Taking Stock

Sigmar Gabriel’s Energy Legacy

  • Why it matters

    Why it matters

    As energy minister, Sigmar Gabriel oversaw Germany’s energy transition for three years. He promised to use market forces to cut prices, but business remains skeptical on high energy costs.

  • Facts

    Facts

    • Seven years after the launch of the government’s “energy transition,” one third of all of Germany’s energy generation now comes from renewables.
    • Large power generation companies like RWE and E.ON have hurried to move away from fossil fuels and nuclear power, separating these legacy assets from renewables and networks.
    • Mr. Gabriel oversaw some change in how renewable subsidies are calculated, from standard price per kilowatt-hour to competitive tendering.
  • Audio

    Audio

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24. Handelsblatt Jahrestagung “Energiewirtschaft 2017” (P1200670)
Sigmar Gabriel speaking at the Handelsblatt Energy Conference on Tuesday, hours before the news broke that he was stepping down as SPD leader. Source: Dietmar Gust / EUROFORUM

Sigmar Gabriel’s surprising decision not to lead the Social Democrats into this year’s federal election means stepping down as vice-chancellor and economics minister.

It also brings to an end to his three years running Germany’s energy policy, overseeing its unprecedented “energy transition”—the radical shift away from nuclear and fossil fuels and toward renewable energy.

When Mr. Gabriel addressed Handelsblatt’s annual energy conference in Berlin on Tuesday morning, few in the audience knew it would be one of his last actions as energy minister. His speech, it turned out, would sum up what he claimed to have achieved during his tenure and point the way forward for his successor, expected to be another Social Democrat, Brigitte Zypries, currently a junior minister in his department.

When Mr. Gabriel took over stewardship of Germany’s shift to renewables, government support for green energy was based on direct subsidies per kilowatt-hour produced. The system proved expensive and inefficient, and is now being overhauled to a system of competitive tendering, reflecting a key theme of Mr. Gabriel’s time in office: “more market, less state.” Also on his watch, Germany launched an overarching climate plan, meant to steer green development until 2050.

“Mr. Gabriel has deliberately understated the cost problems of his energy policy.”

Michael Fuchs, Parliamentary vice-chairman, Christian Democrats

In his speech, Mr. Gabriel said he was driven by a single issue: the fact that “the sum of individual interests in the energy business will not bring about a good energy transformation and do not add up to the common good.” He emphasized what had been achieved: the change in subsidy policy, and the introduction of specific expansion plans for renewables. This led to a fall in prices, he claimed.

The center-right Christian Democrats, Mr. Gabriel’s current partners in government but his political rivals, see things quite differently. The CDU deputy parliamentary leader, Michael Fuchs, said: “The minister has deliberately understated the cost problems of his energy policy.” Subsidies for renewable energies had increased by 30 percent since 2013. “It is costing us €25 billion per year (around $26.8 billion). By 2020, the bill will be €30 billion.” The only reason why consumers had not revolted was the simultaneous fall in global prices for crude oil, gas, gasoline, and coal.

Over the last three years, Mr. Gabriel has frequently been targeted by environmentalists. Many in the wind and solar sectors predicted that a change in subsidy models would derail renewables development. So far the prophets of doom have been wrong, said Mr. Gabriel: “There has been no slowdown.” But he advised combining climate protection with moderation: “We have to be careful that we don’t do climate protection just for the feel-good factor, while inadvertently making our industry noncompetitive,” he warned.

Germany’s energy transformation is undeniable. One third of all electricity is now generated from renewable sources. The country has 26,000 wind turbines in operation, and more than 1.5 million households boast rooftop solar panels.

After much cabinet debate, the German government published its strategic climate plan at the end of 2016, launching it at the World Climate Summit in Morocco. Early, ambitious drafts from the environment ministry were watered down by Mr. Gabriel and Chancellor Angela Merkel, with all industry-specific carbon-minimization goals removed from the final plan, which lays out climate goals for the country until 2050.

In terms of energy reform, Germany still has many challenges, said Mr. Gabriel. A key question was how to accomplish climate goals when traffic and heating began to use large quantities of electricity. “Sector coupling,” as this is known, is a key theme in the Germany energy business—an integrated approach to managing electricity generation, transportation, and heating. Night storage heaters in homes were once common, but were later demonized in the name of greener energy. But Mr. Gabriel said: “We will see that everything will come back with renewable energy. But the current subsidy system will not be enough, so who will bear those costs?”

Chief executive of Innogy, Peter Terium, also speaking at the Handelsblatt conference, agreed with Mr. Gabriel’s emphasis on energy integration. Innogy, one of Europe’s largest renewable energy generators, is a successor company spun off from power giant RWE.

Mr. Terium added: “We have to accomplish a genuine energy transition. So far, we have only had electricity transition.” This would mean a much greater use of renewables in transportation and heating, he said, requiring changes to energy taxes and subsidies in those areas.

 

24 p7 Electricity Production in Germany-01

Mr. Gabriel criticized demands from the Green Party to ban the sale of non-electric cars from 2030 on. “There are 90,000 jobs in Germany dependent on diesel alone. We should set goals that do not cause so much collateral damage that we then have to think about how to pay for that.” Anyone arguing for total electro-mobility had to address the increased need for imported components, and for many more rare earth metals.” Politicians should think about companies’ investment cycles, and not engage in a race to name the earliest possible abolition date. The same went for decommissioning coal-fired power stations, he added.

His ministry last year began a consultation process on integrated energy efficiency, he said, with key economic players asked to contribute expertise and suggestions. The findings will be brought together in a new policy document by this year’s elections, Mr. Gabriel said.

Mr. Gabriel emphasized that storage is a key technology for the energy revolution’s success: he hoped the state could support it without favoring one technology over another, which could lead to inefficiencies. Also speaking at the Handelsblatt energy event, Philipp Schröder, the chief executive of Sonnenbatterie, a leading developer of electricity storage, said the management of fluctuating energy supply and demand was crucial. He hoped to equip 27 million German households with storage technology to maximize energy utilization.

“We have to accomplish a genuine energy transition. So far, we have only had electricity transition.”

Peter Terium, CEO, Innogy

Mr. Terium, of Innogy, highlighted two other components of the ongoing revolution: a new national network of high-capacity electricity transmission routes, currently under construction, and complete, real-time digitization of the energy network, from power generation to end user. “Digitization will allow the maximum use of renewables with a minimum of network expansion. The largest possible amount of renewable energy will be used in the region where it is generated.”

Mr. Gabriel pointed out that it was not clear who would pay for the massive expansion of the electricity infrastructure. “We still have to work on how we reconcile conflicting interests there,” he said. The four companies which run Germany’s national grid estimate that €44 billion in new investment will be required by 2025.

On what was perhaps his last full day as energy minister, Mr. Gabriel said he was proud of the work on energy done since the government had taken power in 2013. “But we have not finished the job. Many challenges remain,” he concluded.

 

Dana Heide is a correspondent for Handelsblatt in Berlin, focusing on energy policies, small and medium-sized companies and innovation. To contact the author: d.heide@vhb.de

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