{"id":8362,"date":"2014-10-06T14:05:57","date_gmt":"2014-10-06T19:05:57","guid":{"rendered":"http:\/\/blogs.edf.org\/energyexchange\/?p=8362"},"modified":"2014-10-28T14:44:58","modified_gmt":"2014-10-28T19:44:58","slug":"while-critics-debate-energiewende-germany-is-gaining-a-global-advantage","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/energyexchange\/2014\/10\/06\/while-critics-debate-energiewende-germany-is-gaining-a-global-advantage\/","title":{"rendered":"While Critics Debate Energiewende, Germany is Gaining a Global Advantage"},"content":{"rendered":"<figure id=\"attachment_8363\" aria-describedby=\"caption-attachment-8363\" style=\"width: 348px\" class=\"wp-caption alignleft\"><a href=\"https:\/\/www.flickr.com\/photos\/abuaiman\/1541094119\/\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-8363     \" alt=\"Source: Frank M. Rafik\" src=\"https:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2014\/10\/German-flag.jpg\" width=\"348\" height=\"278\" srcset=\"https:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2014\/10\/German-flag.jpg 499w, https:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2014\/10\/German-flag-300x239.jpg 300w\" sizes=\"auto, (max-width: 348px) 100vw, 348px\" \/><\/a><figcaption id=\"caption-attachment-8363\" class=\"wp-caption-text\">Source: Frank M. Rafik<\/figcaption><\/figure>\n<p>Economics is the focus of many debates surrounding Germany\u2019s aggressive \u201cenergy transition\u201d (or <i>Energiewende<\/i>), which plans to move the country to nearly 100 percent renewable energy by 2050. Critics say <i>Energiewende<\/i>\u2019s costs are unjustifiable, arguing they hurt the country\u2019s international competitiveness and systemic inefficiencies exacerbate these costs.<\/p>\n<p>At first glance, it\u2019s hard to argue with them. The scale of investment in <i>Energiewende<\/i> can seem intimidating: So far, Bloomberg New Energy Finance estimates the total cost of Germany\u2019s clean energy expansion at <a href=\"https:\/\/www.bnef.com\/News\/92136\">\u20ac106 billion<\/a>. Furthermore, the Wall Street Journal quotes government sources when predicting <a href=\"http:\/\/online.wsj.com\/articles\/germanys-expensive-gamble-on-renewable-energy-1409106602\">total costs<\/a> through 2040 to be about \u20ac1 trillion.<\/p>\n<p>By contrast, however, Germany\u2019s <a href=\"https:\/\/ip-journal.dgap.org\/en\/blog\/going-renewable\/battle-over-electricity-part-ii\">annual investment in fossil fuels<\/a> has been \u20ac90 billion; and, investments in <i>Energiewende<\/i> go into electric grid upgrades that would need to happen in Germany anyway, whereas fossil fuel investments leave the country.<\/p>\n<p>When viewed in context, there are many reasons to believe investments in <i>Energiewende<\/i>\u00a0will reap economy-wide rewards, giving Germany a competitive global advantage over other countries that lagged behind investing in the future.<\/p>\n<p><b><i><!--more-->Energiewende<\/i><\/b><b> is creating jobs, raising GDP, and attracting business<i><\/i><\/b><\/p>\n<p>The German example shows an energy transition can lead to overwhelmingly positive, balanced, and pervasive <a href=\"http:\/\/germany.info\/contentblob\/3179136\/Daten\/1346894\/BMU_RenewablyEmployed_DD.pdf\">employment impacts<\/a>.<\/p>\n<p>In 2004, Germany\u2019s renewable energy sector employed 160,500 people, and that number doubled to 367,000 by 2010. The <i>net<\/i> employment gain from renewable energy in 2009 alone was 70,000-90,000, compared to the \u201cbusiness-as-usual\u201d scenario in which energy was provided by fossil fuels. And this trend is only expected to continue.<\/p>\n<p>The projected net employment gains for 2020 and 2030 are 23,000-117,000 and 105,000-241,000, respectively. Furthermore, because of indirect employment from supplying intermediate products and components to the renewables sector, all regions of Germany are set to benefit from renewable energy expansion.