Introduced in 2000 by the coalition of Social Democrats and Greens (1998–2005), Energiewende became the blueprint for Germany’s ambitious energy policy goals towards “an environmentally sound, reliable and affordable energy supply.”1 Energiewende was first used in a publication of the German Institute of Applied Ecology in the 1980s. It described how growth could be decoupled from energy consumption2 and offered an alternative to “Limits of Growth,” published in 1972 by the Club of Rome. With its energy policy statement in September 20103 and the resolutions on accelerating the energy transition in summer 2011, it entered first national and then international policy discourses. The goals are based on a paper published by the government in 2007. Priority measures include the expansion of renewable energy, decentralised power generation, intensified development of electricity grids, and higher energy efficiency.

Source: German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety.4

These policies, however, seem unrealistic, especially considering that Germany, one of the world’s economic powerhouses, generates only 30 percent of its energy with internal resources.5 Germany is highly dependent on imported raw materials to run its export-oriented industry. In 2016, the country imported 98 percent of its mineral oil, 92 percent of its gas and 93 percent of its hard coal to produce its total energy,6a historic fact due to the tension between energy-intense industries on the one hand and low natural resources on the other. In 1961, the first nuclear power plant was established, and this technology seemed to offer a solution for issues concerning both national security and reliable energy for a flourishing industry.7 However, following the incident involving the nuclear reactor in Fukushima in Japan, the future of this technology was officially buried.

Today, the global trend seems to point in the reverse direction. According to the Global Coal Exit List, over 400 companies worldwide are planning to expand their coal activities. More than 1,600 new coal plants and units are planned or under development in 62 countries.8 If built, these new plants would increase the world’s installed coal capacity by over 42 percent.9 The same trend is observed in nuclear energy. About 440 nuclear power reactors are currently operating in 30 countries, and 50 new power reactors are under construction in 13 countries, notably in China, India, UAE and Russia.10 Most reactors currently planned are in the Asian region, with fast-growing economies and rapidly rising electricity demand. In all, over 160 power reactors are on order or planned, and over 300 more have been proposed.11

While the rest of the world might be ramping up conventional sources of energy, Germany strives for the opposite. There are three aspects to be conceded, which offer both critics and supporters of the energy transition a viable argument:

1.     Against many critical voices, Germany has exceeded its planned capacities in renewable energy.

2.     Several targets such as energy productivity, consumption and share of renewables in the transport sector have not been met.

3.     The central goal of a 40-percent reduction in GHG emissions until 2020 will not likely be met due to the current gap between quota and target.12

Figure 1: Overall Assessment by Expert Commission on Meeting 2020 Targets

Source: Monitoring Report 2016/cleanenergywire.13

In a 2014 survey, Indian experts described Energiewende as “extraordinary, […] setting benchmarks worldwide” but also acknowledged that “Germany is implementing its transition at an unusually quick pace.”14 The German public, on the other hand, sees Energiewende as an unavoidable and necessary step. The current progress is perceived as unsatisfactory, with plenty of room for improvement: 88 percent of the German public supports the energy transition and is critical of the foreseeable failure to meet the 2020 emission goals. Most supporters of all parties represented in the German Parliament back this project. Even among the 77 percent of people who are sceptical about climate change, Energiewende and its 2050 goals15 are not questioned. Around 63 percent of the whole population advocates for an exit from lignite, the largest contributor of GHG emissions in Germany.16 A study initiated by the German Industry Federation (BDI) has concluded that the 2050 goals might be realistic if political engagement is intensified.17

In 2011, the German Advisory Council on the Environment (SRU) ran eight scenarios and came to the conclusion that a transition to 100 percent renewable energy by 2050 is possible.18

In this context, the following questions must be answered:

 A)      How  can  the  establishment  and  strong  public  support  of Energiewende be explained and why is a roll-back unlikely to happen?

B)      What is the status quo, the dependencies and developments in the European and global context?

I.                    From Bottom-up to Brussels-down

A.                 Environmental Awareness

Germany’s decision to leave the nuclear age behind and progress into a carbon-neutral future at the same time was, and still is, hard to understand for observers from abroad. While historically, the shift from one dominating power source to another—coal to fossil fuels—was initiated and driven by economic and rational reasons, Energiewende and the transition to renewables was born out of an emotional and moral civil movement against a rational and empiric global mainstream.

