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Germany Over-Achieves Again

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By John Cregg
News updates on Germany’s renewables achievements and objectives to 2020 caught my attention because I had recently drafted a policy paper on solar PV feed in tariffs in WA, and naturally a quick literature review highlighted Germany as the pace setter in clean energy policy delivery and outcomes.

Well, last month Chancellor Angela Merkel reviewed the nation’s progress on its renewables goal (comprising 17% of German energy requirements now) and laid down the gauntlet to achieve 35% of all energy requirements by 2020, 50% by 2030 and 80% by 2050. (Reuters, May 8
th, 2011).

Now in case you’re thinking that it’s no surprise given the strength of the German Green Party, don’t forget that the Greens are firmly back in opposition whereas Angela Merkel’s Christian Democratic Union (CDU) is more the ideological sibling to our own mainstream conservative party.

Now taking the comparison with Australia a little further, imagine the debate that would ensue if our biggest CO2 emitters presented a forecast akin to that below, after scenario-planning the move from fossil fuel and nuclear generation to renewables.

“RWE—Germany’s biggest producer of electricity by output capacity and Europe's largest emitter of CO2—is forecasting a fall of more than 50% in recurrent after-tax profit by 2013, compared with 2010's €3.75 billion. The company has said it intends increasingly to focus on the higher-growth markets of Eastern and Southeastern Europe and Turkey.”
(Hromadko, May 14th, 2011)

This was no fairy tale; RWE, one of Germany’s largest industrial conglomerates is understandably not happy with its business outlook; but rather than play ostrich it has been quick to adapt to future realities by investing AUS$1.4 billion per year in renewable projects since 2008.

Now at this point I have to be truthful; RWE’s troubles are not solely due to the “warm fuzzy green feeling” washing over the German government and public. RWE has heavy exposure to the nuclear sector and since Fukashima, well, the sky has sort of closed in. Within days of the disaster, Chancellor Merkel's government suspended a plan—agreed only last year—to extend the lives of Germany's 17 reactors, and instead committed to an accelerated exit from nuclear power. (Hromadko, May 14
th, 2011).

Admittedly adding to the pressure on Merkel, the CDU recently lost power in the State of Baden-Württemberg following 60 years of CDU rule, to the Green Party.  The historic result was largely seen as a referendum on nuclear power.

Now the German government is combining its push for renewables with a rapid retreat from its existing nuclear assets.

Some analysts have argued that a nuclear scale-back in Germany would prevent the country from reaching its long-term climate and energy goals. In reality, Germany is already well on its way to transitioning from nuclear and fossil fuel power to renewable energy.

Finally there’s that old economic chestnut often touted by critics, many of whom had hypothesised that Germany’s unwavering support for renewable energy would place a drag on the economy. Yes, Germany did suffer a downturn in 2008 and 2009, but the rebound was rapid. Germany’s export-led recovery added 3.6% to GDP in 2010, giving Germany the strongest export growth in three decades. (Focus economics, 2011). What’s the point? Well in a country where the key export sectors are energy and carbon intensive—heavy machinery and components, diversified industrials, cars and chemicals;  think BMW, BASF, Siemens,
Bosch, Thyssen Krupp, and MAN—any government would be very wary of killing the geese that lay the golden eggs through punitive energy policies.

Germany’s 20-year affair with renewables quite possibly gives the nation the confidence and expertise to transition such an energy-intensive economy. For example Germany is expected to become the first nation to reach broad scale grid parity on PVs by 2012-2013. (FME, 2007)