Earlier this week, I attended a panel on Germany’s transition to renewable energies, hosted by the German American Chamber of Commerce at the German House in New York.
In his welcome remarks, Dr. Oliver Schnakenberg, Deputy Consul General of the of the Federal Republic of Germany in New York, set the stage for the discussion by describing the foundation of the energy policies in Germany and the United States. “While climate change is not a commonly accepted fact by Americans, no one denies climate change in Germany. Besides the EURO, climate change is the most important issue,” said Dr. Schnakenberg.
The consensus about the importance of tackling global climate change is the foundation of Germany’s energy transition to renewables. Germany set the goal to cover 80% of its energy needs through renewables by 2050. And so far, German citizens are on board to save the environment and are willing to pay for it, according to Dr. Schnakenberg. They currently pay about 10 Euro on their monthly energy bill to fund the development of renewable energies.
Dr. Michael Blank, vice president of the German American Chamber of Commerce, added that a commitment to sustainability can increase a country’s rank in the Global Competitive Index, issued by the World Economic Forum. This year, the Nordic countries and Germany were able to improve their scores based on their environmental initiatives.
Keynote speaker Dr. Annegret Groebel of the Federal Network Agency for Electricity, Gas, Telecommunications, Post, and Railway, provided a deep dive on Germany’s efforts to reach its 2050 renewable energy goals. In 2011 about 19.9% of the electricity needs were covered by renewables energy sources in Germany.
Source: AG Energiebilanzen.
Dr. Groebel’s presentation, including this graph, can be downloaded on the website of the German American Chamber of Commerce
According to Dr. Groebel, the challenge is not to increase the percentage of renewable energy; the key challenge is to manage the storage and distribution of the energy across the country. Wind energy, mostly produced in Northern Germany, is volatile and many manufacturing sites are located in the South. Thereby, it is critical to have the grid adjusted and reinforced to balance the energy generation and consumption across the entire country. 3,800 km of new transmission lines are needed, with a focus on North-South transmission lines. Overall, Germany’s transition to a low carbon economy requires both, an increase of energy efficiencies and using more renewables for the energy production.
Dr. Groebel expects the federal requirement plan for the expansion of the grid to be adopted by the end of this year. She emphasized that the complex planning and permitting procedures require close coordination on the Federal and the “Laender” level as well as on the European level. The grid expansion also helps Germany meet the “20-20-20” targets set by the European Union: a 20% reduction in EU greenhouse gas emissions from 1990 levels, raising the share of EU energy consumption produced from renewable resources to 20%, and a 20% improvement in the EU’s energy efficiency.
Among the next milestones for the grid expansion are getting public buy-in and securing financing. The German government is hosting six public hearings to facilitate public acceptance of the plan. To attract investors, the Federal Network Agency’s strategy is to provide certainty with a predictable regulation and to achieve sustained profitability of the investment to generate a steady and stable cash flow.
In the discussion about financing, James Boyle, first vice president, MSB – CoC Renewable Energies, at Commerzbank AG stated that the willingness to finance renewables heavily depends on federal tax incentives. The fact that renewables are a new industry and complex technologies to build increase the financing challenges, added Andrew Eckhardt, vice president at KfW IPEX-Bank GmbH.
Germany’s emphasis on a clear and predictable regulation should be the right path to achieve the financing goal for the grid expansion. But how quickly will other countries follow the example. Unfortunately, the situation in the United States looks very different. According to Boyle, federal tax incentives for wind energy are slated to expire by the end of this year. The world’s largest economy is still mostly powered by fossil fuels. The U.S. Energy Information Agency’s Annual Energy Outlook 2012 reports that in 2010, coal accounted for 45 percent of total U.S. generation; in 2020 and 2035 its projected share of total generation is 39 percent and 38 percent, respectively.
Taking Germany’s stance that climate change is a fact, more countries need to transition to more energy efficient models more quickly. The PriceWaterhouseCoopers (PwC) report “The World in 2050” concluded that global carbon emissions from energy use in a “business as usual” scenario would more than double by 2050. For the advanced G7 economies, this means a reduction in carbon emissions of around 80% relative to current levels by 2050. A more rapid adoption of green technologies is required.
My hope is that the world is watching Germany’s transition to renewables – and more economies will follow suit before 2050.