The roots of German environmental awareness go back to 1713, with the creation of the first comprehensive treatise on sustainable forestry.19

Later in the mid-19th century, when side effects of the industrial revolution surfaced and the effects of industrialisation on societal changes and pollution materialised, nature became a central theme in philosophy, art and science. Consequently, several foundations, institutions and policies were established over time.20 The 1960s and 1970s were dominated by the global environmental discourse. The first global oil crisis in 1973 made the dependence on fossil fuels as well as the absence of road traffic obvious for every citizen: when private transportation was temporarily banned to save fuel, it led to empty streets and clean air but also to a restriction in personal freedom. Growing environmental awareness, together with the anti- nuclear movement, shaped national and European policies. It carried the progressive-left Green Party first into a state Parliament (1979/80)21and later into federal Parliament (1983).22

Environmental policies became both an issue and an asset. Chancellor Helmut Kohl declared in 1982, “…Environmental protection is, in addition to the prevention of armed conflicts, the most important task of mankind in the coming years.”23 Later, his traditional and centre-right party, CDU, passed the Feed-in Act, 1991, which was the first feed-in tariff for renewables worldwide.24

 The nuclear accidents of Three Mile Island (1979) and Chernobyl (1986) had considerable influence on public opinion in Germany. The latter resulted in radioactive fallout over Germany and affected people’s daily lives.25 The subsequent discourse was fuelled by fear and a rising opposition against a technology which had always been praised by experts and lobbyists as “clean and safe”. Germany’s geopolitical position at the forefront of Cold War, with nuclear missiles from both superpowers based in East and West Germany, did not help in developing a positive attitude towards nuclear technology. The rising amount and unresolved long-term storage of nuclear waste raised doubts about economic feasibility and questions regarding the ethical responsibility of the current generation.

 From 1998 to 2005, the Greens did not get into the national driver’s seat but in the shotgun position beside Chancellor Gerhard Schroeder to form a centre-left coalition in the federal government.26 In those years, Germany established one of the most effective programmes in history to drive development and installation of clean energy, to compensate for a progressive nuclear exit in the short run and a fossil-fuel exit in the long run. Thus, Energiewende was born. Together with the German nuclear- power industry, a consensus about a consequent phase-out was negotiated. Although surveys of public opinion towards nuclear energy were inconclusive, the support for policies leading to a low-carbon future grew over time.27 Renewable energy sources promised to tackle both the effects on climate change and the historic dependence on resources.

 Before Angela Merkel became Chancellor in 2005, she served as Minister for Environment (1994–98). Under her leadership, the liberal- conservative coalition published in 2010 the Energy Concept.28 While the goals of the previous government were reiterated and substantiated, the former consensus on nuclear exit was redesigned. The life span of all nuclear power plants was extended by an average of 12 years. Indeed, public support for nuclear energy had gradually recovered. Most voters condoned nuclear power as long as there were sufficient security precautions and regulations.29 However, while the nuclear accident in Russia was portrayed as a result of sloppy safety management and outdated Soviet Union technology, the nuclear accident in Japan—a country with reputable high technological standards—served as proof of the intrinsic unreliability of the technology itself. Following the incident, not only public opinion turned completely against nuclear technology, it even triggered dramatic loss of support among the elites.30

Angela Merkel’s government promptly ordered the shutdown of all 17 nuclear power plants for “security assessments.”31 Subsequently, the government decided to completely phase out nuclear energy by 2022, beginning with the immediate and final shutdown of the oldest plants. Although the industry warned against nationwide blackouts and negative effects on economic growth, none of these predictions came to pass.

 Since Energiewende became the long-term energy and climate strategy, there has been no decrease in environmental awareness.

Studies conducted by the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety between 200432 and 201433 acknowledged only a “generational shift.” While the environmental consciousness from the 1960s was strongly anchored in an individual value system, the awareness of the current generation is characterised by a “post-modern” value mix; pragmatism, flexibility, adaptability and resilience (to crises) are important features. The interdependencies between ecological symptoms and social challenges on a global level become more obvious and give environmental awareness a holistic perspective with long-term goals, as opposed to the specific and narrow perspective that came with the short-term solutions of the ‘60s.The latest study in 2016 observes a continuously rising self- reflective awareness about the shortcomings of environmental strategies. The current commitments by industry and government are considered insufficient.34

B.                 Base Year

The peaceful revolution in East Germany, which had led to the German Reunification in 1990, was another grassroots movement. It played a key role for the climate discourse, not only in Germany but also in Europe and the world.