<\/p>\n<p>As with employment, <i>Energiewende<\/i> also promises to positively impact Germany\u2019s GDP. By 2030, German renewable energy exports are expected to reach \u20ac47\u201369 billion (\u20ac33-48 billion in 2005 Euros). In addition, relative to a scenario with no renewable energy policy, <a href=\"http:\/\/germany.info\/contentblob\/3179136\/Daten\/1346894\/BMU_RenewablyEmployed_DD.pdf\">costs to the German economy<\/a> are negative for all realistic scenarios. In 2009, total profits of German manufacturers of renewable energy facilities were \u20ac16.4 billion. Projected profit ranges for 2020 and 2030 are \u20ac28 billion-\u20ac42 billion and \u20ac43 billion-\u20ac60 billion, respectively.<\/p>\n<p>Large industries, small businesses, and residential consumers share these economic benefits. The Heinrich B\u00f6ll\u00a0Foundation <a href=\"http:\/\/energytransition.de\/wp-content\/themes\/boell\/pdf\/German-Energy-Transition-KF.pdf\">argues<\/a>, \u201ccontrary to one common misconception, renewables have turned Germany into an attractive location for energy intensive industries.\u201d In 2012 alone, renewables had driven down wholesale electricity prices by over 10 percent; and, cheaper electricity prices translate to lower business expenses. \u00a0In addition, as of 2013, <a href=\"http:\/\/www.fes-japan.org\/wp-content\/uploads\/2013\/04\/broschuere_energiewende_en_bf.pdf\">farmers and individuals<\/a> owned renewable energy investments amounting to over \u20ac100 billion.<\/p>\n<p><b>Paying for renewables <i>now<\/i> makes practical sense <\/b><\/p>\n<p>The costs of renewable energy, such as wind, solar, and others, in Germany have fallen and are expected to continue to fall in the future as manufacturers accumulate experience, make improvements, and enjoy economies of greater scale.\u00a0 At present, premier wind farms produce electricity at a price comparable to that of gas and coal plants. In addition, the levelized cost of energy for solar PV has <a href=\"http:\/\/www.lazard.com\/PDF\/Levelized%20Cost%20of%20Energy%20-%20Version%208.0.pdf\">fallen 78 percent<\/a> over the past five years, and PV is now competitive with residential electricity tariffs in many countries, including Germany.<\/p>\n<p>Furthermore, while renewables fuel sources have no fuel costs, Germany&#8217;s <a href=\"http:\/\/www.wwf.de\/fileadmin\/fm-wwf\/Publikationen-PDF\/Myths_and_facts_about_Germany_s_energy_transition.pdf\">costs of importing<\/a> oil, gas, and hard coal have increased by factors of 2.77, 2.68, and 2.26, respectively, over the past ten years. In addition, steel and cement prices jumped between 2000 and 2011, contributing to the cost of constructing a new power plant rising by 70-100 percent in many cases.<\/p>\n<p>While the costs of <i>Energiewende<\/i> are growing, the majority of electricity price increases in Germany have been a result of rising fossil fuel costs. <i>Energiewende<\/i> costs were only responsible for about 29 percent of the average electricity prices\u2019 jump of \u20ac0.118\/kWh between 2000 and 2012. <a href=\"http:\/\/www.google.com\/url?sa=t&amp;rct=j&amp;q=dice%20energiewende%20a%20pricey%20challange&amp;source=web&amp;cd=1&amp;ved=0CDcQFjAA&amp;url=http%3A%2F%2Fwww.cesifo-group.de%2FDocDL%2Fdicereport312-forum3.pdf&amp;ei=o7LSUJCkKMnasgaW1oHABQ&amp;usg=AFQjCNGuznXzeooszqNH1EaTiIrPEwzGGQ&amp;bvm=bv.1355534169,d.Yms\">During this same period<\/a>, costs of electricity generation, transport, and distribution of conventional power have risen by 46 percent of the entire price increase.<\/p>\n<p>Finally, we can\u2019t forget the societal costs associated with continuing to rely on fossil fuels for electricity. <a href=\"http:\/\/www.google.com\/url?sa=t&amp;rct=j&amp;q=dice%20energiewende%20a%20pricey%20challange&amp;source=web&amp;cd=1&amp;ved=0CDcQFjAA&amp;url=http%3A%2F%2Fwww.cesifo-group.de%2FDocDL%2Fdicereport312-forum3.pdf&amp;ei=o7LSUJCkKMnasgaW1oHABQ&amp;usg=AFQjCNGuznXzeooszqNH1EaTiIrPEwzGGQ&amp;bvm=bv.1355534169,d.Yms\">CESifo DICE<\/a> quotes Ku\u0308chler and Meyer when reporting, \u201cThe societal costs of one kWh of wind energy amount on average to 8.1 cents, and those of hydropower to 7.6 cents. In comparison, one kWh of coal power costs on average 15.6 cents (lignite) or 14.8 cents (hard), of natural gas 9.0 cents, and of nuclear 42 cents.