Tschüß Purdue! Hallo Deutschland!

My days left here at Purdue can now be counted on my hands. I already went through my last class; I can never go back to the small room in the basement of LILY hall to discuss environmental politics with a room filled with “green-minded” students. This will be my last blog post for the class, POL 223H; but I have decided to continue blogging as I travel to Germany, in September, to experience the Energiewende personally.

As my last blog post I will be summarizing the things I have learned throughout my semester of researching about the Energiewende. A few personally-held myths that were debunked this semester are also included.

1. The Energiewende did not start because of the Fukushima nuclear disaster; the age of wind began in 1991 with the Feed-in Act, followed by the Renewable Energy Act of 2000, solar, however, did not really get started until that Act was amended in 2004. Likewise, the nuclear phaseout began in 2002 under Chancellor Schroeder. Chancellor Merkel simply reversed that policy in 2010 and then did an about-face in the wake of the disaster at Fukushima. The Fukushima disaster was a huge impetus to aggressively rally and work towards the transition.

2. The German citizens have been surprisingly in support of the Energiewende even at the expense of high power prices. In fact they have been so in support of it that they are getting frustrated by the slow progress being made and some are wrestling for federal control over the grids instead of letting it reside in the hands of self-interested private companies,

3. The companies are all left at a crossroad to decide how they want to contribute to the Energiewende. With increasing electricity prices a lot of companies are debating if they should move to more ‘economically friendlier’ countries. Companies, if they decide to move, will be taking away valuable jobs. The other direction that crossroad offer companies are to jump on an energy saving bandwagon and reduce their electricity bills or become energy independent by generating their own renewable electricity.

4. The current non-renewable electricity providers are incurring a lot of loses. Nuclear plants are being aggressively phased out and coal plants will follow suit. There is no option for them other than either close shop or also start commercially generating renewable electricity instead of non-renewable.

5. The German grid is extremely efficiently designed. The stability and flexibility of the grid can be easily seen at the low numbers of blackouts/brownouts in the country. There obviously is alway room for improvement. The “power highway” that will transport electricity generated by wind farms in the north of the country, and offshore in the North and Baltic Seas, to the manufacturing belt in the south and support the entire nation in being more energy-sufficient by sharing electricity nationally needs to be built rather quickly to keep up with the phase outs.

6. The German government have to play a balancing act. They have all the things they need –  an environmentally conscious majority of citizen, the support of most of the political parties to continue on the transition and the flexibility needed to make a transition like this successful. Reforms like the one in April are encouraging as it shows that the government realizes that there are flaws in the policy (mostly all economics) and they are tweaking it as they go to make it work while still not negotiating on the goals.

There are definitely things Energiewende is doing right and things that still need a lot of rethinking and tweaking but Germany is the only country that I believe can make the transition, be a role model and be a harbinger of a greener european union and maybe even the world. I am extremely excited to see it up close and personal as I study it deeper in Freiburg this September.

Erneubare Energien Gesetz EEG Reforms

As the electricity prices rise, Germany has been losing a lot of companies, who to avoid economic losses are moving out of Germany. The loss of jobs and high electricity prices are enough for the government to worry about losing popular support. The Energiewende needs an economical sound backbone and that is exactly what they are trying to do now.

Early April, the German government met up in Berlin to discuss the future of the Energiewende. German minister of Energy and Economic Affairs Sigmar Gabriel presented a revised draft from Merkel’s Energiewende. The updated policy declares a less-aggressive switch to renewables by limiting the expansion of onshore wind and solar capacity per year and the green subsidies; all in the hopes to hopefully slow down the increase in electricity prices.

According to the new reform of the Renewable Energies Law, by 2025 renewables are to produce 40 to 45 percent of the total energy mix, with this figure rising to 55-60 percent by 2035 (Initially it was supposed to be 50% by 2030, 65% by 2040). 

The existing 9 nuclear power plants are still scheduled to be shut down by 2022 but Germany is clearly trying to be more economically sound with the reforms. Germany clearly wants to remain an industrial economy. In place of open ended subsidies, like previously planned, Sigmar Gabriel has put in place a series of constraints. Onshore wind capacity can expand by no more than 2.5 gigawatts a year. Photovoltaics – that is solar power – are subject to the same cap. Offshore wind – the most expensive source of all – can expand by a maximum of 6.5GW by 2020. Most important of all from 2017 onwards the renewables sector within the electricity market will be subject to competition and there will be no guaranteed prices.