 Both sides—East and West—faced the need for environmental protection in light of the high-grade pollution caused by 40 years of socialism,35 which - like any other ideology - ranked the principles of a dogmatic and abstract theory higher than concrete political solutions in practise. The government of the unified Germany was forced to mitigate environmental standards at the European policy level for a limited time. Before, the (West) German industry was one of the most pressing lobbies for an upward harmonisation of environmental standards in the European Community (EC) to secure its competitiveness in the European market. The environmental disaster in East Germany—the former German Democratic Republic (GDR)—required a delay in West Germany’s push to promote progressive environmental standards at a supranational level. The same regulations became a burden that could not be implemented without shutting down the complete industry and power production in the East, which primarily ran on lignite power. Subsequently, Germany successfully lobbied for a transition period of six years with derogations in several areas.36

In the years after the reunion, the Maastricht Treaty, 1992 turned the EC into the more integrating European Union (EU). The majority vote was introduced also to enforce higher environmental standards more easily, compared to the unanimous agreements required before. This was an initiative of Germany, Netherlands and Denmark. In the 1992 negotiations for the Kyoto Protocol, Germany and a few other countries insisted on 1990 being the base year for commitments to reduce national GHG emissions.

What was the reason?

“The base year of 1990 was very advantageous to European countries. In the UK, you had already experienced the ‘dash for gas’ from coal - then in  Germany they merged Eastern Germany where tremendous restructuring occurred.”37

 Indeed, the 1990 base was both necessary and helpful for Germany. West German economy, which was already sliding into recession, experienced a boom by the sudden demand caused by East Germans desperate for consumer goods. In the East—within only a few years—a significant number of GHG emitters had been shut down or upgraded due to European emission regulations. This helped rapidly reduce national gross GHG emissions in a relatively short time after 1990.

 However, without the reunion, Germany—as two separate entities—would have neither achieved substantial reduction in GHG emissions nor experienced the hike in production accompanied by a rise in GHG emissions.

C.                 Legal Framework

Phasing out nuclear energy and reducing GHG emissions required a viable alternative. It became necessary to resolve tensions between affordability, security and reliability, to provide a roadmap flanked by concrete limitations and stimulations. Energiewende’s legal backbone is the Renewable Energy Sources Act (Erneuerbare Energien Gesetz, EEG) initiated in 2000.38 It guarantees long-term security for investments to overcome teething troubles, attract enough investment in renewables to stimulate mass production to achieve economies of scales, and reach a minimum share in gross power consumption of 80 percent in 2050, without further financial assistance at a later state.39

 Although EEG is perhaps Energiewende’s most powerful tool, it is only one of many others to guarantee a systematic approach, stimulate investment in renewables, and provide a reliable, clean and secure power supply. The Energy Concept, initially published in 2010, is a consistently developing “compass of Energiewende.”42It  includes additional decisions of the Parliament and European specifications, and covers all aspects from energy production to transport and consumption. It also defines the strategy to achieve these goals. German energy governance consists of acts handling over 25 aspects, accompanied by several ordinances. This integrated policy framework covers all sectors of economy and regulates everything including funding, energy security, grid development, saving and efficiency, mobility, mining, water, and emission standards.43The  transition system operators (TSO), together with the Federal Network Agency and public participation,44 develop a grid plan for electricity aligned with the current developments. It is updated every two years.45European legislation provides the supranational framework for reaching the climate goals. It sets the floor for national standards by directives and guidelines that all member states agree on, to guarantee a consistent legal sphere in the EU. The European 2050 Energy Strategy46 is based on the German Energy Concept and the lessons learned from it.

A. Flow of Funds

The reality of Energiewende is by far more complicated than the historic retrospect might offer. Both the legal framework and the figures are enormous. A total amount of €520 billion (2000–25) is funded solely by a premium on every kWh consumed.47 Grid operators must refund the producers of renewable energy with a fixed price and allocate these costs to the end consumer. The higher the difference between market prices and the guaranteed feed-in tariff, the higher the EEG allocation. Today, a regular household in Germany has an annual power bill of €1,100, of which only €185 is for electricity.48

In  addition  to  costs  for administration, tax, royalties and fees, the EEG surcharge currently has a share of around 24 percent. The industry sector profits from a liberalised electricity market (competition) and is excluded from several allocations. Moreover, energy-intensive industries can apply for an exemption from the EEG surcharge (marked in green, below). In 2017, around 2,092 energy-intensive companies opted in.49

The following comparison shows the end price for households and industry.

