The German Energiewende - Modern Miracle or Major Misstep

Posted on December 04, 2015
Posted By: Davis Swan
Topic: Nuclear
 

There is an ongoing debate regarding the value and/or wisdom of the German Government’s implementation of an energy transformation – the Energiewende.  The primary driver for this initiative was the policy decision, first made in 2000, to eliminate nuclear power in Germany.  Nuclear generating stations contributed as much as 25% of the electricity supply in the late 1990’s.

Sorting out fact from fiction when assessing the Energiewende is not as easy as you might expect because most commentators put a significant “spin” on data that is admittedly subject to multiple interpretations.  In this post I will try and summarize the most salient points regarding the Energiewende that can be supported by publicly available factual information.  These are;

  • Germany has successfully developed a very significant base of renewable energy over a sustained period of time without going bankrupt or causing unbearable economic hardship to electricity consumers whether they be residential or industrial.  This is a very laudable achievement – one that many observers would have declared impossible.
  • The Energiewende in and of itself represented enough of a demand for wind turbines and solar panels to have resulted in very significant decreases in the prices for all of the components associated with these technologies.  As every country in the world develops their own renewable resources they will ultimately enjoy substantial cost savings due in large part to the Energiewende.
  • Germany has spent far more public money, in the form of direct grants, tax incentives and utility rate increases than was needed in order to attain the same level of renewable energy generation that it enjoys today.
  • Germany, like Denmark, has only been able to develop intermittent renewable energy resources because of the high capacity inter-connections with other large European energy providers/consumers.  In effect, Germany and Denmark have used the European and Nordic grids as a large battery.  It follows that if other European countries were to follow the path taken by Germany the system as a whole would soon run out of capacity to deal with the fluctuations in renewable energy production.
  • The German Energiewende has not resulted in less dependence on the burning of coal to generate electricity and will not do so anytime soon.
  • The preferential access to the grid that is given to renewable energy production has frequently pushed thermal generation off-line for extended periods of time, particularly at mid-day on windy days in the springtime.  These base-load plants were designed to run 7x24x365 and the business cases underpinning the financing of these plants assumed high utilization factors.  As a result these plants are marginally profitable at best.  The market response to this situation would be to close many of these plants to reduce capacity and stabilize wholesale prices.  That is not possible because all of the thermal capacity is required in the late afternoon and into the night on calm days.

These facts (see detailed discussion below) lead me to the conclusion that the Germany Energiewende has achieved remarkable changes to the energy economy of the largest country in Europe.  Unfortunately, I believe that the approach taken was far from optimal and has influenced many other jurisdictions around the world to follow a similar non-optimal path.  I also believe that without finding an economical and hugely scaleable energy storage system this approach cannot proceed much further.

The impact of the Energiewende on Wind and Solar Component Prices

I suppose you could argue that the impact of the Energiewende on Wind and Solar Component Prices has not been significant but given the scale of development and the timing it seems clear to me that there has been a large impact.  Until China got moving on solar panel installations Germany was purchasing about half the worldwide supply and still represents about 25% of installed capacity.
Germany has also been one of the largest purchasers of wind turbines consuming about 10% of the worldwide supply from 2004-2010 dropping to about 5% more recently as other countries have accelerated their development of wind resources.

Roof-top Solar: $100 Billion plus lost in translation

The biggest failing of the Energiewende has been the investment in subsidies of roof-top solar panel installations.

As I have argued in another blog posting even under the best of conditions in arid regions between 35 degrees latitude north and south roof-top solar does not make sense. Installations are complicated and expensive, roof pitch and orientation is never ideal and there is no ability to implement sun tracking.

In the case of Germany which is located between 48 and 52 degrees north latitude subsidizing roof-top solar panels is pointless. The graph below summarizes electricity consumption and solar power production in Germany in 2013.


Solar power production peaks at about the same time German electricity consumption is at a minimum. For those months solar can meet about 11% of total demand (as much as 30-35% at mid-day on sunny days).

