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How Germany’s Energy Transition Could Get Its Mojo Back - Greentech Media News

Once a European leader on climate and renewable energy, Germany has been a disappointment in recent years on several fronts.

 

But Europe's largest economy may be on the cusp of a renewed period of change, thanks to the increasing maturity of renewables and the emergence of the Green Party as a major political force.

 

Late last year Germany passed its new climate and energy plans, a set of cross-sector policies designed to cut emissions by 55 percent by 2030.

 

In the past, much of the world would have watched Berlin's moves with great interest. Ten years ago, Germany was setting the pace for wind and solar deployment — and developing local supply chains along the way, with companies like Q Cells, Senvion (then known as REpower) and SolarWorld creating thousands of jobs. 

 

Chancellor Angela Merkel (herself a former environment minister) was branded the "Climate Chancellor" early in her tenure. Germany's much-heralded "Energiewende," or energy transition, saw onshore wind and solar capacity rise from 23 and 6 gigawatts, respectively, in 2008 to 53 and 45 gigawatts in 2018.

 

But even during that rollout, the political will that helped spark it was waning.

 

Despite all the potential and the momentum built up over the course of a decade, Germany has ended up wearing the laggard label. Even its latest commitments, made after grueling and protracted deliberation, have been deemed underwhelming.

Solar support under Germany's feed-in tariff was capped, and utility-scale projects were limited to 10 megawatts or below. Public opinion turned on onshore wind, and even Merkel's own personal climate commitment was not going to overcome it.

Meanwhile, Germany pushed back on tougher EU emissions standards for cars at the behest of its economically critical auto industry. As early as 2018, the government acknowledged it would not hit its 2020 emissions reduction targets.

But things are changing again. Merkel will be stepping down at the next election, currently slated for autumn 2021. There are new and powerful voices in German politics that Merkel and her successor will need to heed.

 

And then there are Germany's industrial giants, whose story has changed in recent years too.

 

Germany's automotive sector is making transformational changes to align itself with momentum for climate action. Audi announced the cut of 9,500 job with the sole aim of saving €6 billion ($6.7 billion) to invest in its switch to electric vehicles. The Siemens Energy IPO later this year could reinvigorate a global industrial firm that hasn't yet made the most of the energy transition.

 

RWE, Europe's largest emitter of greenhouse gases, has transformed into a global renewable player — only this week bringing online its first solar project in Texas, the 100-megawatt West of the Pecos facility. RWE now hopes to be carbon-neutral by 2040, a decade earlier than Merkel's verbal commitment to a 2050 net-zero target.

 

These days, Germany's government is not only lagging its peers in Western Europe, it's also falling behind its industrial stalwarts.

The politics of German energy

Germany's upcoming election could be a catalyst for a new period of change, and the energy and climate package passed last year could get an overhaul.

 

But the shape of the next government remains hard to predict in a country where coalition governments are the norm, said Felix Heilmann of the climate and energy think tank E3G.

“If we have a different government, which might involve the Greens in the federal government, they will certainly reopen the [2030 energy] package and renegotiate parts of it,” Heilmann told GTM.

The current government is an uneasy coalition of Germany's two largest political parties, Merkel's center-right Christian Democrats (CDU) and the center-left Social Democrats (SDP). However, in December, junior party SDP elected a more left-leaning leadership that has been more vocal in its criticism of its colleagues in the CDU.

 

In this environment, antagonizing the coal lobby, or historically coal-reliant communities understandably ill at ease about their future, was not in the cards.

 

At the time of writing, opinion polls have the CDU at 27 percent and the Greens in second with 21 percent. No other party has more than 15 percent, making the prospect of a CDU/Green government a very real possibility.

 

Heilmann attributes this progress for the Greens to their new leadership and a shift away from radicalism. Instead, the Greens of today are looking for realistic ways to meet the most pressing challenges (including climate change). The Greens are already part of governing coalitions in 11 of the country’s 16 powerful state legislatures.

 

On the other side of the battle line is Germany's significant coal lobby.

 

While the rest of Europe is shutting down coal plants, Germany has approved a 1.1-gigawatt coal plant set to connect to the grid this year. Germany's 2038 coal power phase-out date is around decade later than those of most of its EU peers. Compliance with the Paris Agreement requires all OECD nations to ditch coal by 2030, Heilmann points out.

 

But Heilmann sees the possibility of rapid changes in attitudes, due at least in part to the youth climate strikes. The strikes have made an indelible mark on the usual script in Germany, changes that were made evident during recent state elections.

 

The Greens’ surge and their influence at the state level meant the party was able to force late changes to the 2030 bill, including ratcheting the proposed €10 ($11.19) per ton carbon tax up to €25 per ton in 2021, rising to €55 in 2025.

 

On its own, the carbon tax could expedite Germany's coal phaseout and catalyze the need for more generation from alternate sources.

Near-term challenges for wind and solar

That’s the political landscape at the current juncture. In the immediate future, the wind and solar sectors have to contend with a series of challenges that the 2030 package does little to relieve.

 

Arguably the single least popular item in the package from a renewables standpoint is the "1-kilometer distance rule" for onshore wind, which creates an effective planning buffer zone for wind farms around built-up areas and covers half the country's landmass.

 

Longer-term targets for onshore wind deployment were also scaled back from 80 gigawatts by 2030 to a target range of 67 to 71 gigawatts. The wind lobby is furious.

 

Germany's wind power trade association, the BWE, has called the 2030 plan "inadequate" on all fronts — too small to help the country’s struggling wind supply chain or to meet the national climate commitment made under the Paris Agreement. 

 

Germany's new energy package targets 98 gigawatts of solar capacity by 2030, up from 49 gigawatts currently.

 

“This is a step in the right direction, but [it] urgently requires further improvements and rapid legal concretization," said Carsten Körnig, managing director of the solar trade group BSW. "Otherwise, as a result of the nuclear and coal phaseout and a growing demand for electricity, the security of supply with climate-friendly energy will be seriously endangered as early as the mid-2020s."

 

The source of that concern is a study by EuPD Research that predicts 162 gigawatts of PV will be required in Germany by 2030 to avoid regular blackouts (PDF, in German). That’s based on the anticipated electrification of transport and heating demand increasing more rapidly than efficiency improvements can reduce it.

 

Yet while Germany's wind and solar industries both face near-term headwinds, their fortunes could change again just in time for a political shift.

 

With a goal to hit 65 percent renewables by 2030, and some face-saving to do after missing its 2020 emissions targets, permitting delays and other problems for onshore wind developers may have helped galvanize support for the 20-gigawatt offshore wind target in the 2030 energy package. Germany recently hit its 6.5-gigawatt offshore target for 2020.

 

As for solar, Germany added 4 gigawatts in 2019, its best year since 2012. And projects are getting larger, helping developers take advantage of economies of scale. 

 

According to SolarPower Europe, systems over 750 kilowatts in size made up less than 20 percent of last year's installations. And the rise of unsubsidized projects could give a further boost to the utility-scale market.

 

Homegrown developer BayWa r.e. says unsubsidized projects that pencil out economically are right around the corner. Utility EnBW signed off on its first unsubsidized solar project in October of last year. From the 10-megawatt size restriction, it will also be the country's largest (180 megawatts).

 

Expect to see more post-subsidy wind and solar in Germany in 2020  — and potentially another new chapter for the country's once-roaring Energiewende.

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