 Figure 3: Average Electricity Prices and the Components, in Cent Per kWh (2016)

Source: German Federal Ministry for Economic Affairs and Energy, 2017.50

However, the EEG allocation is expected to level out from 2020. The latest tenders for offshore wind already exclude any such a stimulating tool due to lower investment costs and higher efficiency.51

The electricity price does not accurately reflect the total costs. While the extra charge for renewables becomes obvious in the electricity bill, expenditures for other energy sources covered by the government (financial aid, tax benefits and other favourable frameworks) are not included and, therefore, invisible. To get a clearer picture on government facilitation, the following calculation identifies the hidden expenditures for all energy sources covered by the tax payer.

Figure 4: Government Facilitation in Billion Euro, by Technology (1970–2016)

 Energiewende seems to be an expensive adventure only at first glance: a net profit of €50 billion until 2030 and €100–500 billion until 2050 is expected as government facilitations for conventional energy is reduced to zero,53savings of social and health costs caused by conventional sources of power not included.

 It is important to take a closer look at the supply side. So far, more than one-third of renewable energy production has been from private sources: a process of decentralisation of energy, accompanied by democratisation and a spread of income.

Figure 5: Ownership of Renewable Energy Production in Germany (2016)

 However, several of these fossil-fuelled power plants were not liquidated. They deferred their availability for periods of extreme weather condition (cold reserve). Suitable reserve power plants, capable of providing the reserve service in a timely and targeted manner, are still required. In February this year, the EU agreed that Germany tenders a capacity reserve of 2 GW for the period between 2019 and 2025. This standby reserve is only to be used for covering a potential capacity deficit. To reduce the necessity for this on-demand supply in the future, electricity suppliers who are unable to meet their delivery obligations will have to pay a proportion of the total cost of the reserve commensurate to their contribution. The minimum price for suppliers who are unable to cover their obligations will be €20,000 per MWh. In 2017, the average wholesale price on the day-ahead market was €34 per MWh. As a result, suppliers will have a strong incentive to hedge their delivery obligations through forward transactions or agreements with their customers at an early stage. 56

A.                 Emissions and Growth

Current figures reveal the inconsistent and unpleasant reality of Germany’s green future. The focus on the energy sector and the transition to renewables made sense, as 85 percent of GHG emissions are generated here. However, while Germany has achieved several of its goals, some issues have come to light.

a)      Since 2009, there has been a certain stagnation in GHG emissions, with a slight increase in the second year in a row (2014–16).57 This is primarily caused by the growing transport sector.58

 Figure 6: Greenhouse Gas Emissions in Germany, by Sector (1990–2016)

Source: German Federal Environment Agency.59

b)      The growth in renewables is so high that on sunny and windy days, the energy production can cover more than two-thirds and temporarily even up to 95 percent.60 However, Germany is not yet able to distribute the renewable energy generated in the windy north to the economic powerhouses in the south.

c)      Germany is ranked only 30th in the world in Yale University’s

Environmental Performance Index (EPI).61

Compared to other

countries, it is still one of the highest emitters of GHG in Europe, responsible for 20.8 percent of GHG emissions of the EU.62

d)      The most powerful, yet one of the most energy-consuming economies in Europe, Germany still obtains approximately 54 percent of its power requirements from fossil fuels. The main polluter in the energy sector are lignite power plants, which still supply over 23 percent of the total energy produced.

 Figure 7: Gross Power Production in Germany (2016) in TWh and Total Share (Percentage)

In 2014, a McKinsey report said Germany might not be able to meet the 2020 targets due to the significant coal-based energy sector.64 While the latest report from the German government expects to miss its reduction goals in 2020 by 5.3 percent,65a study from AGORA

Energiewende, a German NGO that attracted international awareness in September 2017,66 predicts a gap of 9–10 percent or 120 million tonnes of CO2    in 2020. Indeed, if no additional climate programme is implemented by the first half of 2018, the envisioned figures seem impossible to meet.

To contextualise these statistical figures, it must be taken into account that during this period of 26 years, Germany’s GDP grew by an additional 139 percent.

