Germany's Plunge Into Renewable Energy : From Bad to Worse?

And I thought the Germans were the smartest of the smart, but they apparently aren't any smarter then we are. Who knew?

A Bumpy Ride for Germany's Green Energy
Source: Lauren Aragon, "A Bumpy Ride for Germany's Green Energy," National Center for Policy Analysis, June 3, 2015.

June 8, 2015

The aim of the German Energy Transition is to decarbonize the energy supply by increasing access to renewable energy and improving energy efficiency. A key part of the Energy Transition is the outright rejection of nuclear power and the shutdown of nuclear facilities by 2022.

The strategy focuses instead on wind, biomass, hydropower, solar power, geothermal and ocean power. So, how does Germany expect to transition to renewable energy so quickly?

• In 2014, onshore wind power provided 8.6 percent of the country's power supply.
• By 2020, Germany plans to triple the amount of energy produced by wind (both onshore and offshore).
• Germany is aiming to have 6.5 gigawatts of installed offshore wind power by 2020.
• Increase "energy cooperatives" ― community-owned renewable projects, which have already garnered more than 1.2 billion euros in investment from more than 130,000 private citizens.

One of the most key impacts of Germany's energy transition has been the democratization of energy resources. By 2012, citizens and co-ops owned 47 percent of renewables, while energy suppliers controlled 12 percent and institutional and strategic investors owned 41 percent. In Freiburg, Germany, for example, citizens of the town of about 220,000 people funded a third of the investment cost for four turbines, with the rest coming from banks loans.

The rush into renewables was also poorly timed and coincided with increased investments into traditional energy production by utility companies. The increased generation from both renewables and fossil-fuel power plants has overwhelmed demand causing prices to fall and hurt profits. Additionally, Germany had guaranteed above-market prices for newly installed renewable energy, to incentivize investment. The surge of renewables on the market are subsidized directly by a surcharge on customers, which increases in parallel with the addition of more renewable kilowatt hours.