Germany

 

COBENEFITS Factsheet Germany

Status quo energy policy

In 2000, Ger­many embarked upon a path­way to trans­form its ener­gy sys­tem with the adop­tion of leg­is­la­tion to pro­mote the so-called “Energiewende”. Efforts to reduce the country’s depen­dence on fos­sil fuel imports in the face of the 1970s oil crises, wide­spread pop­u­lar resis­tance against nuclear pow­er from the late 1970s onwards, and the emer­gence in the late 1980s of a broad social move­ment for sus­tain­abil­i­ty and cli­mate pro­tec­tion pro­vid­ed a sol­id foun­da­tion for this far-reach­ing ini­tia­tive.

Build­ing on these three phas­es, the Renew­able Ener­gy Act (2000) trans­lat­ed soci­etal impe­tus into leg­is­la­tion, cre­at­ing an envi­ron­ment that fos­tered pub­lic and pri­vate invest­ment in renew­able ener­gy gen­er­a­tion and grant­i­ng cit­i­zens a direct stake in the tran­si­tion to a clean­er ener­gy sys­tem. In this fourth phase of the Energiewende, a num­ber of enabling fac­tors were put in place, which sparked rapid inno­va­tion and cost reduc­tions in renew­able ener­gy tech­nol­o­gy and impres­sive growth of renew­able ener­gy capac­i­ty. Cre­at­ing invest­ment secu­ri­ty, devel­op­ing financ­ing rou­tines, and build­ing trust with respect to renew­able ener­gy were cru­cial to the suc­cess of this endeav­our.

With the Renew­able Ener­gy Act, Ger­many intro­duced two mar­ket inno­va­tions that opened up the elec­tric­i­ty mar­ket and cre­at­ed invest­ment secu­ri­ty and busi­ness oppor­tu­ni­ties for all. First­ly, the leg­is­la­tion assured Inde­pen­dent Pow­er Pro­duc­ers (IPPs) that they would be able to sell all of their gen­er­at­ed elec­tric­i­ty to the mar­ket by guar­an­tee­ing grid access and grant­i­ng grid pri­or­i­ty for these new pro­duc­ers. Sec­ond­ly, the intro­duc­tion of fixed feed-in tar­iffs for gen­er­at­ed pow­er for a peri­od of 20 years made the return on invest­ment cal­cu­la­ble and reli­able. This, in turn, also moti­vat­ed finan­cial insti­tutes to pro­vide IPPs with loans to start their busi­ness­es. Long-term nation­al tar­gets for renew­able ener­gy capac­i­ty also sent impor­tant sig­nals about the scope of this new sec­tor and its expect­ed growth.

Pro­vid­ing loans for solar PV rooftop facil­i­ties and oth­er renew­able ener­gy projects has since become rou­tine for Ger­man banks. But the financ­ing mod­els and process­es required did not emerge overnight; they are close­ly con­nect­ed to the spe­cif­ic char­ac­ter­is­tics of the nation­al bank­ing sec­tor and required active learn­ing on the part of both finan­cial insti­tutes and IPPs.

Energy-related Challenges and Opportunities

In Ger­many, renew­able ener­gy inno­va­tions have opened up an entire­ly new jobs sec­tor based on tech­nol­o­gy devel­op­ment, pro­duc­tion, instal­la­tion and main­te­nance (IRENA 2015). Sim­i­lar­ly, dis­trib­uted pow­er gen­er­a­tion sys­tems built around small­er-scale projects can be linked to region­al eco­nom­ic val­ue and job cre­ation. Val­ue cre­ation at the local lev­el can also be traced back to the emer­gence of cit­i­zens as renew­able ener­gy pro­duc­ers and providers. In 2013, an esti­mat­ed 47% of the over­all installed renew­able ener­gy capac­i­ty in Ger­many – totalling 33.5 GW – was in the hands of cit­i­zens, main­ly through pri­vate­ly-owned solar rooftop sys­tems and wind pow­er coop­er­a­tives. Those projects pro­vide approx­i­mate­ly 1.6 mil­lion Ger­mans with addi­tion­al income or reduce their spend­ing on exter­nal elec­tric­i­ty.

Fol­low­ing the 2013 Fukushi­ma Dai­ichi nuclear dis­as­ter, the then Ger­man gov­ern­ment decid­ed to phase out nuclear ener­gy by 2022. Coal-fired pow­er gen­er­a­tion has since been ramped up in order to main­tain the nation­al base­load pow­er sup­ply as nuclear plants are decom­mis­sioned. The result­ing increase in Germany’s CO2 emis­sions runs counter to the country’s ambi­tions to meet its cli­mate pro­tec­tion tar­gets, espe­cial­ly those relat­ed to the reduc­tion of green­house gas emis­sions. But the efforts to pro­mote renew­ables not­ed above have increased the over­all share of renew­ables in the pow­er sec­tor and demon­strate the fea­si­bil­i­ty of tran­si­tion­ing to a clean­er ener­gy sys­tem.

Despite its promis­ing begin­nings, the Ger­man PV indus­try has lost its com­pet­i­tive edge in the after­math of a sub­sidy-based boom and an out­flow of cap­i­tal towards East Asian economies. As a con­se­quence, the indus­try has entered a peri­od of mar­ket con­sol­i­da­tion and job loss­es. This under­lines how vital it is to fur­ther stim­u­late the renew­able ener­gy sec­tor and acti­vate hid­den co-ben­e­fits in the future.