Figure 8: CO2 Emissions of the Energy Sector/GDP (1990/2000/2016)

Source: Statistsches Bundesamt, 201767/ German Federal Environment Agency, 2016.68

Although these figures reflect the aspiration of decoupling growth from the emissions caused by the energy sector, the 2020 emission goals seem unreachable. In the climate discourse, economic growth has often diminished the gains in savings. As a result, the GHG gross emissions worldwide are still on the rise.

B.                 The Coal Burden

The main reason for the high GHG emissions in Germany is coal. This source of energy still provides over 40 percent of Germany’s electric power and causes—as per a study by an NGO (2016)—87 percent of GHG emissions in the energy sector (including for heat-generation purposes69 and 78 percent for electricity only), 28 percent related to hard coal, 50 percent to lignite.70

In 2016, 66 power plants71 accounted for around 78 percent of the total hard-coal consumption, the steel industry for around 20 percent. While currently only 10 percent of hard coal is from national sources, the reliance on imports will rise to 100 percent after 2018.72 In 2007, both industry and government agreed to close the remaining hard-coal mines.73 Due to deep located mineral deposits, hard coal has never been an economical source of power as the mines generate further— infinite—maintenance costs.74 This is different from lignite, which is harvested in open mines and is therefore highly cost effective. However, lignite is under public pressure as it emits the most GHG of all fossil fuels.

Figure 9: CO2 Emissions by Source in Germany Related to Power Generation (g/kWh)

Gas                                   391

Hard Coal                          863

Lignite                              1,151

Source: German Federal Environment Agency, 2017.75

Like in other countries, Germany’s policy-makers must handle the trilemma of maintaining economic growth of energy-intense industries, low national resources, and energy security. Because of Energiewende, there is now the additional dilemma that the country still relies on coal while self-determined ambitious environmental targets have to be fulfilled. In Germany, less than 20,000 people are employed in the lignite sector76 and all the 45 lignite power plants77 are in only three out of 16 states.78 Thus, the social costs for a shutdown would be relatively low. Gas, currently the only alternative source of power, is expensive and the lignite energy lobby remains influential.79

Therefore, the remaining lignite power plants might be operated as long as politically and legally possible due to the low operating costs and the price effects caused by the power surplus. Running on lignite is profitable for business and is neither a social matter nor–officially– a security matter. Nevertheless, a political decision has shifted the responsibility from national to supranational policy level and paved the way for a lignite exit indirectly and effectively.80 Germany has voted—together with other coal-intensive countries such as Czech Republic and Poland—against European regulations, which raise limiting values for particulate matter, mercury and nitrogen oxide (effective 2021). However, the German government failed to meet the deadline for recourse to the courts.81 As a consequence, more than 100 coal and lignite power plants in Europe—representing a third—have to be either closed or upgraded.82 Practically, this means that Germany has passively agreed to either shut off or retrofit all its remaining power plants within the next three years. According to a study by Energy Brainpool, shutting down the oldest and least efficient coal and lignite power plants would not jeopardise national energy security.83 However, every intervention on the supply side requires significant adjustments of the power transmission grids.

C.                 Grid Flexibility: Merging Gas and Power

The power grid is the weakest link in the chain and requires continuous investments. In the latest grid plan, the Federal Network Agency scheduled around 3,050 km of optimisation and reinforcement measures in the existing grid and around 2,750 km of new routes added until 2024.84 The expected costs are about €15 billion for the connection to offshore wind parks and €18 billion for grid enforcement on land. However, these figures do not include the additional costs for underground cables on land.85

Figure 10: Solar and Wind Energy in Germany: Installed capacity by Postal Code Area, Megawatts/Square Mile

Source: National Geographic/Fraunhofer IWES; US Energy Information Administration, German federal Ministry for the Environment; Eurostat.86

 Once developed and shaped by a centralised power generation in a concise number of major power plants, the power sources today multiply while the development of the grid lacks in quality as well as quantity.87 In the coming years, major investments are essential. To handle the volatile flow of supply and demand, the adjustment costs of the grid grew from €715 million (2016) to €1 billion (2017).88

So far, the grid seems to have kept up with the challenges. Although the strains on the grid are rising both in terms of numbers of suppliers and consumers, the incidents as well as duration of current interruption  are continuously decreasing:

Figure 11: Tabular List of Supply Interruptions, 2006–16 (Nationwide)

Source: German Federal Network Agency, 2017.89

 The conventional approach in securing national power on the supply side is a distinction between base load, medium load and peak load. The reason for this practice was a centralised power generation by plants, which cannot be regulated due to technical and/or economic reasons. A nuclear or coal power plant can only be turned on or off. However, with the rising supply of renewables, flexible power plants—most likely gas—are required to cover the “residual base.” Residual base describes the positive or negative gap between total demand and renewables (flexibles) added by current base-load plants (nuclear, fossil fuel). With a rising share of renewables (volatile supply) and diminishing amount of conventional base-load power, residual base becomes the crucial figure to be monitored and covered by:

a)     residual-base power plants (demand higher than the supply; residual base is positive)

b)     storage technologies (supply higher than demand; residual base is negative)

Flexibility in quantity and quality becomes the main attribute of “residual base.”

