Energy transition in Europe’s power house: Disaster or creative destruction of the German power industry?

Remember the big, somewhat bulky Mercedes Benz cars of the early 1990s? State-of-the- art at that time, they chased their competitors on Germany’s autobahn. Mercedes is still here today, but the Germans fear that two decades of neglect after the reunification might have seriously damaged the once superb infrastructure of (West-) Germany. Similarly, Germany once possessed one of the world’s most well-engineered power systems. Yet in 2014 the country urgently needs new power grids – or ‘Stromautobahnen’ (electricity highways) – to keep supply stable despite growing numbers of volatile renewables. The ‘Energiewende’, that is the rapid transformation of the power system towards a massive increase of green energy thus raises concerns whether the project might turn out to be harmful for Germany’s industry.

Admittedly, electricity generation from renewables lately rose to new, unprecedented highs. But doubts remain, whether the transformation of the power sector can keep pace with the phase out of nuclear power, and whether the ambitions to run the country’s industry on renewables are realistic. Almost doubled since the year 2000, electricity tariffs are one of the indicators that the ‘Energiewende’ project could turn out to be a serious burden for the German economy. The fact that CO2 emissions did not decrease, but actually increase over the last years, is another sign that the project is not on track. Moreover, it is no secret that German energy companies are not doing well. Is Germany thus about to sacrifice the once famous reliability of its power system and its power industry for increasing greenhouse gas emissions? And if so, what might be the way forward? Back to nuclear energy?

The disastrous state of Germany’s repositories for radioactive waste such as Brunsbüttel and Asse are not encouraging. Moreover, public support for the nuclear phase-out and renewables is still great. Not without gusto, and to the great amusement of the participants of a conference in Berlin (2013), Vladimir Putin could thus offer the Germans firewood from Siberia to solve the country’s energy problems. Apparently the Energiewende did not exactly impress the Russians. But how about others? Japan – maybe ‘the’ potential partner for Germany’s Energiewende project – is about to fully relaunch its nuclear programme; the United States are happy with their shale gas, and at home in Europe not many countries joined the Germans either. On top of it Günther Oettinger, Germany’s accomplished top official in the European Commission, is no longer responsible for energy. It would hence seem that Germany’s energy policy has not many influential supporters left.

Remains the idea to sell green tech on the world markets. However, Desertec, the infamous project to build huge solar parks in the North African desert, turned out to be nothing but a mirage. In a sense this is not a big deal for the Germans, as many components of the project might have come from China anyway, where large parts of the production of solar panels went. But if the production of windmills would follow, the idea to make green tech a base for industrial production would experience a serious setback. It is hence doubtful whether renewables represent an adequate focal point for high-tech industries in Europe.  But most things in life have two sides. And so does Germany’s attempt to modernise – some would say revolutionise – its power sector.

The great hope is, that German engineering will once more surprise the world with technical solutions for difficult problems in difficult times. The power grid is central in this regard. If technical components such as storage could be found which allow a quick and flexible response to changes in the output of wind and solar power, and if consumption could react more flexibly to the ups and downs caused by the elements, then the zero marginal costs of renewables could indeed represent an alternative to other energy sources. The power grid and its components, not Vladimir Putin’s firewood, could thus be the ‘Wunderwaffe’ able to solve Germany’s energy problems. But these new techniques need to be affordable, otherwise the effect will be negligible and only perpetuate the existing problems.

Another, yet much less debated issue concerns the country’s nuclear programme. If Germany will indeed pursue on the given course, the development of third generation nuclear plants will be in the hand of countries such as France, Britain and Poland who are not following the example of Germany’s nuclear phase-out. But German industry is famous for its ability to occupy profitable technological niches. Given that there are many nuclear power stations to be dismantled, and a lot of nuclear waste already rotting in the state of Germany, the Germans will have to find solutions to deal with it. If they still are the engineers they used to be, so they will.