At six in the morning in the small town of Heide, Udo Balzer’s bakery is filled with the smell of fresh sourdough bread and all seems right with the world.
Mr. Balzer has been baking Germans’ beloved loaves for 30 years. He runs 10 outlets and employs 100 people. All would be dandy, if only it weren’t for energy lawmakers.
The price of electricity is going through the roof. “Fifteen years ago I paid €9,000 a month for electricity,” Mr. Balzer explained, “now it’s almost €27,000 even though I have five fewer shops.”
Small and medium sized companies aren’t eligible for the electricity discounts available to huge baking factories, so firms like Mr. Balzer’s are stuck subsidizing expensive green power. Bigger companies get subsidies to stay internationally competitive.
The bakery’s bills are just one example of all that is wrong with Germany’s feted switch to green energy. It all started off with good intentions when, 20 years ago, a coalition government of center-left Social Democrats and Greens promised to make the electricity of the future affordable, economic and climate-friendly. After the Fukushima nuclear disaster in Japan, Chancellor Angela Merkel, a center-right Christian Democrat, renewed this green promise, committing to shut down nuclear power production by the end of 2021 as part of Germany’s transition to clean energy.
That transition has turned out to be unaffordable, uneconomic and pseudo green, however.
Although solar and wind make up a third of Germany’s power supply – matched nowhere else in the world – the switch to green power comes at an absurdly high price. This year, Germans will subsidize their clean green power with €24 billion, or $25.6 billion. Plus, further billions are needed to enlarge the distribution grid and wind down nuclear power, a bill that private households and small businesses like baker Mr. Balzer will pay.
Households pay more for power than almost anywhere in the European Union. Within Germany, power prices vary by as much as 26 percent between Bonn and Dresden for example.
Still, opinion polls show nine out of 10 Germans are in favor of the “Energiewende” in theory, though they keep complaining about the price of power.
The sense of injustice isn’t confined to small businesses but spreads to households and farmers. It sets northerners against southerners, small firms against bigger companies. All say the system is unfair and ineffective.
Farmers argue that burying the cables to ship electricity to the country's more populated south and southeast will ruin their land, warming the soil and spoiling the vegetation.
Politicians and executives agree the system needs to be changed. Now, the economics ministry is reevaluating competition, grid growth and the financing regime in a process led by top German institutes like the Fraunhofer Institute for Systems and Innovation Research in Karlsruhe, the Baden-Württemberg Centre for Solar Energy and Hydrogen Research, the consultancies Consentec and Ecofys, Berlin’s Technical University and the Foundation for Environmental Energy Law. They will design new funding systems in the coming two years.
But until then, power providers and consumers are struggling with irregular amounts of green power, an underdeveloped grid and subsidies which distort the market.
One problem is flux – how the price of electricity rises and falls. Last year the price of power fell to less than three cents per kilowatt-hour, the cheapest it has been in 12 years. That is partly due to cheap coal and gas, combined with power fed into the system by wind turbines and solar cells.
These low prices are good news for industrial customers but less so for those like baker Balzer, who buy less power. That’s because the government guarantees the price it pays to green power producers. Consumers cover the difference between the wholesale price of electricity and these fixed prices through a renewable energy tax known here as the “EEG” levy. It applies to all businesses except those which are energy intensive, meaning those major bread factories that dominate Mr. Balzer’s industry and get him hot under the collar.
Besides the sense that the burden of turning green is being unfairly distributed, what also hurts the popularity of the energy transition beside the EEG levy – a quarter of the power price – are other taxes.
Household power bills list an electricity tax and value-added tax, needed by the government to fund the expansion and reorganization of the electricity networks. That’s necessary to bring green power for example from the north to the energy hungry south, where much of the country’s industry is based but little of the renewable energy is produced.
Improvement proposals floating around range from electricity products with source certification to staggering the EEG levy so customers pay less when the price of wind or solar power falls.