The real problem comes in the winter months when German consumption of electricity is highest. In the months of December and January German solar production is about 500 GW-Hours which meets about 1% of demand. Even if Germany was to double the number of solar panels that have been installed over the past 15 years it could meet only 2% of winter demand and in that situation there would be a huge surplus of solar power at mid-day in the summer. There is no solution to this imbalance between winter and summer insolation which is the primary reason that solar power is so ineffective in Germany.

I am not alone in my criticism of the German approach. A recent report states that Germany has in effect wasted over $100 billion by focusing on solar power. The study suggests that if the same amount of financial support had been directed towards developing solar power in Spain together with additional transmission capacity in central Europe then northern European Countries would have access to much more renewable energy when they need it most in the winter.

It is undeniable that solar panels generate a lot of electricity in Germany. But it is also true that the return on the investment made in solar power has been very poor both in financial and environmental terms.

“Green power sets new record at 78% of German supply!”

Statements similar to this come out on a regular basis, usually in June or July.  They are factually correct and impressive but they can easily lead the reader to conclude that the majority of electricity in Germany can be generated from renewable sources quite often.  It is in fact a very rare event.

On very low demand days between May and August when winds are blowing strongly Germany can see renewables reach those levels for a few hours at mid-day.  However, there are many, many more days and even more late afternoons and evenings when renewables make almost no contribution to the electricity supply.  This can be seen by the annual average generation by renewables which stands at about 25%.

Renewable penetration of 25% of total generation would be very impressive if it was actually used in Germany.  However, just as in Denmark which makes similar claims regarding wind as a percentage of total generation, a large amount of renewable generation in Germany is of absolutely no value.  This is solar energy at mid-day and wind energy at night when there is insufficient domestic demand.  In those circumstances Germany has no choice but to export this surplus electricity at very low prices (sometimes negative) and Germany’s neighbours have to absorb this electricity whether they need it or not.  The Czech Republic, France, Poland, and Switzerland have been complaining quite bitterly about the negative impacts of these exports.  Stress on the regional grids, the need to cycle power sources in those countries in response to the fluctuations in German generation, and low wholesale spot prices are issues that are increasing in severity every year.

From the graph above you will note that German exports have increased about 35% since 2009 as more renewable energy has entered the market.  Note however that imports have decreased less than 10% since 2009.  This is because of the intermittent nature of renewables. Exports take place at times of low demand and garner low prices. Imports typically take place at peak demand times and at peak demand prices.  As a result German retail electricity prices have continued to rise despite the fact that generation capacity has exceeded domestic demand for a number of years.  In my blog I have called this combination of increasing supply, increasing or stable imports and increasing prices an Electricity Paradox – or Electrodox

Non-Renewable Sources Supplying More Electricity Than 25 Years Ago

One of the claims by supporters of the Energiewende is that the growth of renewables will allow Germany to reduce its dependence upon coal-fired generation thereby reducing CO2 emissions. That has not happened over the past fifteen years and reducing coal-fired generation will not take place anytime soon.

Germany is burning almost exactly as much coal today as it was 10 years ago.   A number of new coal-fired plants have actually come on stream in the last 5 years. The addition of natural gas fired plants means that Germany is now generating more electricity from burning hydro-carbons than it was 25 years ago.

From the graph it might appear that renewable generation has largely replaced nuclear generation but the situation is a bit more complicated than that.

Germany has had surplus capacity for many years (all responsibly regulated electricity markets have reserve capacity) and has exported electricity since before the turn of the century.  In the past those exports were primarily nuclear power at peak demand times and prices and German nuclear was a welcome addition to the central European energy mix.  Now those exports are renewables at off-peak times and very low prices which cause issues for Germany’s neighbours.

It is true that every day of the year renewables make a significant contribution to the electricity supply in Germany, reducing the need to burn hydro-carbons and/or generate power from nuclear stations. The positive impact on CO2 emissions and other forms of pollution is significant. But it is also true that there are many times when renewables contribute very little generation and Germany must make use of all its thermal generating capacity and import power from its neighbours. As a result it has not been possible to retire any significant amount of coal-fired or natural gas-fired generation capacity.

Can Price Volatility Guarantee Security of Supply?

