Green Technologies: Can Germany keep its edge?

When it comes to renewable energy, Germany is a perfect ‘10’ – at least during 2010.

This year marks the tenth anniversary of the passing of Germany’s comprehensive Renewable Energy Act (EEG), which has helped cover over 10 percent of the country’s total energy consumption from sources like wind, solar, water, or biomass.

And renewable energy in Germany isn’t just about fewer carbon emissions or energy independence, either: along the way, Europe’s largest economy has built up an industry that leads the world in exporting renewable energy technology, providing some 280,000 jobs worth an annual turnover of €40 billion.

In what is widely considered a success story for developing renewables in the industrialised world, Germany has demonstrated that a strong political will can kick-start and sustain a “green” technological revolution.

“The public really supports renewable energy,” said Claudia Kemfert, energy expert at the German Institute for Economic Research. “There’s no political party in Germany that doubts it’s a success.”

There have, of course, been hiccups. Chancellor Angela Merkel’s centre-right coalition has backpedalled on Germany’s decision to phase out nuclear power and aims to cut feed-in tariffs subsidising solar power by 16 percent starting in July, which could lead to a wave of insolvencies in the domestic photovoltaic industry. Citizen groups have also sprung up lamenting how wind and solar farms are a supposedly a blight on otherwise bucolic Teutonic landscapes. But none of these issues change Germany’s fundamentally green credentials.

With laws first passed in 1990, Germany pioneered the feed-in tariff system as a political tool for encouraging the development of renewable energy. Under a feed-in tariff, producers of renewable energy are guaranteed that they will be able to sell the electricity they create at relatively high prices that remain fixed for twenty years. The additional costs are spread to all electricity consumers, who pay about €0.011 cents per kilowatt hour as a ‘renewable energy surcharge.’

“Critics might say it’s an intrusion into the free market,” Jörg Mayer, director of Germany’s Renewable Energy Agency, told The Local. “But supporters say that climate change can’t compete on the free market. That the real external costs are not covered by the amount we are otherwise paying.”

The idea behind the feed-in tariff, overhauled and extended in 2000, is simple: Create reliable demand, and supply will appear. This strategy has paid off, with more than 15 percent of German electricity now supplied by renewable sources. And the feed-in tariff has become a model for fifty countries, from Israel to Uganda.

While a desire to lower carbon emissions was a key motivator behind the feed-in tariff legislation, there was a business model at work, too. For one, a strong German renewable energy sector would create jobs. Additionally, went the thinking, if developed early on, Germany’s companies would gain a first-mover advantage on the global market. “There’s the strategy of providing the right environment, one that’s good for their own companies,” said Angus McCone, an analyst at New Energy Finance, based in London.

Indeed, as the rest of the world began to go renewable, they have bought road-tested German technology. But now, as the Untied States and China enter the field, some of Germany’s early advantage has eroded, particularly in the field of solar voltaics. “The problem is that other countries are seeing that strategy,” said McCone. Still, “the Germans have a head start.”

Given the financial crisis and its dramatic impact on the German economy last year, there is a certain danger that the political will to nurture developing technologies until they are competitive may waver. And cost is always an issue: developing technology is more expensive, at least in the short term, than using fossil fuels, coal, or nuclear power. While the expectation is that these technologies will become competitive as they mature, some wonder how long that will take.

“Costs of the EEG are high and currently further rising,” said Jochen Diekmann, Deputy Head of the Department of Energy, Transportation, and Environment at the German Institute for Economic Research. “However, these costs will decrease in some years. To hold additional costs low is one challenge for the future.”

Domestically, technical problems must be solved in the near future if the current industry goal of nearly 50 percent of energy consumption to be renewable by 2020 is to be met. These include building a new, decentralised smart grid, and finding a mix of energies that won’t leave renewables out in the cold.

Key terms and sectors

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