Thursday, 28 October 2010

German (energy) efficiency

Germans of today have always struck me more as pragmatic rather than visionary by nature. One needs to dig several centuries deep in the intellectual landscape until the shovel eventually hits the crusty remains of Goethe, Kloppstock or Kant; thinkers that were once led by the belief that our world will change to a better place if only our minds are enlightened, and not by striving obsessive compulsively for efficiency improvement.  Yes, I did miss the courage for having visions in my country. That is, until I read about our new energy and climate roadmap to 2050, which gave reasons for hope again.

The new energy concept was made public in September by the Federal Government, lead by Chancellor Angela Merkel, and offers a compass for cutting emissions by 80% compared to 1990 base level by 2050. An eighty per cent emissions cut looks like a great vision.

Reading in more detail about the plan allows some interesting insight into the works of a German mind. So, how does Germany plan to achieve the 80% emissions cut? There are eight pillars holding the energy and climate construct:  1) renewables will make up 80% of Germany’s electricity generation by 2050, 2) energy efficiency will be drastically improved, 3)  existing nuclear power stations will stay on the grid for up to 25 more years, 4) smart grids will be introduced to allow for more efficiency between demand and supply, 5) the housing sector will be restructured towards more efficiency, 6) electric vehicles will be substantially subsidised, 7) more funding will be allocated to research and development and 8) Germany will spend effort and money to harmonize the European electricity grid to allow a better transfer between countries.  In summary, Merkel has managed to put German efficiency into a vision of decarbonising a country. 

Of course the strategic paper contains information on how the eight pillars are planned to be implemented. For a complete understanding it is necessary to take a step back and look at how Germany’s energy and electricity production mix is structured right now. 
As of 2009 renewables make up 15.6% of electricity production only. And I say only, because Germany aims at 80% in 40 years, which means adding almost six times the existing generation capacity, assuming constant energy consumption. Right now 45% of electricity production stems from coal, 23% from nuclear and 13% from natural gas. If we zoom further into the renewable wedge we see that it is made up of 40 % wind energy, 25% biomass, 20% hydro, roughly 10% photovoltaic and 5% renewable waste. In order to increase the amount of renewables, the government offers a loan worth 5 billion Euros to investment in offshore wind projects in the North Sea. Biomass is planned to be increased on the communal and regional level in particular as a fuel for co-generated heat and power plants.

The central point Germany will tackle is reduction of primary energy consumption. Compared to 2008 levels the country aims at 50% energy reduction and 25% electricity consumption reduction.  The effort is primarily undertaken in the building and housing sector as well as the energy intensive heavy industries. The latter will be subject to mandatory CO2 reduction obligations after 2012. German’s “Mittelstand”,  medium- sized businesses with 30 – 150  employers, will receive special treatment by the government in the form of low interest loan access to a newly formed “energy efficiency fund” with the aim to finance  more efficient technologies (engines etc.).  

Responses to the plans have been mixed. Germans default position towards government decisions is the one of slight mistrust instead of open-arm acceptance. And I am sure historians are able to find some reasons for such behaviour.  The decision to let the 17 nuclear power plants stay on the grid for up to 25 years caused several street protests over the summer that were on the verge of escalating into riots.  Last year after the election the government “promised” to fade out nuclear power in Germany. After a long debate a compromise has been agreed, to leave nuclear power on the grid but to raise a nuclear fuel element tax. Half of the tax revenue will be directly recycled to investment in renewables, the other half to finance the household deficit.
And two weeks ago it was decided that the additional costs of renovating buildings and houses towards higher energy efficiency can be passed on to the tenant. How this affects the housing sector and mobility is beyond the scope of this blog, but it doesn’t need to be mentioned that this decision caused a mild uproar among German’s tax payers.

In conclusion I would like to remark that the concept of 80% CO2 reduction will in fact only work if some major assumptions hold true. I am saying this being German but without holding a track record of past insightful visions. Just mentioning two examples here, it is expected that the European grid is harmonized to the extent that Germany can in fact import electricity harnessed from solar systems in North Africa. Another assumption made is that by the year 2030 six million electric cars will drive on Germany’s road.  Time will tell if these visions hold true.

1 comment:

  1. Excellent analysis. This certainly sounds like an ambitious plan (pillar 1, 2, 5 and 6 in particular) and interesting when contrasted with UK energy plan, which requires a different set of assumptions.