With renewables pushing conventional generation off the grid frequently and with little notice it is very difficult to operate thermal power plants efficiently or profitably. Frequent and unpredictable cycling of coal-fired and natural-gas fired plants increases operating expenses, reduces service life, and introduces uncertainty into revenue projections.

In the absence of any kind of capacity plan utilities are making economic decisions that can be in conflict with the goals of the Energiewende. For example, highly efficient Combined Cycle Gas Turbine (CCGT) facilities are being closed while lignite coal-fired plants remain open. Natural gas is simply more expensive than coal in Europe. As a result the rational economic choice favours plants that emit more than twice as much CO2 as well as harmful airborne pollutants.

The heated debate over the need for a capacity market in Germany has been going on for several years. For the time being nuclear plants contribute to a significant oversupply situation. That will change in 2022 when the remaining nuclear plants are due to be retired. Making sure that there is adequate and reliable generation capacity available to replace the loss of the nuclear plants remains a work in progress.

The government position at the moment is to allow high spot market prices to be the primary incentive for utilities to maintain adequate generation capacity. German Energy Minister Sigmar Gabriel has stated that “high prices at times of scarcity would ensure that conventional power plants would remain profitable”. The idea is that if prices are allowed to go high enough when renewables are not available (for example on calm nights), then it will still be possible to make a profit running a thermal generation station if only for a few hours on a few days.

This is the same approach taken by Texas which has raised its ceiling spot price to $9,000/MW (the average price paid is $45/MW). The response of Texas electricity utilities has been “That dog don’t hunt”. In January, 2014 they took out a full-page advertisement warning of a future plagued by blackouts and system failures.

Where Do We Go From Here?

Of course nobody can reliably predict the future so the following comments are pure speculation.

I cannot see how Germany can continue to develop significantly more wind and solar resources in the next few years. The imbalances between supply and demand at different times of the day and different months of the year are becoming too extreme. And with so much generating capacity in place it is difficult to imagine utilities building any new plants. What that means when the nuclear plants shut down is anyone’s guess but it does not look like a pretty picture to me.

The ability for other European countries to move aggressively with renewal energy development also appears to be constrained by the challenges to regional grid stability introduced by Germany. The need for a pan-European strategy seems clear.

Setting up a capacity market in Germany might address the profitability of existing thermal generation but would raise electricity prices. Despite a small decrease in 2014 Germany consumers still pay the second highest retail prices in Europe. Any further increase to support a capacity market would not be welcome.

There is certainly plenty of potential to continue developing solar power in southern Europe – particularly CSP plants that can provide power after sunset such as the Gemasolar plant that runs 7x24x365. The potential to make greater use of Nordic hydro resources through conventional pumped storage schemes or by adding generation capacity in a concept I have termed “unpumped storage” also exists. Both of these approaches would require significant investments in the European grid infrastructure as well as an increased level of political co-operation amongst Euro-zone members.

My assessment of the German Energiewende is mixed based upon what I feel is the ultimate goal – an end to the burning of hydro-carbons to generate electricity. Reducing hydro-carbon usage is not sufficient and will not transform us to a truly sustainable energy society.

What Germany has achieved so far is impressive. It is impossible to deny that. But I would have preferred to see even 20 GW of renewable energy equipped with storage of some sort so that some coal-fired or natural gas-fired generation could be permanently retired. A financial and policy commitment to storage technology that was as firm as the position taken by Germany with respect to solar panels would have been more constructive in my opinion.

 
 
Authored By:
Davis has been involved with energy policy development and the exploration of innovation in energy use throughout his career. For more than 20 years he worked in the oil & gas industry where he had broad exposure to the technologies used in the development of natural gas, conventional oil, heavy oil, and tar sands resources. He has also acted as the energy policy advisor for the Official Opposition in the
 

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Comments

December, 04 2015

Ferdinand E. Banks says

This is an excellent article, and I intend to read it a number of times, but even so I am too intelligent to Believe that I should waste my valuable time trying to make sense of the Energiwende.

