Germany: energiewende kaput?

Germany’s energiewende (energy transition) has been in the news.

Angela Merkel’s Vice Chancellor Stuns, Declares Germany’s ‘Energiewende’ To Be On ‘The Verge Of Failure’! [1]

No other major economy has embraced the dream more than Germany of abandoning fossil fuel and nuclear power in the name of saving planet Earth. If the German energiewende was to fail then surely it must fail everywhere else?

The penetration of wind energy in 2012 was 3.4% and solar 2.1% of total energy consumed and I would judge that this is too low a level of penetration from which to draw any conclusion about the success or failure of the energiewende. This in itself is a problem. Huge investment and publicity so far has produced rather little in return. In electricity production, wind accounted for 7% and solar 5% of total production. If the grid cannot easily tolerate these levels of electricity production this augers badly for future expansion.

There is no macro-scale evidence as yet that pursuing the energeiwende has either harmed or helped the German economy that continues to power onwards and upwards.

Figure 1 In 2012, 10% of Germany’s total energy consumption was from renewable sources, the remainder from fossil fuels and a dwindling amount from nuclear power. The spilt in the renewables segment is hydro 16%, wind 34%, solar 21% and other (bio-mass) 30%. The contribution from these renewable sources  to the whole was roughly one-tenth of these percentages in 2012.

Figure 2 Penetration of renewables power generation reached an average of 22% in 2012. This has continued to grow with a recent peak generation record of near 75% [2] in May 2014. But wind and to a lesser extent solar continue to present the problem of being there one moment and gone the next. Deep penetration of renewables into Germany’s power sector is undermining the economic viability of the traditional generators upon which the renewable generators depend to balance the grid. The conventional thermal generation is deduced by deducting renewable generation from total generation.

Data

All of the energy statistics reported here are drawn from the 2013 BP statistical review of world energy [3]. The economic and population data are drawn from the United Nations National Accounts Main Aggregates Database [4]. All data sources are referenced on charts.

Figure 3 Renewables reached 22% of total generation in 2012. 7% from wind and 5% from solar. Only the German people and government can say whether or not this relatively small contribution is worth the intrusion and cost and the disruption to smooth operation of the grid.

Figure 4 The official reason for Germany’s energiewende is to reduce CO2 emissions, aiming for zero emissions by 2050. Unfortunately Green pressure is also resulting in the closure of nuclear plant and this has consumed 63% of the gains from new renewables since 2001!

Figure 5 Relatively speaking, Germany is an energy poor nation. BP do not report oil production suggesting it is negligible. The small amount of gas production is in decline. Coal is Germany’s main indigenous resource. Deep mining for hard coal is continuing many decades of managed decline while surface mining of low grade lignite is reported to be rising and coal production figures rose in 2011 and 2012. This is an emblem of failure of the energiewende. Nuclear power is also undergoing managed decline. The only significant expansion is new renewables. The most significant observation from this chart is that growth in new renewables has not replaced the decline from other sources.

Figure 6 This picture of Germany’s primary energy consumption is very similar to that for the UK. Overall the trend is down since the second oil shock of 1979. Gas starts close to zero in 1965 and expands to substitute for coal in power production and home heat. Renewables are expanding because of political manipulation of the energy market.

Figure 7  With primary energy production running at roughly 100 million toe (tonnes oil equivalent) per annum and consumption at 300 toe per annum, Germany imports roughly 200 million toe per annum, about two-thirds of all energy consumed.

Figure 8  Germany is the 4th largest economy in the world after the USA, China and Japan. Like Japan and S Korea, Germany is energy poor and has a large bill to pay for energy imports. With a large export orientated manufacturing sector, Germany manages to pay this bill with consummate ease and has run a large structural surplus since the year 2000. Since 1970, the cumulative surplus amounts to 1.7 trillion $US (current). Germany has benefited from the adoption of the € in 1999 since, for the highly efficient German economy, the € is undervalued making German exports cheap on international markets.

Figure 9 To have a large economy you need to have a large population. Post re-unification (1990) Germany was left with a population of 80 million making it the biggest European country by far. The population is now in slow decline. Since 1970 GDP (in constant $2005) has more than doubled while population has been effectively flat.

