Pennsylvania Can Learn from Germany’s Experience with Renewable Energy

Pennsylvania can learn a lot from Germany about clean energy, according to Lindsay Baxter, Program Manager for Energy and Climate at the Pennsylvania Environmental Council. She recently spent three weeks learning lessons and best practices from Germany’s energy transition. She shares her takeaways below – from the importance of a clear goal, to costs and public acceptance, to Germany’s perception of the U.S., and more.

This past autumn, I traveled throughout Germany for three weeks through a McCloy Fellowship in Environmental Policy from the American Council on Germany. In addition to eating bratwurst and drinking bier, I also completed more than 30 interviews and site visits to gather best practices and lessons learned from Germany’s energiewende, or energy transition, which may inform clean energy work in Pennsylvania. A brief synopsis of my final report is offered here.

Importance of a Clear Goal

As basic as it sounds, the most important lesson from my experience in Germany is the importance of a clear goal. The energiewende has multiple goals – decreases in energy consumption, reduction of greenhouse gas emissions, expansion of electric vehicle infrastructure, and increases in renewable energy production – all with multiple targets on varying time scales.

Baxter visited a pilot battery storage system operated by DREWAG, a local company in Dresden, Saxony.

Baxter visited a pilot battery storage system operated by DREWAG, a local company in Dresden, Saxony.

While all are worthy goals, progress toward one does not always lead to progress toward another. For example, as Germany’s renewable energy production has steadily increased, in large part due to the country’s feed-in-tariff (FIT) solar support program, CO2 emissions have not slowed as rapidly as expected, and even rose slightly in 2014 – the result of increased coal usage due to market conditions and the country’s transition away from nuclear.

While many benefits can result from energy efficiency and renewable energy – job creation, energy independence, reduced costs, etc. – programs and policy can be developed most effectively when aligned around a clear goal. It is my strong opinion that this goal should be deep reductions in CO2 emissions. A well-defined CO2 goal does not limit us, but rather empowers us to develop a strategy to most cost-effectively meet that goal.

Destroying the Myth

Perhaps the most significant outcome of Germany’s experience is that it has destroyed the myth once and for all that renewable energy in amounts greater than a small percentage will disrupt the electricity grid, leading to blackouts and expensive infrastructure improvements. Germany has achieved 30% renewable electricity production while maintaining exceptional reliability and incurring little additional infrastructure expenses. Many Germans perceived this to be the most significant impact of the energy transition.

This monument in Essen pays homage to the region's history as 'coal country.'

This monument in Essen pays homage to the region’s history as ‘coal country.’

Costs and Public Acceptance

When discussing the energiewende in America, a frequent concern is the high electricity costs in Germany. Although wholesale electricity prices continue to fall in Germany as a result of the energy transition, household utility bills are much higher than in the U.S., due in large part to taxes and surcharges, including those which fund the FIT. However, most Germans with whom I spoke did not perceive electricity costs to be a significant concern.

Instead, a significant challenge in Germany is public acceptance of energy infrastructure, including wind turbines and transmission lines. The clean energy transition is facing significant NIMBY (“not in my backyard”) backlash, which, in particular, is preventing construction of much-needed transmission lines to transport electricity from north to south, from areas of generation to areas of high usage. If Germany is already encountering this challenge at 30% renewables, how will it reach 80%? Further, if a green-minded country like Germany is having this problem, what does it mean for efforts in the U.S.? Moving forward, we need to be prepared for potential public acceptance issues that may slow the progress of renewable energy deployment.

Need for Clear Market Signals

A final key theme that continued to come up in conversations in Germany was the need for clear market signals. Financial incentives, like the FIT, can be very useful at spurring investment. However, because the FIT is set by policy, it does not fluctuate with the economy, skewing the electricity market.

An aggressive carbon price could be a more effective tool. (Because Germany’s CO2 goal is more stringent than the EU goal, participation in the EU carbon trading program alone does not suffice.) Carbon pricing incentivizes the use of less-carbon intense sources. Further, incentivizing flexibility, on both the supply and demand side, will be an important part of future electricity markets, to balance the variable nature of renewable energy sources.

A timely example in Germany is the use of natural gas plants, which provide the flexibility of being able to turn on and off to accommodate shifts in demand and renewable production. However, under current market conditions, gas plants are uneconomical to run and have trouble competing with existing coal plants.

Final Thoughts

A conversation with Mr. Martin Dulig, Saxon State Minister of Economic Affairs, Labour and Transport

A conversation with Mr. Martin Dulig, Saxon State Minister of Economic Affairs, Labour and Transport

Many Germans joked that solar was “Germany’s gift to the world,” as the heavy investment through the FIT allowed for a worldwide drop in solar prices. These same Germans asked me to imagine what the impact could be if the U.S. would embark on a similar energy transition. They perceived the U.S. to have the innovation and entrepreneurship to have an even bigger impact. Further, many Germans emphasized (and were a bit jealous of) the greater diversity of energy sources and, more so, the open space available for energy development.

We are often tempted to dismiss efforts in places like Germany, or even California, as being too different from Pennsylvania to make a useful comparison. While Germany may be a more “green-minded” society, investment decisions are made based on dollars and cents (or Euros, as the case may be), just like in the U.S. Truly, we are more alike than we are different, and have much to benefit from a continued exchange of information.

There is so much more I want to share, but for that, you’ll have to read the final report.

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