well as grid adaption will have to be solved.
Will renewable investment costs become cheaper?
The figure below shows the results of a meta-study (summarizes 11 studies of 2009-2011) by the Potsdam-Institut für Klimaforschung e.V. (PIK) on behalf of the Umweltbundesamt that analysis investment costs of electricity plants of today and 2050. According to the study, the costs of renewable ernergy production will decrease in the long-run.
Specific Investments of Renewable Energies (UBA, 2012)
The figure below shows the results of a meta-study (summarizes 11 studies of 2009-2011) by the Potsdam-Institut für Klimaforschung e.V. (PIK) on behalf of the Umweltbundesamt that analysis investment costs of electricity plants of today and 2050. According to the study, the costs of renewable ernergy production will decrease in the long-run.
Specific Investments of Renewable Energies (UBA, 2012)
Further reading
Many tools such as the Emissions Trading System, the Cogeneration Act or the Act on Accelerating Grid Expansion are not mentioned here. Those two websites provide excellent information for further reading.
http://energytransition.de/
Federal Ministry for Economic Affairs and Energy
http://energytransition.de/
Federal Ministry for Economic Affairs and Energy