Figure 10 The population structure of Germany still bears the scars of WWII with sharply reduced numbers of old males. The most striking feature though is the low numbers of young people. As the population ages, the smaller numbers of young will struggle to support the growing numbers of old.

Figure 11 Since 1970, per capita GDP in Germany has risen steadily while per capita energy consumption has been in decline since the mid-80s. Per capita energy consumption in 2012 was 3.77 toe, close to but slightly higher than the UK figure of 3.24 toe per capita.

Figure 12 From 1970 to 1985 growth in German GDP was accompanied by growth in energy consumption. Since 1985 Germany has pulled off a miracle by growing GDP with a static population and declining per capita energy consumption. This in part is down to growing efficiency of German industry – turning out more high quality and expensive cars, with contributions from off-shored manufacturing in China and city boys in Frankfurt performing financial magic tricks by producing money out of nothing.

Figure 13 The evolving view of the relationship between national per capita energy consumption and GDP is I believe getting interesting. The data series are time series normally increasing from bottom left (1980) to top right (2012) (or from bottom to top). The dashed line is constant efficiency of converting energy to GDP = $11,667 (current international $) per toe. Portugal and Turkey are equally efficient as Germany in converting energy to money but Germany is wealthier because it is able to consume (i.e. process) more energy per capita. I was surprised to see how similar Germany was to the UK, but also note how quickly a yawning gap has opened up post-2008 as the German economy recovered while the UK economy stagnated as some of the city boy phantom GDP went up in smoke. I will shortly do a separate post on the significance of this chart once I have added a few more countries – Luxembourg, USA, Canada, China, Japan, S Korea, Saudi Arabia, UAE, Brazil and South Africa. Suggestions welcome.

Concluding thoughts

I have not been to Germany for many years but will visit my younger son in Munich this summer and look forward to seeing whether or not the deployment of renewables has thus far scarred Germany.

Germany is reported to be building 10 new coal fired power stations [5]. Some of these may replace old plant closed under the EU large power plant directive and others the closure of nuclear power plants. No doubt the new coal fired stations will have a flange that says “connect CCS here” (carbon capture and storage). I am left with a feeling that Germany is wearing an environmental heart on its sleave, whilst planning its energy future with its head.

The substitution of low carbon nuclear base load by wind and solar power must be one of the most unusual strategies ever adopted in the battle to reduce CO2 emissions.

References

[1] Angela Merkel’s Vice Chancellor Stuns, Declares Germany’s ‘Energiewende’ To Be On ‘The Verge Of Failure’!
[2] Germany Sets New Record, Generating 74 Percent Of Power Needs From Renewable Energy
[3] BP: Statistical Review of World Energy 2013
[4] UN: National Accounts Main Aggregates Database
[5] Steag Starts Coal-Fired Power Plant in Germany

Other countries in this series of posts

Egypt – energy, population and economy
Russian Power
Post-peak Algeria?
Libya – energy, population and economy
Turkey – on its way to a mature economy
Ukrainian Death Spiral
Does the UK Economy Run on Energy or Hot Air?
Portugal – renewables to the rescue?
Belarus grows while Ukraine withers
Goodluck Nigeria – a failed state?

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25 Responses to Germany: energiewende kaput?

  1. Willem Post says:

    EUAN,

    I was in Germany a few years ago.
    PV systems in meadows and hillsides do not look that good.

    A very good article presenting many diverse data streams, but no COSTS.

    This article concentrates on the costs of the ENERGIEWENDE.

    http://theenergycollective.com/willem-post/338781/high-renewable-energy-costs-damage-germanys-economy

    • Euan Mearns says:

      Willem, thanks for link to interesting post. We have contrasting but complimentary styles. I am very interested in the economics but personally don’t have the expertise or time to go down that avenue. Are you able to summarise what the energiewende has cost Germany so far – € spent over the last x years/ year and what Germany has got for it. You make some incredibly important points about selling energy at a loss, which the renewables guys seem to think is a good thing.

      We had this series of posts by Hannes Kunz et al on The Oil Drum a number of years ago called The False Fire Brigade – incredibly “popular” and controversial. I think one of the main points was that with renewables “all” of your costs are up front and even though the fuel is free thereafter, you have to discount your upfront costs over x years to get the true cost. It is a huge irony that installing renewables is like buying a car while relying on coal in 2020 is more like taking the bus.