Another difficulty is how power production fluctuates; when it’s windy or sunny there’s more green power than on still days, or in the night. That flux is a headache for grid operators who need to balance the amount of energy in Germany’s grid, steering between days when storms send the country’s wind turbines into overdrive and days of too little, when there’s the risk of blackout.
Staff at transformers hurry to respond to weather changes, switching over if a storm arrives an hour sooner than expected, for example, to increase or decrease power station outputs or take wind generators off the grid. That’s expensive because wind power producers get paid even if the power they produce doesn’t enter the grid, another hidden cost of the switch to green.
Then there’s bringing the power wind turbines create off the north coast down to the factories dotted through the more populated southern Germany. Many countries transmit power through pylons, but this prospect is wildly unpopular. Citizens lobbied for the power transmission lines to be buried underground, driving the cost of expanding Germany’s electricity highway sky high.
Not everyone is happy with the solution. Farmers argue that burying the cables underground will ruin their land, warming the soil and spoiling the vegetation. It’s also far more expensive; the two main routes to the south and southeast will cost at least €15 billion, depending on the quality of the ground.
Then there are conflicts over who pays the bill to build up the grid. In some areas, like low-priced Dortmund in the west, the region already has a functioning electricity grid in place. So locals pay relatively little for power. Unsurprisingly, they are against standardized grid levies across Germany. “About a third of the German GDP is produced in our control zone. We have DAX companies and lots of mid-sized companies here. These SME enterprises would end up paying up to 66 percent grid levies if standardization happened,” said Hans-Jürgen Brick, chief executive of Amprion. He wants to see the grid expanded more quickly, saying it would cut costs in the long term.
The conflict won’t be resolved any time soon. As lawmakers prepare for national elections on September 24, they are reluctant to touch this political hot potato. While many parties are calling for new rules, the debate has been quiet during the run-up to the May 14 regional election in North-Rhine Westphalia, the most populous state whose election outcome could offer the first serious sign of how the national elections will play out. After that, the debate is likely to get a lot livelier.
For now, politicians are dodging the bullet, while the energy lobby realizes it has a problem. At a recent meeting of the German Renewable Energy Federation (BEE), an umbrella lobby group for the renewable energy sector, they pushed ideas back and forth on ways to ease the subsidies to green energy and put an end to coal, and how to still reach the country’s 2020 climate goals.
BEE President Fritz Brickwedde predicted the government would fail to meet its targets without a major rethink. He scolded lawmakers for putting off a decision to exit coal until the next legislative period and called for ways to lighten the burden on citizens and to scrap the electricity tax.
But citizens are also taking matters into their own hands rather than leaving the energy transition to politicians and corporations. Take a little house in Albertshofen, a village in Bavaria, where Frank Stadtelmeyer is modeling the energy future. On his roof there’s a 10 kilowatt photovoltaic assembly to power his home and his two electric cars. He feeds any surpluses into the grid. Instead of paying for solar power, Mr. Stadtelmeyer makes money from it.
In his cellar, which looks a little like a power station control room, Mr. Stadtelmeyer shows off his storage battery. It links to other producer-consumers (known here as prosumers) spread across the country, storing energy and selling it to grid operators. It’s the brainchild of start-up Caterva, a Siemens spin-off launched four years ago in Pullach, near Munich.
“I don’t have to worry about rising power prices any more,” said Mr. Stadtelmeyer. Nor is he up for the electricity tax or the grid levy. Mr. Stadtelmeyer has spent about €40,000 for the solar assembly, power storage and the technology to network the systems and sees this as an investment. Each time power prices rise, it pays off that little bit more.
It feels like good-news story, but there’s a hitch: The more that private individuals such as Mr. Stadtelmeyer do, the less taxes like the grid levy or political ideas will work, harming the overall energy transition. But then, perhaps that’s the revolutionary message of the power rebels: “Fix the system or we’ll turn our back on you and create our own.”
This article originally appeared in WirtschaftsWoche where authors Angela Hennersdorf, Niklas Hoyer, Andreas Macho and Dieter Schnaas cover the energy industry. To contact the authors: email@example.com