The European Commission, in December, announced a full assessment of EEG compliance within EU law because reductions should only be provided to energy-intensive companies that are really exposed to international competition

In April, EU Competition Commissioner Joaquín Almunia announced conditions for a possible compromise and some German firms may be required to repay refunds they had received in previous years.

“The EEG reform is not an electricity price cut. The winner of this reform is the industry,” concludes the expert from the German Institute of Economic Research who claims that the electricity price could be reduced if the industry exemptions were reduced and the stock exchange price would be stabilized by the shutdown of old and inefficient coal power plants.

The reforms seem a step in the right direction to make the transition more economically sound and by the looks of it, it seems promising. The transition is not being negotiated to the point where renewables loose but there is some inertia that will be lost. The reforms apparently may lead to the loss of some €3bn ($4.12bn) in value-creation across Germany and impede 20,000 new jobs in renewables by 2020, a study by the institute for ecological economic research IÖW commissioned by Greenpeace says. I think the reform is a balancing act; the aggressive renewable switch if continued without changes would have been extremely economically unsound.

Business: Bust or Boom?

In the last blog post, I analyzed the effects of the Energiewende on the citizens of Germany; how the consumers pay the difference between the market price of electricity and the subsidy on renewable electricity. Big companies, the backbone of the countries economy, are big consumers of electricity. This post is a succinct analysis on the effects of the Energiewende on the big companies doing business in Germany.

Electricity costs are also going up for companies, making them less competitive than their rivals from America, where energy prices are falling due to the recent fracking boom. This encourages a lot of the companies to displace their location to more ‘economically-friendlier’ countries. To forestall job losses, German government has exempts globally-competing, energy-intensive companies from paying for the subsidies. 

The analysis of the impact of the Energiewende on German businesses is complicated. Companies have been affected differently depending on their response to the energy transition. Companies like Siemens who jumped on the energy saving bandwagon earlier now make 40% of its revenues from green technology while the energy price differential between Germany and its five leading trade partners has reported to cost the nation’s manufacturing sector €52bn in net export losses for the six-year period from 2008 to 2013.

More companies have demanded exemptions to avoid economic bust. The number of officially “energy-intensive” firms has risen from 59 in 2003 to over 2,000 today. Between them they use around a fifth of Germany’s power. Companies that still do not qualify for the exemption but still use a lot of power are increasingly building their own generating capacity to avoid paying the green levy. As more firms generate their own power, fewer contribute to the high prices promised to renewables producers thus cutting in to the profit for people switching to renewables. The European Commission has started to investigate the exemptions as a possibly illegal form of state aid.

All this is happening as prices for natural gas and electricity in North America are plunging, thanks to the shale revolution, so Germany’s most energy-intensive industries are now eyeing expansion on the other side of the Atlantic. 

The German businesses are at a crossroad; they can decide to adopt greener technologies and make early investments in hope for better returns like Siemens or possibly relocate to another country. The loss in jobs, obviously not being an ideal outcome, will push the government in updating the Energiewende to improve in economic support to avoid losing companies. There are a lot of loopholes in the economics of the Energiewende. The next blog post I will be summarizing what the German government could do to improve the Energiewende, what the citizens can do to facilitate it and what the companies should do to thrive through the transition.

Examining Energiwende’s Economics

The critics of the Energiewende have repeatedly scrutnized the economic repercussions of the transition. Articles about the impeding failure of the Energiewende are scattered around the world wide web. After reading articles breaking down the horrors and victories, in the next few posts I am going to analyze the economic effects of the Energiewende on some major stakeholders of the transition, this article mainly deals with the citizens outlook to the transition.

The Energiewende is greatly facilitated by green subsidies provided by the government to make renewable energy a more feasible option. These subsidies have proven to be expensive. The difference between the market price of electricity and the subsidy on renewable electricity is paid by the consumers. Both the naysayers and yeasayers of the Energiewende agree that there has been an increase in electricity bills; An average household pays an extra  €260 ($355) a year to subsidize renewables: the total cost of renewable subsidies in 2013 was €16 billion.

hamburggrid

Hamburg citizens protesting to buy back the grid from the private companies

The high utilities bill while would be a huge negative factor in most countries, the citizens of Germany have had surprisingly an equivocal response to it. The rising bills while a deterrent for most has not garnered negative sentiments as it is seen as a necessary evil. The fact that 65% of the renewables produced are from small, privately owned sources show that the citizens are still positive towards the transition. In fact some citizens are supposedly aggravated by the slow pace of a transition that the entire world calls too aggressive. 50.9% of the population in Hamburg voted to re-communalize electricity, gas and district heating networks which are currently in the hands of multinational energy companies Vattenfall and Eon. This is majorly attributed to the fact that the citizens believe that Vattenfall and Eon — the current grid operators — don’t act in the best interest of the people and are delaying Germany’s shift to renewable energy.

