Wind Energy

German Renewables Sector Overheating

merkel wind-Imago
Some winds are blowing against Chancellor Merkel's plans to rapidly expand renewable energy.
  • Why it matters

    Why it matters

    The faster-than-expected expansion of renewable energy in Germany has sparked fears that the resulting costs to consumers will rise too fast, and that the construction of modern power lines can’t keep pace.

  • Facts

    Facts

    • The government expects that it will reach its goal of 40 percent renewable energy generation in 2020 — five years ahead of schedule.
    • Conservative lawmaker Michael Fuchs told Handelsblatt that the expansion could increase subsidy costs for renewable energy to €30 billion per year in 2018 from €25.7 billion.
    • German energy reform think-tank Agora has proposed that Germany phases out all coal-fired power generation by 2040.
  • Audio

    Audio

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Robert Habeck is a big fan of renewable energy. The energy minister of the northern German state of Schleswig-Holstein has a vision of a land crowded with wind turbines. By 2025, he wants his state to produce three times more power from renewable sources than it consumes, putting it at the forefront of Germany’s drive to expand renewable energy.

It’s not an unrealistic plan by the Green party politician, who wants to become his party’s leading candidate in the 2017 general election. The expansion of power generation from wind, sun and biomass is advancing so rapidly across Germany that the Federal Economics Ministry is forecasting that renewable energy will reach a share of around 40 percent of total power generation as soon as 2020.

That’s according to a letter by the ministry to lawmakers from the ruling conservatives in the German lower house of parliament, or Bundestag. It means Chancellor Angela Merkel’s government is well ahead of schedule in its energy transition, known as the “Energiewende,” launched in 2011 — a bold plan to phase out nuclear power by 2022 and wean Europe’s largest economy off fossil fuels by 2050.

“Electricity should increasingly come from renewable energies, no one’s questioning that. But the growth we’re currently seeing exceeds all sensible dimensions.”

Michael Fuchs, Deputy leader of CDU Parliamentary Group

In 2014, when the government amended the renewable energy law to make it more affordable, it foresaw a share of renewables of between 40 and 45 percent by 2025. That target corridor was seen as being set in stone. But now it’s set to reach the lower limit of that goal as many as five years earlier, sparking criticism from some in Ms. Merkel’s government because it means that the expansion will boost costs.

“We’re talking about a rise in subsidy costs from €25.7 billion ($28 billion) per year to possibly €30 billion in 2018,” Michael Fuchs, deputy leader of the conservative parliamentary group, told Handelsblatt. Mr. Fuchs demanded that the expansion should be slowed down and synchronized with the construction of power lines. The construction hasn’t been keeping pace, causing problems because it means the ever-fluctuating generation of wind and solar power can’t always be integrated into the power grid efficiently.

Everything is going faster than planned. When the government amended the law in 2014, it set a target corridor for new onshore wind power of 2,500 megawatts per year, equivalent to two large coal-fired power stations. But according to industry estimates, wind turbines with an output of 3,600 megawatts were installed in 2015. Official estimates will be released at the end of the month.

It’s a problem because the expansion of renewables is partly financed via a surcharge on electricity bills, which rises automatically in line with demand for subsidies.

The surcharge multiplied to a record of 6.24 cents per kilowatt hour in 2014, up from 3.59 cents in 2012 and from 0.41 in 2003. For an average household that meant an annual surcharge of €216 on their power bills last year. In 2000, it was €2.80.

The government took steps in 2014 to slow the expansion, which included cutting back subsidies. Evidently, though, the changes aren’t having the desired effect.

“Electricity should increasingly come from renewable energies: no one’s questioning that. But the growth we’re currently seeing exceeds all sensible dimensions,” Mr. Fuchs said.

Wind farm Ingo wagner DPA
Germany’s wind farms keep growing. Source: Ingo Wagner/DPA

 

He criticized the economy ministry for calling a renewables share of 40 percent by 2020 sensible. “That puts us 14 billion kilowatt hours above our upper target,” he said, adding that the costs of subsidising renewables were at risk of getting out of control.

Meanwhile, the government is working on another amendment to the renewable energy law. At present, the law sets fixed feed-in tariffs for power generated by wind turbines, solar plants, hydroelectric and biomass plants.

The planned change calls for a tender system in which investors who accept the lowest feed-in tariff for renewable power will get approval for their new power project. The government hopes this scheme will make power from new renewable plants significantly cheaper. But exceptions are to be granted for operators of small plants.

The Achilles Heel of the whole process, however, is the slow expansion of the grid. The government’s latest grid development plan notes a need for “optimization and reinforcement measures” for existing power lines over a length of 3,050 kilometers and for new construction projects over a length of some 2,750 kilometers.

A 2009 law ordered the construction of 1,876 kilometers of new lines — but by the end of 2015 only 558 kilometers had been built.

At present, coal mining — lignite and black coal — still accounts for more than 40 percent of German power production. German energy think tank “Agora Energiewende“ on Monday presented a paper envisaging the complete phase-out of coal-fired power by 2040.

The group recommends switching off aging plants from 2018 and allowing newer, more efficient ones to carry on until 2040. It said the government should provide €6 billion in structural aid for the regions affected by the shutdown, adding that it was essential that no new lignite mines be developed in future.

The government listens to Agora because its director, Patrick Graichen was a senior official in the environment ministry until 2012 and is regarded as a close confidant of Deputy Economics Minister Rainer Baake, a former Agora director.

To allow the government to meet its energy transition goals and to safeguard the supply and affordability of electricity, Agora proposed that coal-fired power generation be scaled back at an initial rate of three gigawatts at most per year — equivalent to two or three large power plants — and that this step begin in 2018.

The proposals got a mixed response from the government. A spokesman for the environment minister called it a helpful study. A spokeswoman for Economics Minister Sigmar Gabriel said it wouldn’t make sense to phase out nuclear and coal power at the same time.

Energy experts said Agora’s plans are realistic though. They take into account the political implications of a phaseout and include structural development considerations, Harald Hecking, the director of ewi Energy Research & Scenarios, told Handelsblatt.

 

Klaus Stratmann is the deputy bureau chief of Handelsblatt in Berlin and covers the energy market. To contact the author: stratmann@handelsblatt.com

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