Think about it. There is a tsunami in Japan, and Germany stanrts to lock down its nuclear inventory. Of course, this might be the way things are traditionally done in Germany. On December 7, 1941, Japan attacked the US, and on Dec 11 Adolf Hitler declared war on the US, promising to bring Franklin Roosevelt Before a state Court.

Anyway, the bottom line for me is as follows. Germany is not betting on wind and solar, but on electricity imports and coal. And the Point is not to construct an optimal structure/program for providing Germany with Electric Power, but to get the extra votes necessary to keep Merkel and her foot Soldiers running the German government for Another few years. I could of course go into the price of electricity in Germany (and Denmark), but I passed my thoughts on that topic to a gentleman who needed some input for the climate farce in Paris.

December, 05 2015

Ferdinand E. Banks says

I hope that I have not offended anybody by Calling that business in Paris a farce, but you see I know about those things. In the film Wag the Dog Dustin Hoffman spoke about the great things that can happen when you assemble a room full of creative people. Well, I know what can happen when you assemble a room fúll of tthe other kind. I got a full dose of that while working at the Palais de Nations in Geneve, and during my 3 years thereI made sure that I was Always available - in the library - when they were bowing and and scraping to each other. and Calling each other the "right honorable gentleman."

Why the library? Because that was one room that the experts made it their business to avoid.

December, 08 2015

Xisto Vieira Filho says

A very interesting and valuable paper by Mr.Swan. A proliferation of intermitent sources is currently a trend in planning,for obvious reasons.. But to operate a system like that is not an easy task. Power system stability will certainly be an issue for the system. To improve storage technologies is of paramount importance,but first,it will still take time to achieve a technology for so high scale storage requirement,and second, to what extend this could contribute to transient and dynamic performance of the resultant power system system ?

December, 08 2015

Malcolm Rawlingson says

Davis, Excellent article. One of the best I have read on this topic. It clearly illustrates the farce that is ongoing in Germany. A policy that is supposed to be eliminating nuclear generated electricity and reducing CO2 emissions but does neither. It is surprising to many that the quantity of carbon dioxide produced by Germany from power generation has increased and that several new coal burning plants have been commissioned.

It is obvious why. Both the Sun and the wind are unpredictable. That means gas and coal fired plants must remain running and on standby to take up the variations in supply that inevitably arise from the use of intermittent sources.Very interesting to nore your observation that Germany (and Denmark) have been using the European grid connections as a giant storage battery. Of course if ALL nations went the route of Germany there would be no grid battery to use and the lights would go out.

The great grid stabilizer is France which produces almost 75% of its electrcity from nuclear and the rest from hydroelectric with a little fossil fuel thrown in - mostly gas I beleive. So which system would you rather have. The French that use nuclear power with zero emissions or the German which uses solar power and wind with increasing emissions.

I am not interested in the blather going on in Paris for the reasons Fred has outlined in his post plus a few others. It is inevitable that the world will move heavily into nuclear power in the coming decades as the realisation sinks in that solar and wind do not decrease CO2 emissions as promised...they increase it . I understand there are 35000 delegates at Paris. Harnessing all that hot air could produce a few megawatts. Since very few of them walked or got on bicyles to get there I would hazard a guess that the airlines that brought them to Paris consumed a few million tons of aviation fuel. Does that not produce carbon dioxide and does that not make each and every one of them a complete hypocrite. I would say so.

Time will show the German experiment to be a failure just as time has shown VW to be about as environmentally friendly as a bucket of mercury... but that will not become apparent until Ms.Merkel is no longer running the show. Fortunately the Japanese Government understands reality and is steadily restarting its fleet of nuclear reactors. Sendai Unit 1 and Unit 2 are back in commercial operation at full rated output of 890MW...that is the equivalent of 1,780,000 1kw solar panels....except those plants run all the time and don't go offline at night or on cloudy days. These two are soon to be followed by Takahama Units 3 and 4 and Ikata 3 next year. Good steady progress in the right direction as opposed to Germany which is demonstrating good staedy progress in the wrong direction.