      • Willem Post says:

        EUAN,
        See the last part of the article.

        EEG Capital and Surcharge Cost Summary:

        This section has an estimate of the capital and surcharge costs of the EEG-1 phase; start 2000 – end 2014 (15 years), and EEG-2 phase; start 2015 – end 2030 (16 years). The assumptions take into account the EEG surcharge build-up and wind-down periods of RE systems built during the phases. RE subsidies are for 20 years.

        EEG – 1

        The total EEG-1 surcharges on electric bills increased from zero at start of 2000 to about 24.5 b euro in 2014, will be decreasing to zero by end of 2034.

        Costs During the EEG-1 Build-up and Wind-down Period:

        Surcharge during build-up from start 2000 to end 2014, b euro………………………………..111.6
        Surcharge during wind-down from start 2015 to end 2034, b euro…………………………….275.8
        Total surcharge, b euro……………………………………………………………………………………….387.4

        200.1 b euro capital cost to build the RE systems, which typically last only 20 to 25 years!!

        Costs, such as grid build-outs, capacity adequacy, balancing losses, etc., are not included.

        EEG – 2

        The total EEG-2 surcharges on electric bills increased from zero at start of 2015 to about 11.7 b euro in 2030, will be decreasing to zero by end of 2050.

        Costs During the EEG-2 Build-up and Wind-down Period:

        Surcharge during build-up from start 2015 to end 2030, b euro………………………………..102.3
        Surcharge during wind-down from start 2031 to end 2050, b euro…………………………….111.0
        Total surcharge, b euro……………………………………………………………………………………….213.2

        243.0 b euro capital cost to build the RE systems, which typically last only 20 – 25 years!!

        Costs, such as grid build-outs, capacity adequacy, balancing losses, etc., are not included.

        NOTES:
        - RE systems installed at the start of 2000 receive feed-in rates to the end of 2019, i.e., for 20 years, etc.
        - (EEG-1 + EEG-2) surcharge peaks at about 25.68 b euro during 2019, will be decreasing to zero by end of 2050.

      • Leo Smith says:

        Windmills still need maintenance and often to pay rent on the land used.

        And with MTBFS of a few weeks they need a LOT of maintenance.

  2. Roger Andrews says:

    Euan, you say: “I would judge that this is too low a level of penetration from which to draw any conclusion about the success or failure of the energiewende.”

    Beg to disagree. I think we already have enough data to say that the Energiewende is a failure, at least in its present incarnation. The CEO of EON certainly seems to think so:

    http://www.bloomberg.com/news/2014-05-06/eon-urges-eu-policy-revamp-as-power-markets-face-crisis.html

    And so do the two reports linked to in this article (according to the second of which “Germany lost €15 billion in exports last year from having to pay a premium for electricity compared with international competitors, and a total of €52 billion in the six-year period from 2008–13”) :

    http://www.the-american-interest.com/blog/2014/02/27/germanys-energiewende-a-path-to-economic-self-destruction/

    And so, as you note, does the German Vice-Chancellor (who actually said that the Energiewende is on the “verge of failure”, but that’s close enough).

    The question is whether it’s possible to reincarnate the Energiewende in a form that allows it to do what it’s supposed to do, namely reduce CO2 emissions, replace oil, coal and gas (and in the case of Germany nuclear) with renewables, reduce energy imports etc. while at the same time ensuring that power costs remain at affordable levels and the grid doesn’t get fried and the lights stay on. I can’t think of any way of doing it, but maybe German ingenuity can come up with something. ;-)

  3. Hi Euan,

    A great job. The population histogram is astonishing.

    “Suggestions welcome.”

    Indonesia, India, and Australia.

