Germany's Energiewende: A Disaster in the Making

Summary of Study

Bottom Line: Under the Energiewende (“energy transition”), Germany has led the drive to install as much renewable energy as possible to drastically reduce greenhouse gas emissions and combat climate change. The country has utilized countless incentives and policies to force the adoption of wind and solar power in particular. There are some key factors that support these goals but the problems and expenses being incurred easily outweigh them. Germany’s politicians seem unable to error, with a policy correction only possible in the long-term.

Under the influence of the Intergovernmental Panel on Climate Change and the strong demands of local society, media, and politicians, Germany has become the global leader in renewable energy policy. The country has installed a highly expensive energy transition to combat climate change by ending the use of fossil fuels.

It is an immense decarbonization plan based on forcing as much wind and solar at any cost, aiming to ultimately increase the share of renewables to between 80 and 95% of total energy supply by 2050.

There are some saving graces to assist in Germany’s highly expensive endeavor: lack of political opposition, oversupply leading to lower prices for some, over-engineering that has given the power grid a wide safety margin, and neighbors that can help when issues arise.

The reality, however, is that the problems being created mean that a crisis is lurking right around the corner. First, wind and solar power are naturally intermittent and thus require continuous amounts of costly new capacity. This intermittency makes them even more expensive since they must be paired with high cost storage options, such as batteries.  

Secondly, renewables typically supply too little or too much energy and work to destabilize the grid. With subsidies and other incentives that can actually end up paying generators for energy that was never produced, wind and solar are usually oversupplying during times of low demand but unavailable during times of high demand.  

Thirdly, this can create an overflowing of energy for the grid that creates a market distortion. Overly subsidized wind and solar farms unfairly cause other fossil fuel plants to operate in the red or even be mothballed, such as more reliable and economical gas plants.

Finally, renewables have far fewer green credentials than advertised since they require huge swaths of land and kill/disrupt wildlife across the country, namely birds and bats.

Germany has a few paths forward. Most will simply muddle through the renewable problem unable to admit policy error. This will end in some new form of state energy management that will remain expensive and detrimental to growth. For others, policy correction is possible but only over the long-term and if certain conditions are met, such as more frequent grid failures or loss of public support.

Read the full study here

Feature Charticle

Germany’s Energiewende Target for 2050

Ministry of Economy and Energy

Findings: 

  • Germany's "energy transition" has established the most ambitious and expensive climate policies in the world.
  • There are some support mechanisms but the problems being created easily outweigh them.
  • A crisis is lurking on the horizon.
  • Policy correction is required but likely only possible in the long-term.

Read the full study here.