\u201d<\/p>\n<p>All of this is to say, capitalizing on renewables now makes for a prudent investment that will pay for itself as both the actual and societal cost of obtaining, generating, and moving conventional energy sources continues to increase.<\/p>\n<p><b>Cost vs. price: understanding the difference matters<i><\/i><\/b><\/p>\n<p><a href=\"http:\/\/www.spiegel.de\/international\/germany\/high-costs-and-errors-of-german-transition-to-renewable-energy-a-920288.html\"><i>Spiegel Online International<\/i><\/a> points out that \u201cGerman consumers already pay the highest electricity prices in Europe.\u201d<\/p>\n<p>But such a position is short-sighted. While the <i>price<\/i> of a kilowatt-hour of energy is high in Germany, the <i>cost<\/i> of electric bills is not unreasonable. The average German and American electric bills, at about $100\/month, <a href=\"http:\/\/energytransition.de\/2013\/10\/three-reasons-why-germany-is-kicking-our-arsch-on-solar\/\">are the about same<\/a>. Germany&#8217;s energy efficiency leadership enables them to afford high rates without especially high bills.<\/p>\n<p>An additional insight into <i>Energiewende<\/i>\u2019s industrial affordability comes from the <a href=\"http:\/\/www.wwf.de\/fileadmin\/fm-wwf\/Publikationen-PDF\/Myths_and_facts_about_Germany_s_energy_transition.pdf\">World Wildlife Fund<\/a> (WWF), which states, \u201caveraged over all industrial enterprises, energy costs account for a mere 2 percent of a company\u2019s gross production value.\u201d Similarly, <a href=\"http:\/\/www.google.com\/url?sa=t&amp;rct=j&amp;q=dice%20energiewende%20a%20pricey%20challange&amp;source=web&amp;cd=1&amp;ved=0CDcQFjAA&amp;url=http%3A%2F%2Fwww.cesifo-group.de%2FDocDL%2Fdicereport312-forum3.pdf&amp;ei=o7LSUJCkKMnasgaW1oHABQ&amp;usg=AFQjCNGuznXzeooszqNH1EaTiIrPEwzGGQ&amp;bvm=bv.1355534169,d.Yms\">CESifo DICE<\/a> finds <i>Energiewende<\/i> affordable on the residential level; as of 2012, electricity expenditures only accounted for 2.5 percent of a private household\u2019s consumer budget.<\/p>\n<p><b>Putting \u201clow income\u201d in context<i><\/i><\/b><\/p>\n<p>All sides agree heightened energy costs due to <i>Energiewende<\/i> have a greater adverse impact on the poor than on other social classes.<\/p>\n<p>As <a href=\"http:\/\/www.spiegel.de\/international\/germany\/high-costs-and-errors-of-german-transition-to-renewable-energy-a-920288.html\"><i>Spiegel Online International<\/i><\/a> expresses:<\/p>\n<p style=\"padding-left: 30px;\">\u201cIn the near future, an average three-person household will spend about \u20ac90 a month for electricity. That\u2019s about twice as much as in 2000\u2026But despite those price hikes, government pensions and social welfare have not been adjusted. As a result, every new fee becomes a threat to low-income consumers.\u201d<\/p>\n<p>To this point, <a href=\"http:\/\/www.wwf.de\/fileadmin\/fm-wwf\/Publikationen-PDF\/Myths_and_facts_about_Germany_s_energy_transition.pdf\">WWF<\/a> notes \u201cprivate households on low incomes need energy advice and support, e.g. to buy highly efficient appliances. Needy households which are hit especially hard by rising electricity prices should be supported with subsidies.\u201d<\/p>\n<p>For international context, however, even when compared to some of the most developed countries in the world, such as the United States, energy poverty is <a href=\"http:\/\/www.wwf.de\/fileadmin\/fm-wwf\/Publikationen-PDF\/Myths_and_facts_about_Germany_s_energy_transition.pdf\">less prevalent in Germany<\/a>. In 2011, <a href=\"http:\/\/www.welt.de\/politik\/deutschland\/article127089231\/Hunderttausende-Deutsche-sitzen-im-Dunkeln.html \">312,000<\/a> German households had their electricity cut off. Meanwhile, there were <a href=\"http:\/\/www.wwf.de\/fileadmin\/fm-wwf\/Publikationen-PDF\/Myths_and_facts_about_Germany_s_energy_transition.pdf\">16 million<\/a> living in energy poverty in the United States.