Kein Konvertor

Nimbyism in Osterath

All the citizens are not gung-ho about everything that comes with the transition. Nimbyism hasn’t evaded the citizens of Germany; for instance the backwater in the Ruhr near Osterath is the proposed site for Europe’s biggest convertor station. This convertor station is an integral part of the German “power highway” that will transport electricity generated by wind farms in the north of the country, and offshore in the North and Baltic Seas, to the manufacturing belt in the south. The residents of Osterath reckoned that the proposed station will be an eye sore. A bill to determine the outlines of the new “power highway” is making its way through the federal parliament. Of 3,300 objections from the public, 2,300 are from Osterath.

Osterath is the perfect example of the opposition to the Energiewende among the citizens; people see no paradox in demanding an end to nuclear power but objecting to the new transmission grid being built in their backyard. Hamburg on the other hand is the perfect example of strong support to the Energiewende; people realize the importance of the transition and takes matters in their hand to hasten the transition and take control away from the naysayers like Vattenfall and Eon.

Proposed "Power Highway"

Proposed “Power Highway”

Even though the majority of the citizens are ready to swallow the bitter pill of high utility bills for the greater greener good. The ambivalent emotions among the citizen is indirectly contributing to the lack of co-ordination between different states. Political wrangling has made cross-country projects like the “power highway” hard to plan and harder to finance. Fifteen out of 24 grid-expansion projects are up to seven years behind schedule. The expansion is extremely important for the success of the Energiewende.

The economic effect on the next important stakeholder, big companies and existing businesses, will be analyzed in the next blog post.

 

Energiewende: Newtonian Laws Applied

You might be familiar with Newton’s three laws of motion;
as an engineer I have been force fed the laws for a few years now and I can’t help but apply the laws of physics to the policies of political science…

Newton’s first law: When viewed in an inertial reference frame, an object either is at rest or moves at a constant velocity, unless acted upon by an external force.
In simple words there is a stimulus needed to change the current state of motion. There were multiple stimulus for a switch to the Energiewende. The switch can be traced to the Feed-in Act of 1991 that started wind energy in Germany followed by the Renewable Energy Act of 2000. Solar entered the energy market of Germany when the Renewable Energy Act was amended in 2004. Nuclear energy remained a major contributor to the energy demand in Germany but the Fukushima nuclear disaster was the ‘external force’ that countered the nuclear inertia to a rapid transition to renewables.

Newton’s second law: The acceleration of a body is directly proportional to, and in the same direction as, the net force acting on the body, and inversely proportional to its mass.
There is a lot of ‘mass’ put against the Energiewende; many countries think that Germans bit off more than they could chew and the increase price in utilities and the ‘instability‘ of renewables energy is all a recipe for disaster. The opposition for the Energiewende claim that the citizens of Germany are unhappy with the transition and the rising utility bill.Contrary to popular belief, the citizens of Germany are the driving ‘force’ behind the success of the Energiewende; a survey taken on October 2013 states that 93% of citizens believe that Germany needs further growth in renewable energy. In fact 65% of the renewable electricity produced in Germany comes from small producers like citizens who are taking more initiatives to accelerate the transition even more. Thus, the successful acceleration of the Energiewende is directly proportional to the force of citizen participation and inversely proportional to the mass of opposition.

Newton’s third law: For every action, there is an equal and opposite reaction.
There is always a balance to life; Yin and yang if you must. While the switch to renewables, environmentally, sounds like a step in the right direction the economics behind such an aggressive transition is shady at best. The subsidies provided by the German government, like fixed low pricing for solar panels and windmills and renewable preference to the grid, is adversely affecting the established utilities that are involved in conventional energy generation. Consumer bills have been rising for years to finance these subsidies. An average household in Germany now pays an extra €260 ($355) a year to subsidise renewables. Utility costs for big companies are also going up, making them less competitive than rivals from America, where energy prices are falling thanks to the fracking boom. There is a change needed to counteract the losses endured by conventional utility companies and big companies. I will go into more details about the economics behind the Energiewende on my next post.