Figure 12: Gross Electricity Generation and Residual Load in Germany (Sample Week in April 2022 with 50 Percent Renewables)

Source: Agora Energiewende.90

In 2011, a study predicted a systemic conflict in Germany and the end of classic base-load power plants from 2020.91 Four years later, another study declared the base-load principle as outdated and insufficient for tackling the challenges of intermittence of renewables.92 In a scenario of 100-percent renewable supply, affordable and reliable storage technologies become essential. Such flexibility can be achieved by:

a)     thermal gas power plants, which can be quickly booted;

b)    smart meter technologies, which regulate supply and demand by necessity and availability;93

c)     storage technologies, e.g. thermal energy storage (TES) or power-to- X (PtX).94

The latter seems to be the most attractive as there is the necessary infrastructure (gas-transmission grid) with a tremendous capacity already in place. While the storage capacity of electricity is currently 0.6 hours, the gas transmission grid can offer a buffer of 2,000 hours or three months.95 There are several options in PtX:96

1.                   Power-to-Heat (PtH) uses surplus electricity for the heating market; simple heating elements are fed into district-heating systems.

2.             Power-to-Valuables (PtV) uses surplus electricity in industry for the targeted production of chemical products, compressed air, melting of metals, surface finishing processes etc.

3.             Power-to-Mobility (PtM) uses excess electricity to charge electric vehicles. The car becomes a power storage and feeds energy back into the power grid. Alternatively, hydrogen and methane generated from power-to-gas processes can be used for CNG and LNG mobility.

4.             Power-to-Liquid (PtL) uses surplus electricity through electrolysis/hydrogen production to usable basic chemicals (e.g. methanol). With this method, fuels can be obtained from synthetic hydrocarbons (dimethyl ester, kerosene etc.).

5.             Power-to-Gas (PtG) uses surplus electricity through electrolysis (splitting water into hydrogen and oxygen). The optional subsequent methanation (production of renewable natural gas by the addition of carbon atoms) serves as a central coupling element between electricity and gas infrastructure.

 Following the PtG approach, the existing gas and power grid becomes an asset and serves the diverse requirements of supply and demand. It only requires the necessary installations at both ends of each grid to transform one form of energy to the other. The effects of synergy are expected to be tremendous.

Source: Solares bauen GmbH. 97

A.                 Common Market

When discussing dependencies, the European context is a crucial aspect. There are two levels of the challenge to handle the indifferent power supply (and demand): national and international. The successive final shutdown of Germany’s remaining seven nuclear power plants until 2022,101 providing 13 percent of Germany’s electricity, will result in a gap of the power supply, which needs to be closed. In this context, Europe’s liberalised power market balances supply and demand in the continent. Germany can provide temporary power surplus to the rest of Europe, and in turn, power deficits in Germany can be eliminated by its neighbours’ supply. The necessary legal frame was established in 1996 when the European energy market was liberalised. From 2007 onwards, every household and industrial consumer was entitled to choose its energy supplier. 102 More and more power was crossing the borders.

Figure 14: Energy Flows: Import/Export, by Country in TWh (2017)

Source: Fraunhofer ISE, 2018.103

Germany usually consumes only 64 to 78 gigawatts of electricity daily. Conventional power plants, together with renewables, reach between 80 and 90 gigawatts on windy and sunny days.104 In other words, Germany can shut off 20 of its oldest lignite power plants only by reducing its energy exports. In case of a power shortage, several gas power plants—mostly on standby105—ensure the necessary energy supply.106

As explained in the preceding section, the principle of (national) base load is outdated and not useful, since renewables have been playing a major role. Today, the market price for electricity decides the flows of electricity. A combination of strong winds and high national demand lead to rise in prices in Europe. Base-load power plants start to export their comparably expensive electricity and become an unreliable factor as they create a national gap on the supply side. Therefore, border-crossing analyses instead of base-load calculations became the main tool to ensure national power supply. While investments into the grid are required at the national level, cross-border interconnectors to 12 neighbouring countries are the main focus and cause for disputes at the international level. Even though Europe’s energy-consuming industry profits from Germany’s exports and the general power surplus, national—often state-owned—power producers suffer from a lower wholesale price level and higher volatility, as they mostly operate expensive, centralised base-load power plants.