    Dave

  4. According to reports, wind and solar reached a record 67 % of power demand a few days ago. This is with annual energy of around 7% and 6% respectively. It is obvious that much beyond these instantaneous penetrations, energy will need to be spilled, stored or exported to the European grid. During summer, around 40% of PV is already exported sometimes, but what is true for Germany is not true for Europe. The Continental European synchronous grid spans around 17° of longitude (equivalent to a separation of local solar noon of 66 min); hence, there is limited capacity for dispersed European solar to balance output across time zones. For example, see slide number 180;

    http://www.ise.fraunhofer.de/en/downloads-englisch/pdf-files-englisch/news/electricity-production-from-solar-and-wind-in-germany-in-2012.pdf

    Likewise, for continental-wide wind regimes. It seems to me that Germany has done the easy part, the hard part will be deciding whether to store or spill energy, and at what energy and economic cost.

    • Euan Mearns says:

      Graham, there are only 2 time zones I believe, UK, Portugal and Canary Islands and the rest. If other countries build out solar and wind to same scale then there is nowhere for this stuff to go on peak production – where prices of the most expensive electricity ever made gets dumped negative. So there are only two options – curtailment or storage. Curtailment the reason for this stuff existing. So storage is only real option. Without grid scale, affordable and energy efficient storage renewables will die – quite soon I believe. And then we can get back to fretting about FF depletion and who’s going to be first to die from radiation.

    • Bernard Durand says:

      Graham, German eolian and PV are already facing difficulties for exporting temporary but high excesses of power on the ENSTO grid, because grids in some countries cannot convey so high powers. The Ceck republic wants for instance to put a barrier (a dephaser), and it might be that other countries will do the same (Netherland, may be France?). But also the increase in wind and power capacities all over ENSTO countries will increase considerably these excesses of power. You say that there is no real dispersion of solar between countries, but this is also the case for wind as demonstrated by Bach and Flocard. As a result of these, the Whole ENSTO will suffer, not only Germany.

  5. Robert Christopher says:

    I posted this on Bishop Hill Unthreaded, but it is too good to miss:

    “The German Ministry of Environment has falsified the conclusions of a UN climate change report in the German-language version released last week, in an attempt to hide the fact that the country’s ‘green policies’ are useless.
    The ministry’s four-page summary of the report contains outright contradictions and falsifications of Intergovernmental Panel on Climate Change (IPCC) recommendations, apparently made to hide UN criticism of the way the German government has turned emissions-trading into a cash cow for futile renewable energy projects.”

    http://www.breitbart.com/Breitbart-London/2014/05/19/german-govt-falsifies-climate-report

    with a link to articles in Die Welt (in German) and No Tricks Zone (in English).

  6. Joe Public says:

    O/T – Russia Today Published time: May 20, 2014 10:48: Russia / China gas agreement

    “(China is)…… looking at somewhere between $350 or maybe slightly less for 1,000 cubic meters of gas. (China is) looking at the deal that is worth around $400 billion over a 30-year period of time. (China is) looking at something that could generate for Russia approximately $13 billion a year.”

    http://rt.com/op-edge/160164-russia-china-deal-west-sanctions/

    • Syndroma says:

      To put things into perspective: $13 billion a year is not much, considering that Russia earns $300 bn a year from selling oil (2.7Gb * $110/b = $300bn). If average price of oil increases by 10 dollars, Russian revenue increases by $27 billion a year. On the other hand, gas sales are something like $30-40 bn a year.

  7. Joe Public says:

    And on a similar theme, Russia (Yester)Day

    “As for the possibility of Russian oil giant Rosneft selling a 19.5 percent stake minus one share to Chinese companies, Medvedev says it is up to the company to decide.”

    http://rt.com/business/160056-medvedev-china-gas-deal/

    • Euan Mearns says:

      Thanks Joe, Europe seeks to diversify supply away from Russia, Russia seeks to expand client base and dependency on Europe. In addition to the South Stream pipeline, Russia is building LNG and now a pipeline to China. Europe seeks energy security in windmills and gas from Libya.

  8. Ed says:

    All these unsightly ‘windmills’, killing all our birds. You guys crack me up. Long live the Fukushima dream hey?

  9. I have calculated the nuclear capacity retired prematurely:

    http://crudeoilpeak.info/germany-energy-transition

  10. Lars Evensen says:

    Very interesting blog you have here. May I suggest that you also do time series on Sweden, our neighbours to the East? In 2005 former Swedish prime minister Göran Persson made the case that Sweden is to phase out oil consumption altogether within 2020. Now that seems pretty far fetched, but it would be very interesting to see how far they actually are from that goal and how much renewables have gained I think.