I find it quite fascinating that Japan that suffered the earthquake and tidal wave that damaged Fukushim-Daichi beyond repair is restarting its reactors while Germany that endured nothing is hell bent on shutting theirs. Could it be that Japan does not have the luxury of a grid to make it appear like solar and wind are working?

Great article Davis. Well done.

Malcolm

December, 10 2015

Winnie Waudo says

This is an excellent article particularly for economies looking to be 100% green. It provides food for thought about the implications of many scenarios.

Winnie

December, 10 2015

Malcolm Rawlingson says

Interesting thoughts Xisto. I have long maintained that large scal storage is the only practical way either wind or solar can be mainstream power producers. As of now these technologies rely on the stability of the grid provided by nuclear coal and gas fired plants to enable them to contribute. Of course they do not have to pay for that. As long as they are producing the grid is obliged to take the power.Storage would take the place of the grid for that application but who will pay for the storage facility. The wind generators? I doubt it. If they had to pay for their own installation costs and grid connections as well as storage facilities to level out the intermittency of the power produced the cost becomes completely uncompetitive.The real gainers if large scale storage becomes practical (and I doubt that will happen in the next 50 years) will be nuclear since all load becomes baseload in that scenario....for which they are ideally suited.

Let's take solar electric as an example. I'll make some broad assumptions here first but the principle applies universally. Let us say that we have to supply a constant load of 1000MW over a period of 24 hours. We will also assume that the Sun shines at unwavering full power 12 hours a day (never any clouds) and does not shine at all for the other 12 hours. We install a 1000MW solar plant (several square kilometers of solar arrays). The array produces 1000 x 12 MWhours of energy but only has a 50% capacity fractor. ie it can only ever run half of the time. Let us now say that we invest in a 1000MW battery or flywheel plant to store that energy. In order to power the load during the day ALL the output of the solar panel is required. The battery does not get charged as there is no remaining capacity and the load has to shutdown at night as there is no electricity. Solar output is nil. Storage outut is nil because it did not get charged up during the day. So in order to charge the battery a SECOND solar array (also covering several square kilometers) is required. That is double the capital cost because the capacity factor is only 50%. So now we have one solar array powering the load with zero interruptions due to clouds (read Sahara Desert NOT Philadelphia) and a second solar array charging the battery. While both solar arrays shutdown at night (no fuel) the stored energy is released back into the grid (assuming zero hysteresis losses) and the 1000MW load is powered 24/7.

It is oversimplified of course but the economics are clear and make no sense at all. To power the 1000MW load you have covered many square kilometers of land in solar panels, incurred double the capital cost (two 1000MW plants instead of one) as well as incurred the cost of a storage system. Very expensive, highly damaging to the environment and will work only in places where it never rains ie deserts. Actual solar capacity factors - especially in Germany - are nowhere near 50% which means incrementally more solar arrays. Same with wind which in the windy places only gets you a 25% capacity factor.

That is the reason why the German experiment will result in disaster for that economy and is the very reason why coal plants have had to be built in recent years to compensate. It is a wonderful example of Merkel smoke and mirrors. If you shutdown coal plants due to climate change and nuclear plants because you don't like them solar and wind can not sustain an industrial economy. But - like VW - the Germans have become adept at makiing things appear to be what they are not.

Fortunately the Chinese, after trying to suffocate Bejing a few times, have now realised that the only possible way solar and wind can work is to have stable nuclear power on a massive scale to back it up and to replace their coal fired plants. About 1 1000MW nuclear reactor is being started every month in China and, when the benefits of clean air, low land use, jobs and safety are taken into account it is going to be hands down the cheapest electricity in the world. On the other side of the world Germany will have one of the dirtiest power systems in the world with the most expensive electricity.

A major misstep by Germany to be sure.

But Ms. Merkel will be long gone before the crisis she created hits the German people.

Malcolm

December, 11 2015

Xisto Vieira Filho says

Very interesting comments,Malcolm. And I fully agree with you that termal plants,like nuclear,coal and gás fired plants will still have to support adequate system operation for a long time.