<\/p>\n<p><b>Conclusion<\/b><\/p>\n<p><i>Energiewende<\/i> has already positively impacted the country\u2019s GDP and employment situation, and this state of affairs promises to continue as renewable energy prices trend downward and the costs of importing fossil fuels trend upward.<\/p>\n<p>Moreover, criticisms of <i>Energiewende\u2019<\/i>s costliness tend to lack perspective. While electricity prices are high, electricity bills are as affordable as those in the United States. Renewables have caused electricity prices to rise in Germany over recent years, but conventional fuels have contributed to even larger increases. And energy poverty is a serious issue, but relative to other developed countries, Germany has fared favorably.<\/p>\n<p>Regarding <i>Energiewende<\/i>\u2019s long-term economic ramifications, <a href=\"http:\/\/energytransition.de\/wp-content\/themes\/boell\/pdf\/German-Energy-Transition-KF.pdf\">The Heirich B\u00f6ll Foundation<\/a>\u00a0foresees even more economic benefits. Germany\u2019s goal is to gain \u201cfirst-mover advantage\u201d and develop high value engineering technologies, such as those required for solar panels, wind turbines, biomass and hydro power plants, battery and storage systems, smart grid equipment, and efficiency technologies.<\/p>\n<p>Finance professionals spend their careers searching for investments that entail manageable upfront costs, low risk, and extraordinary potential. So far, <i>Energiewende<\/i> has fit this mold.<\/p>\n<p>&nbsp;<\/p>\n<p><em>This is the second blog post in\u00a0a six-part series on <\/em>Energiewende<em>, which will describe best practices gleaned from the German experience and examine their U.S. applicability.\u00a0<em>Topics will include the\u00a0<a href=\"https:\/\/blogs.edf.org\/energyexchange\/2014\/10\/06\/while-critics-debate-energiewende-germany-is-gaining-a-global-advantage\/\">Economics<\/a>,\u00a0Politics, Governance,\u00a0<a href=\"https:\/\/blogs.edf.org\/energyexchange\/2014\/10\/28\/germanys-energiewende-is-shifting-the-energy-paradigm-now-its-time-to-optimize\/\">Implementation<\/a>, and\u00a0<a href=\"https:\/\/blogs.edf.org\/energyexchange\/2014\/10\/19\/germanys-energiewende-proves-electricity-can-be-clean-and-reliable\/\">Reliability<\/a>\u00a0of\u00a0<\/em><\/em>Energiewende<em><em>.<\/em><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Economics is the focus of many debates surrounding Germany\u2019s aggressive \u201cenergy transition\u201d (or Energiewende), which plans to move the country to nearly 100 percent renewable energy by 2050. Critics say Energiewende\u2019s costs are unjustifiable, arguing they hurt the country\u2019s international competitiveness and systemic inefficiencies exacerbate these costs. At first glance, it\u2019s hard to argue with &#8230;<\/p>\n","protected":false},"author":39754,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[42996,4127,53091,177],"tags":[],"coauthors":[],"class_list":["post-8362","post","type-post","status-publish","format-standard","hentry","category-smart-power","category-dynamic-pricing","category-energy-financing","category-renewable-energy"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>While Critics Debate Energiewende, Germany is Gaining a Global Advantage - Energy Exchange<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/blogs.edf.org\/energyexchange\/2014\/10\/06\/while-critics-debate-energiewende-germany-is-gaining-a-global-advantage\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"While Critics Debate Energiewende, Germany is Gaining a Global Advantage - Energy Exchange\" \/>\n<meta property=\"og:description\" content=\"Economics is the focus of many debates surrounding Germany\u2019s aggressive \u201cenergy transition\u201d (or Energiewende), which plans to move the country to nearly 100 percent renewable energy by 2050. 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Critics say Energiewende\u2019s costs are unjustifiable, arguing they hurt the country\u2019s international competitiveness and systemic inefficiencies exacerbate these costs. 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