Forum_Energiewende_normal_06

Gauging Germany’s Grid

Blog

The grid is an interconnected network that delivers electricity from the suppliers to the consumer. The big debate about electricity grids is whether to upgrade it to a ‘smart’ grid or not. Smart grids are named so because it gathers information about the supplier and the consumer, like the source of electricity generated or the usage data of electricity by consumers, to make the grid more reliable and efficient. While a smart grid reduces the chances of overloading the grid, reduces brownouts and blackouts and allows smarter planning of the management of the grid it also raises concerns like the privacy of consumers’ usage, removing transparency of the supplier’s rate system and possibility of information leverage.

Smart grids are the call of our century as it allows massive potential for sustainability. The major concerns with depending on the sun shining and wind blowing to satisfy our energy demands is the intermittent nature of renewable resources. Smart grids if managed properly addresses the problem of intermittent generation; the grid in Germany prefers renewably generated electricity over any other source which gives incentives for consumers to invest in subsidized solar panels and windmills to generate their own electricity and to supply the excess to the grid, thus reducing their usage from the grid and reducing their utility bills. The grid’s “renewable preferred” operation has huge economic repercussions on conventional utility companies like coal and nuclear power plants. The trouble is that power plants using nuclear fuel or brown coal are designed to run full blast and cannot easily reduce production to adjust to the intermittent renewable energy getting added to the grid. However, environmentally this is a huge step as this increases low-carbon energy production.

The German grid has got a lot of criticism for being unreliable because it is so heavily dependent on the ‘fickle’ renewable sources. According to countries that are highly dependent on traditional power generation, Germany’s aggressive nuclear phase-out does not help in maintaining the stability and reliability of the grid because it is putting more reliance on intermittent renewable power generation. Blackouts and brownouts are proposed to be a common occurring in Germany because of their grid management but data shows that Germany has the most reliable grid than any other country.

CEER

CEER Brownout/Blackout Data for the EU

The Council of European Energy Regulator recorded all the brownouts and blackouts in the EU; Germany had the least minutes of interruptions in any of the EU countries at 15 minutes in 2010 while the US had 240 minutes of electricity interruption.

The energy policies in Germany (Energiewende) are not full-proof and has a lot of issues that still need to be debated and updated but the one thing that cannot be denied is that the smart grid in Germany has a lot of advantages and is a model that could be an example for a lot of countries in the world.

Articles to read for more information:

Smart Planet: Designing the grid for renewables

Deutsch Energiewende 101 (German Energy Policy 101)

It was the year 2011 and the calendar read the 11th of March.                 The usually calm ocean around Tōhoku, Japan brewed with an undersea earthquake that in minutes escalated into a tsunami. As if the tsunami itself wasn’t enough it hit the Fukushima Nuclear plant releasing a cloud of radioactive material once again in the air and water of Japan.

But every cloud, even a highly radioactive one, has a silver lining. The Fukushima nuclear disaster was the seed that led to aggressive changes in energy policy across the world, specially in Germany. The Fukushima nuclear disaster was the push that Germany needed to muster national support for the Energiewende (German for energy transition) as the country aggressively started shutting down nuclear plants and shifting to renewable energy (From 6.8% in 2000 to 22.9% renewable electricity consumption 2012) with the ambitious future target of 35% renewable electricity usage by 2020, 50% by 2030, 65% by 2040, and 80% by 2050.

The drastic shift that is required for such a radical transition in energy consumption obviously warranted an overhaul of the current energy policy of the country. Germany, being the largest economy in Europe, enjoys a lot more freedom of  experimenting with energy policies. The German government is approaching this overhaul in policy  extremely innovatively; regulating the transition to renewable electricity , subsidizing cost of renewable energy and changing grid policies. The Energiewende has a ripple effects on the environment (CO2 emission and pollution) and the economy (Rise in prices of non-renewable electricity).

In the subsequent weeks, I will analyze the shift in the energy policies of Germany to accomplish such a drastic energy usage transition. I will also be discussing the effects of the Energiewende on the citizens of Germany, the environment and the economy of the country.