By Kyra Ward
Economics & International Relations Student
In June of this year, Germany made the unprecedented move to scale back on its world-class green energy sector. One of its radical renewable energy programs Energiewende (literally translating to energy revolution/transition) is taking substantive budget reductions and restructuring. As a country on the forefront of the transition to green energy sources, this raises a number of questions. Has the progressive energy policy been ineffective? How did it affect the economy of Germany? And most importantly, is Germany a model for other countries in terms of the future of renewable energy, or does it stand as an example of how green energy isn’t cost effective enough to exist in today’s society?
Germany has historically been on the forefront of green technology. Since 1995 it has dedicated itself to reducing carbon emissions and using greener renewable technology to replace traditional energy production. The country is also a signed member of the Kyoto Protocols of 1997 and met its goal of a 21 percent emissions reduction in 2008: a full four years ahead of schedule. For a country where being on time means being early, this comes a no surprise.
While the reduced emissions were a good thing for Germany, most of its energy still came from nuclear power. But it wasn’t until after the Japanese nuclear meltdown at Fukushima in 2011 that Germany became serious about making green energy its mission. The main mechanism of change from regular energy sources to renewables in Energiewende is the Feed-in Tariff program named, “German Renewable Energy Sources Act” otherwise known as the EEC. A Feed-in Tariff program is one in which the government mandates that transmission utility companies are decreed to buy energy from renewable sources, primarily wind, solar and hydro, at a ‘tariff’ rate over the course of 20 years. This program had immense success, and by 2014, 30% of all electricity came from renewable sources a direct result of the EEC.
However, this progress wasn’t without the cost. With the global recession in 2008, Germany was also hit and their economy suffered. The good news is that, likely, the EEC programs are not the cause of the German economy’s slow growth, but rather the slow growth of Europe as a whole, which has continuously hurt German exports (55% of which go to the UK). The bad news is that the incredibly high energy bills for the German citizens, approximately €22 billion (the second highest in Europe) have suppressed consumption and as a result the EEC has the potential to indirectly slow GDP growth into the future.
Germany has historically been on the forefront of green technology.
It is for these reasons and others that the German government has decided to limit the current boom in the renewable energy sector. Whereas before an unlimited amount of German companies could create and benefit from the Feed-in Tariff program, according to the Wall Street Journal, the new legislation requires, “generators of renewable energy to submit bids on a restricted number of projects as of 2017…” The reasoning behind the shift is that rather than charging a flat rate, the bidders will have to propose their own rates and the utility companies will be able to choose the lowest one. This increases competition in the green market sector of the economy, but it also disincentives companies from looking into expanding into green energy options. This also opens the market for other energy resources like fossil fuels and coal, which provide a much cheaper energy cost, albeit at a much higher environmental cost. These industries, which were hurt with the boom of green manufacturing, now are allowed some protection under the new bidding paradigm.
The new legislation also puts a cap on the amount of wind generators that can be built in the north of Germany. This is primarily because the energy grid has not caught up to the supply, causing companies to buy electricity that goes to waste because of the lack of infrastructure. While this legislation will allow Germany to hit its goal of 45% of renewable energy by 2025 it also makes it the maximum that renewables are able to produce.
Given the current realities of climate change, the aggressive green policy that Germany has put forward should be a model for the rest of the world. Understandably it is also equally hard to convince a population, especially in a time of political turmoil and economic downturn, that high-energy prices are in their best interest and that in the future it will benefit everyone. Because of this it seems that Germany is backing off many of their progressive goals on renewable resources, something that comes as a great loss to the advancement of green economic policies.
Given the current realities of climate change, the aggressive green policy that Germany has put forward should be a model for the rest of the world.
There is still a silver lining. The programs that Germany put in place since 2001 have created a much more energy efficient and booming green technology sector. As the technology continues to grow and the rates of energy continue to decline renewables may just surpass other energy sources naturally. Germany has by no means abandoned its green agenda, and still has a strong commitment to combatting global warming, both domestically as well as globally. With the weakened economy these setbacks, while necessary, are only temporary until the economy can sustain more aggressive green policies. Far from a failure the green energy sector in Germany is a success story in its own right. Going from using 6.3% renewable energy in 1990 to now with 30% Germany shows what progress you can make in as little as twenty years.
In battling climate change Germany stands as the future of energy and its intersection with the economy. As climate change becomes an ever more dangerous reality, the entire world needs to follow Germany’s example and start investing in green energy.