 Without a common (energy) market and all countries in Europe sharing their power surplus, Germany’s ambitious green-energy transition would not have been possible, simply because the industry’s energy demand could not have been guaranteed and costs would have been substantially higher. France was once the main advocate for a common, not liberalised energy market in the late ’80s.107 The massive energy surplus generated by its nuclear power capacities sold on a common energy market promised additional revenues. Back then, this policy was strongly opposed by the German power industry, which saw its national monopoly position being threatened.

B.                 Diverging Interests

In Europe, national interests still dominate the European disputes, which is clear from the latest discourse applauding a coal exit. While French President Emmanuel Macron and more than 20 other leaders of countries, states and organisations demanded a phase-out deadline of coal-generated energy and formed the Power Past Coal Alliance,108 Angela Merkel once again refused to fix any date at the COP 23 in Bonn.109

A lower rate of coal-power share corresponds to such a declaration. For instance, France derives only three percent of its electricity from coal and 75 percent from nuclear energy.110 The following table explains how national interests are influenced by the dependence on coal:

Figure 15: Europe: Energy from Coal in Percentage (Declared Exit Year)

Source: Frankfurter Allgemeine Zeitung111/Powering Past Coal Alliance.112

Germany accepts gas as a source of energy (during transition, to cover residual load). Instead, countries of the former Warsaw Pact (today, most of them are members of the EU) such as Poland, identify gas as a threat to national security because the majority share has to be imported from Russia. Gas-powered generation causes a rising dependence due to a lack of sufficient gas fields and a decrease in domestic production in the EU. Theoretically, Germany and France are not dependent on gas imports. Due to either their current spare capacity in renewables and other fossil or nuclear-fuel powered plants, both countries can even increase their electricity exports without importing gas.113

Germany has the highest gas-storage capacities in Europe114to buffer volatilities and temporary reliance on imports.

C.                 Emission Certificates

Once introduced as a flagship of the European climate policy, the EU Emissions Trading System (EU ETS) has been developed as a market tool rather than a legal regulatory instrument to influence emitters’ behaviour—a market tool that works on the simple principle of demand and supply. The more greenhouse gases (GHG) an emitter produces, the more certificates—European Allowances (EUA)—are required, or more money has to be spent on reduction technologies to save certificates. This is in theory. In practice, however, a heavy surplus of free EUA emitted in the beginning (2005)125 ruined the price as well as the goal: carbon-gas emitters, foremost energy-dependent industries, got a free ride. Others sold their certificates. High supply and low demand resulted in low prices (marked as a black line in table below):

Figure 16: Emissions, Allowances, Surplus and Prices in the EU ETS (2005–16)

Source: European Environment Agency/Point Carbon, 2012; EEA, 2017; EEX, 2017; ICE, 2017.126

With a current price tag of €5 per million tonne of CO2, this instrument is playing in the same league as the latest calculations published by the US Environmental Protection Agency (EPA) under the current Trump administration, which elaborated a price of US$1 and US$6 for a carbon certificate representing one metric tonne from 2020 on.127 The EPA under the Obama administration had set a price of about US$50 per metric tonne, 128 which was even more ambitious than the OECD recommendations of US$30 necessary to influence the emitters’ behaviour and investment strategies.129

Low fossil fuel and emission certificate prices kept production costs low and profit margins high. While once the value of Deutsche Mark rose with the demand for German products, the exchange rate of the single-currency Euro (introduced 2001) was not rising. German products were kept affordable for the export market outside Europe as the central banks cut interest rates and increased money supply to stabilise financial markets. Conditions were perfect for an export economy with full order books. Although the monetary instruments worked (so far) to stabilise the currency, the market for carbon emissions faced a crisis as the lower demand for certificates further decreased their value.