December, 11 2015

Malcolm Rawlingson says

Agsolutely agree with you Xisto, but that is the big problem. In some utilitiyu areas where subsidised solar and wind compete on a non level playing filed companies are forced to take solar and wind whether they need it or not. The resulkt is that some large power plants have become uneconomic to operate. Most notably the Pilgrim nuclear plant is going to be closed which will take the sdtabilising effect of emissions free nuclear off the market and replace it with natural gas. Solar has therefore caused an INCREASE in emissions. Malcolm

December, 14 2015

Richard Vesel says

The reality behind why coal continues to be a steady contributor? See your 2003-2013 chart above. Germany wound down it's nuclear contribution by 40% during this decade, and is still on the path towards 0% nuclear - a big mistake in my mind. IF the nuclear contribution had remained constant, then coal-fired generation would have been giving ground instead. Flat use of coal is not an issue perpetuated by the expanded use of renewables, but rather a consequence of the other parallel policy decisions.

RWV

December, 15 2015

Malcolm Rawlingson says

Agreed Richard. While it is a commonly held belief in the media that there are no nuclear plants operating in Germany that is not true. Germany closed its older plants...the newer ones are still in operation....9 of them I understand.There are plans to close these too but there is no possibility Germany can meets its emissions targets by doing so.

In my view - as noted by Davis - this is a major industrial misstep by Germany and will inflict considerable damage to that economy in the long term. German products are already expensive worldwide and increased electricity costs will serve to drive up industrial costs even farther. At one time the increased cost was considered worth it because of quality of the goods provided. Not any longer. The VW scandal as well as competion from Asia is changing that paradigm and it is not in Germany's favour. Cheap natural gas from Russia is also under considerable threat hence the building of coal plants fired with the worst form of coal - lignite - which is home produced. The notion that Germany is almost self sufficient using solar and wind (as portrayed by the media and not challenged by Ms. Merkel) is entirely false. On the odd occassion solar generation causes headlines by reaching all time highs in production - you may consider that a good or bad thing depending on your opinion of solar power in a northern climate - the truth is that solar power has an awful capacity factor << 50% which necessarily makes it unreliable. Since grids must be 100% reliable (or close to that) solar requires back up with either nuclear or coal. Nuclear is out of fashion - so that leaves coal. The irony is that as solar increases so does the burning of coal since you cannot have one without the other.

Looking around my house I have almost no German manufactured goods. The quality and reliability of South Korean products is at least as good if not better than those produced in Germany and substantially cheaper. I recently purchased a Samsung washer and dryer and was pleasantly surpised at the quality and reliability of both purchases. Not a single fault or complaint. South Korea notably is building nuclear power plants of its own design (Shin-Kori plants) and exporting them ... notably to the United Arab Emirates (Barakah Units 1 - 4). The result is a stabilisation and general lowering of electricity costs for resource poor South Korea.

I find it particularly sad that yet another European country is pricing itself off the market by ill-conceived political decisions.

Malcolm

December, 16 2015

Ferdinand E. Banks says

What is happening in Germany has to do with keeping Angela Merkel at the head of the German government. That and nothing else. She likes her job - is crazy about it - and intends to do as much as she can to keep it. Funny how people who will eventually suffer as a result of this behavior refuse to get the message.

December, 17 2015

Richard Vesel says

Time Magazine announces Angela Merkel as "2015 Person of the Year", so there are apparently a lot of people who love Angela in her job. (I know little more about her, so I have no pro/con opinion.)

RWV

January, 01 2016

Malcolm Rawlingson says

Interesting Richard. Who casts the votes for Time Magazine? Since most of the media is anti nuclear (but pro being very comfortable as a direct result of it) I find it no surprise at all that Time would bestow such a title. But it is meaningless.Who cares? I don't and I am quite sure the Chinese give a hoot about what Time thinks or does.Their focus is to dominate the world nuclear industry.Maybe the Chinese own Time Magazine? They just bought an $82 million stake in Fission Uranium in Canada and a 25% stake in the Langer-Heinrich mine of Paladin Energy in Namibia. Does not appear to me as though China is going to pull the plug on nuclear any time soon so quite sure they do not care about Germany. Happy New Year all. M

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