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Perhaps when Germany’s Chancellor Angela Merkel was a child, she attended a party and was the only one who came without a present, or was wearing inappropriate attire—and the embarrassment she felt haunts her to this day. That’s how psychodynamic psychology (Freud) might explain her December 3 decision to spend more money on Germany’s failing energy experiment to avoid, as Reuters puts it: “the embarrassment of missing her government’s goal of a 40 percent reduction of emissions by 2020.”
As Europe’s biggest economy, Germany has also embraced the biggest carbon dioxide reductions through a program known as “Energiewende”—or, in English, also called energy change, shift, or transformation. Energiewende was launched in 2000 under Merkel’s predecessor, who offered subsidies for any company that produced green energy.
While the European Union (E.U.) has committed to carbon dioxide cuts of 40 percent by 2030, Germany’s national goal aims to get there a decade sooner—which may have seemed achievable early in the program. After the 1990 reunification of Germany, the modernization of East Germany brought rapidly reduced emissions. However, the program’s overall result has raised costs and the emissions the expensive programs were designed to cut.
A few months ago, Bloomberg reported that due to increased coal consumption: “Germany’s emissions rose even as its production of intermittent wind and solar power climbed fivefold in the past decade”—hence Merkel’s potential embarrassment on the global stage where she’s put herself in the spotlight as a leader in reducing emissions.
On December 3, while 190 governments were meeting for two weeks of climate change talks in Lima, Peru (which, after 30 hours of overtime, produced a compromise deal that environmental groups see “went from weak to weaker to weakest”), Merkel’s cabinet agreed to a package that continues Germany’s optimistic—though unrealistic—goal and increases subsidies for measures designed to cut emissions. Regarding Germany’s “climate protection package,” Barbara Hendricks, Environment Minister, admitted: “if no additional steps were taken, Germany … would miss its targets by between five to eight percentage points.”
The results of the German agreement will require operators of coal-fueled power plants to reduce emissions by at least 22 million tons—the equivalent of closing eight of them. The Financial Times (FT) believes the plan will “lead to brownouts in German homes.”
With the goal of generating 80 percent of its energy from renewable sources by 2050, Germany has aggressively pursued a green dream with unsustainable subsidies that have produced an unstable system described by FT, on November 25, as: “a lesson in doing too much too quickly on energy policy.”
So, what are the lessons? What should the U.S., and other countries, learn from Germany’s generous subsidy programs and rapid, large-scale deployment and integration of renewable energy into the power system? These are the questions U.S. legislators should be asking themselves as they argue over a tax extender package that includes a retroactive extension for the now-expired Production Tax Credit for wind energy.
Fortunately, the answers are easy to determine. Finadvice, a Switzerland based advisor to the utility and renewable industry, did an exhaustive study: “Development and Integration of Renewable Energy—Lessons Learned from Germany.” The introductory comments of the resulting report, includes the following statement: “The authors of this white paper would like to state that they fully support renewables as a part of the power portfolio. …a couple [of the authors] have direct equity interests in renewable projects.” The authors’ viewpoint is an important consideration, especially in light of their findings. They wanted Germany’s experiment to work; yet they begin the Executive Summary with these words:
“Over the last decade, well-intentioned policymakers in Germany and other European countries created renewable energy policies with generous subsidies that have slowly revealed themselves to be unsustainable, resulting in profound, unintended consequences for all industry stakeholders. While these policies have created an impressive roll-out of renewable energy resources, they have also clearly generated disequilibrium in the power markets, resulting in significant increases in energy prices to most users, as well as value destruction for all stakeholders: consumers, renewable companies, electric utilities, financial institutions, and investors.”
After reading the entire 80-page white paper, I was struck with three distinct observations. The German experiment has raised energy costs to households and business, the subsidies are unsustainable, and, as a result, without intervention, the energy supply is unstable.
Anyone who reads “Development and Integration of Renewable Energy” will conclude that there is far more to providing energy that is efficient, effective and economical than the renewable fairytale storytellers want consumers to believe. Putting a solar panel on your roof is more involved than just installation. The German experiment proves that butterflies, rainbows and pixie dust won’t power the world after all—coal, natural gas, and nuclear power are all important parts of the power portfolio.
Why, then, did Merkel continue Germany commitment to an energy and economic suicide? It is all part of the global shaming that takes place at the climate change meetings like the one that just concluded in Lima, Peru.
If only U.S. legislators would read “Development and Integration of Renewable Energy” before they vote for more subsidies for renewable energy, but, heck, they don’t even read the bill—which is why calls from educated constituents are so important. I am optimistic. Maybe we could learn from Germany’s experience what they haven’t yet learned themselves.