A.                 General Trust and the Moral Aspect

To tackle climate change successfully, it is necessary to consider the causes that have led to the present reality. Developed countries and their representatives today are trying to convince developing countries to adapt their strategies and reduce GHG emissions. However, reducing GHG emission might prevent economic development – the main goal of these emerging markets. At first glance, the highest emitters of GHG gross emissions worldwide seem to be obvious. A second look shows another picture:

Source: PBL Netherlands Environmental Assessment Agency.133

This leads to resistance from developing countries in the climate- change dialogue with industrialised countries. It becomes a moral and thereby an emotional issue for both sides. Since developed countries have already economically profited from over a century of industrialisation and polluting the world, the developing countries are opposed to adapt to higher environmental standards that lead to substantial economic disadvantages.

The effects of climate change (e.g. droughts, rising sea-levels and storms) will further increase. A much higher flood risk than in previous calculations has already been predicted.134 It is to be expected that every flood and storm will generate and shape the environmental awareness in developing countries. This will create tremendous pressure on politicians and industries to adjust policies, practices and business models, but also on governments of industrialized countries to increase aid and assistance. In such a high emotional discourse, rational arguments go unheard and smart transitions are hard to achieve, especially if the connection between pollution and health, or even survival, becomes an issue in political discourses. Air pollution, for example, is already today the fourth most reason for death.135

“Pollution is the largest environmental cause of disease and premature death in the world today. Diseases caused by pollution were responsible for an estimated 9 million premature deaths in 2015 – 16 percent of all deaths worldwide – three times more deaths than from AIDS, tuberculosis, and malaria combined and 15 times more than from all wars and other forms of violence. In the most severely affected countries, pollution-related disease is responsible for more than one death in four.”

—The Lancet Commissions, 2017136

In the most severely affected countries, pollution-related diseases are responsible for more than one in four deaths. Pollution disproportionately kills the poor and the vulnerable. These effects are most obvious in low- and middle-income countries, where 92 percent of pollution-related deaths occur. Children, in particular, are most affected by pollution.137

Interests—and the power to push them through—shape politics. Historically, there are several shareholders, each with different risk awareness and focus within the discourse. While industry, generating income and jobs, is politically highly influential, the German example proves that this pyramid of power can be turned upside down if people are aware of the consequences caused by their behaviour. The matter becomes essential and—especially in a democracy—empowers the masses while the influence of the elites diminishes. The Edelman Trust Barometer describes such a tendency: a loss of trust in the elites in nearly all countries.138 In the 2017 report, India was the global leader of trust, but in this year’s report, India belongs to the six countries with the highest losses.139

In other words, the detrimental effects of climate change can politicise much of the population, which would then hold the elites (government, and industry, among others) accountable and push for immediate actions. This pressure might bleed through to the developed world, which is expected to share the burden. As witnessed in Germany’s nuclear exit, these movements can hardly be rationally explained or forecasted, politically eased or moderated. Instead, more radical and costly steps become necessary or are enforced.

B.                 It’s the Economy, Stupid

Price Drops

Reducing pollution and the effects of climate change is in the interest of all stakeholders. Besides ethical issues, pollution is costly for an economy. GDP in low-and middle-income countries decreases annually by up to two percent. Additional healthcare comprises up to seven percent of total healthcare costs in middle-income countries. Welfare losses caused by pollution sum up to US$46 trillion or 6.2 percent of global economic output,140 numbers that tend to grow as more diseases can be linked to pollution over time.

Looking at the energy demand due to economic growth of developing countries, the business opportunities for renewables seem to be significant:

“Powering China and India presents a $4 trillion opportunity. These countries account for 28 percent and 15 percent of all investment in power generation to 2040. Asia Pacific sees almost as much investment as the rest of the world combined, at $4.8 trillion. Of this, just under a third goes to wind, a third to solar, 18 percent to nuclear and 10 percent to coal and gas.”141

 Referring to the major coal-sector development plans mentioned at the beginning of this paper, current figures show the opposite. World coal production dropped by 6.2 percent, or 231 million tonnes of oil equivalent (MTOE), the largest decline on record. China’s production fell by 7.9 percent or 140 MTOE, and US production fell by 19 percent or 85 MTOE to 364.8 MTOE.142 According to these figures editor Chandra Bhushan’s prediction of the beginning of “the end of coal” might be accurate.143 Even if it were not, the recent price cuts for renewable energy installation must be acknowledged in future scenarios.

 Recently, the International Renewable Energy Agency (IRENA) published a report that showed a sharp drop in electricity costs for solar power between 2010 and 2017.144