    • Euan Mearns says:

      I’ll put Sweden on my list. In 2005 Sweden consumed 339,000 barrels oil per day. In 2012 295,000 bpd. Down 13% in 7 years is probably not much different to other OECD countries impacted by high oil price. I seem to recall the Swedish preference was to flatten Amazon rain forest and use sugar cane ethanol instead.

  11. Simon Smith says:

    Hi Euan -

    The problem with Gernamy’s renewables is not total generation over a year, but the pattern of production over a day: especially with solar it changes very, very fast. This story:
    http://www.utilitydive.com/news/german-grid-hits-record-74-renewables/264181/

    ..reports that renewables reached 74% of total demand, and that fossil fuel plants couldn’t turn down fast enough; they exported ‘more than 10GWs to neighbouring markets’.

    My understanding is that on a daily basis – especially at dawn and dusk when solar appears and disappears – they need to import/export to balance their system. This is causing problems to the rest of the European System Operators: they have to take actions to balance the subsequent fast-changing imports/exports. If it’s spread out over enough other systems it’s probably OK, but there has to be a limit on the changes each system can manage – Germany is far beyond its own and it is pushing the others towards their limits although I don’t know what their capacities are.

    I do know that the Euro System as a whole has problems, in that there are recurring ‘frequency variations’ of 3 times normal variations recently. (I can dig out the link if you’re interested.)

    This is the basic problem of renewables: you need to have very fast changing backup to match its ups and downs. The larger the max instantaneous change is, the bigger problem you have. The percentage total over a day or week or year isn’t too relevant.

    Thanks -

  12. disdaniel says:

    Roger A. wrote: “Germany lost €15 billion in exports last year from having to pay a premium for electricity compared with international competitors, and a total of €52 billion in the six-year period from 2008–13”)”

    except more and more of Germany’s industry is exempted from the energiewede, which is why the rate keeps going up for the residential/commercial customers. Also only about 1/3 of the increase in german consumer rates over the past decade+ is due to (direct) renewable costs. Meanwhile wholesale rates have plunged due to competition from renewables…which has greatly helped german industry.

    • Euan Mearns says:

      I’m really interested in this oft quoted plunge in wholesale electricity rates. The wind and solar power produced is incredibly expensive – right? And yet when it is over produced prices get dumped. High cost and low price does not sound like a good business model to me. But can you explain how this works. The renewables producers still get paid the same high price no matter what. So who is it that benefits from this low price? I’m genuinely confused. It sounds like classic Doublethink.

      • Simon says:

        I think part of it that when they can’t turn down conventional generation fast enough and have to export it, they face very low prices (sometimes negative: they pay other countries to take it away). That’s not a good model: pay high for the renewables, pay again to take the excess conventional away. That low price for conventional probably gets into the average for conventional.

        Cheers -

  13. In part, the merit order effect due to an oversupply of capacity in the wholesale market leads to a wealth transfer from generators to consumers (i.e, lower profits for generators). Of course the renewables also derive income from subsidies, FiTs etc. The conventional generators may also derive income from the ancillary markets (capacity, reserves, voltage etc). Conventional generators may also change their bidding so that they obtain greater revenue during low solar, low wind conditions.
    In Australia, the high cost of exiting the market due to staff redundancies and the investment in skills, mine rehabilitation, decomisioning etc means that many generators are simply reducing maintenance and hoping for the best. High costs, a loss of manufacturing etc, is reducing energy demand putting further pressure on markets. In the old days, the ancillary services including capacity, reserves, inertia, voltage etc were supplied at low or no cost, and the energy markets ensured an efficient system. But wind/solar don’t contribute these essential ancilary functions and only participating in energy. This market problem evidently wasn’t thought about when virtually all generation was synchronous generators driven by a rotary turbine (steam, gas or hydro). This is a difficult problem wih increasing penetration of non-synchronous, non-dispatchable generation.
    The only reason the system still works is because of legacy generation. It simply wouldn’t operate from scratch because engineers would be asking where the black start capability would come from, the reserves etc, and all of this would have to be explicitly costed rather than getting all of this for free.

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