Germany is not alone

The goal of Germany’s energy transformation (“Energiewende”) is to generate power in a more sustainable way. The domestic debate on this issue tends to focus on problems – like costs and risks – from an excessively national perspective. But Germany’s efforts are receiving a great deal of attention worldwide, as the study “Wahrnehmung der deutschen Energiewende in Schwellenländern” (Perception of Germany’s Energiewende in emerging markets) by the Konrad Adenauer Stiftung (KAS) shows.

Emerging economies see promising potential in Germany’s shift to renewable-energy technology. They recognise an opportunity not only to achieve environmental and climate policy goals, but also to increase the security of energy supply and develop new technologies. In general, other countries view Germany as a “pioneer in the use of renewable energies” and expect Germany’s transformation to “catch on worldwide”.

The international context

Germany is not the only country that intends to transform its energy infrastructure however: 138 countries have set goals to expand their renewable sectors. Sweden is particularly ambitious. It plans to eliminate the use of fossil fuels at least for heating purposes by 2020 and to stop importing fossil fuels entirely by 2030.

Not only highly advanced nations have set themselves ambitious targets. Morocco, for example, intends to increase its renewable-energy share to 42 % of its installed capacity by 2020. Emerging economies and developing countries are often less interested in protecting the climate than in providing large numbers of people with up-to-date services and reducing their dependence on fuel imports.

Neuhoff et al. see Europe technologically in a pioneering role. They point out that Europe is second only to Japan in terms of the number of green-technology patents worldwide. This is a result of recent European energy and climate policies, the authors state in “Europa ist nicht allein” (Europe is not alone).

Neuhoff et al. also highlight the achievements of countries that have made rapid progress in recent years. While Germany and Italy have the most photovoltaic plants in the world, and EU countries “still have the largest amount of installed wind power capacity worldwide”, both the US and China are witnessing high growth rates in these fields. Between 2009 and 2012, China accounted for 39 % of the global increase in wind power capacity. Moreover, Neuhoff et al. state that India is the frontrunner in terms of energy efficiency in the global cement industry, which is said to account for five percent of humanity’s carbon emissions.

The authors call for “ambitious European energy and climate policies”, which would not only help Europe maintain its credibility in regard to global climate protection, but would also secure a long-term, reliable and cost-effective power supply. Moreover, such policies would drive innovation in industries that have great future potential.

The Handelsblatt Research Institute (HRI) investigated energy systems in 24 indus­trialised and newly-industrialising countries and examined the progress that these countries have made in converting their operations. The goal was to “look beyond the horizon of national energy policy and learn from the successes and failures of other countries”. The HRI analysis focused on the three core issues of supply security, cost-effectiveness and sustainability.

In the HRI ranking that reflects the current state of energy supply, Germany is in the eighth place, a bit above average. Topping the list were four countries that are rich in hydropower: Sweden came first, followed by Norway, while Austria and Switzerland tied for third with Denmark. Denmark is particularly interesting. This country systematically exploits its abundant wind-power potential, and it is the leader when it comes to combining heating services with power generation. The HRI authors draw special attention to Brazil’s tenth place. Brazil was the only emerging economy to land in the top half of the list thanks to its hydropower capacity.

In another ranking, the HRI assessed how countries’ energy supply changed over a period of five years. The order of the countries differs significantly from the ranking mentioned above, and Germany was actually in the last place. According to the HRI analysis, this was due to Germany’s rising electricity prices, its continued high dependence on imports and the large portion of power it generates from coal. Most of the other countries use more gas-fired plants. On the other hand, power supply is more reliable in Germany than in most other countries, so it is a bit surprising to consider the German performance so poor. This aspect did not figure in the ranking, however, because of a lack of valid data.

The HRI authors advise Germany’s Federal Government to draft energy policy more systematically in order to serve the European context and reduce carbon emissions in a cost-effective way. The authors also recommend a stronger focus on energy efficiency and more use of trains instead of trucks for transporting goods.

According to the HRI, the crucial issues that determine the success of energy transition are topography and meteorology, costs and popular acceptance. The geographical conditions in Germany are considered unfavourable, but the HRI stresses the upside of a “vast majority of the people supporting the transformation”.

Nuclear power is carbon free, but due to safety issues, Germany has decided to phase out its reactors. In view of the costs, however, the HRI authors note, nuclear power is only an alternative to renewables “to a rather limited extent”. They point to rising electricity bills in France, with the driver being “retrofitting of security measures in reactors”.

Learning from other countries

A study by McKinsey examined what Germany can learn from other countries. The authors present 20 specific measures that have proven effective in other countries. They discuss to what extent they can be applied in Germany.

Merely by copying 11 economically attractive examples from abroad, Germany could reduce carbon emissions by an additional annual 25 million tons by 2020, the report claims. The Federal Government could thus achieve two percentage points of its target to reduce the nation’s carbon emissions to 60 % of the level of 1990 by the year 2020. At current trends, Germany would end up with 67 % to 70 % of that level.

Three cost-effective approaches are:

• Waste heat from industry should be reclaimed and used for climate-neutral power generation. “In China and India, legal regulations have resulted in the widespread use of industrial waste-heat recovery in sectors like the cement industry”, the McKinsey report states. Retrofitting Germany’s cement plants and glassworks would generate approximately two billion kilowatt hours of electricity starting in 2020 (corresponding to the annual consumption of about 570,000 private households), which would eliminate roughly one million tons of carbon emissions per year. The investments would pay off in approximately three years.
• The electrical drives that are used in German industry consume approximately 85 billion kilowatt hours per year (about 14 % of Germany’s total electricity consumption). They offer a great opportunity for improving efficiency. “The investment in variable-speed pumps in Madrid’s water supply system paid off after just two years”, the study reports. If the same thing were to be done in Germany, electricity consumption would decline by 6 billion kilowatt hours and carbon emissions by 2.6 million tons starting in 2020. The costs of replacing the drives could be regained in less than three years.
• Finally, all new subway cars could be equipped with driver assistance systems like in China. According to the McKinsey report, its cars use 15 % less electricity than cars with conventional controls. Installing driver assistance systems in German trains would pay off after just one year.  

Achim Neumann works as sector economist in the Energy, Water and Agriculture Competence Centre of KfW Development Bank.
achim.neumann@kfw.de
http://energiewende.kfw.de/

References:
Handelsblatt Research Institute (HRI), 2014: Neue Impulse für die Energiewende (New momentum for Energiewende – only available in German).
http://files.gecompany.com/gecom/de/GE_Studie_­Energiewende.pdf
Konrad-Adenauer-Stiftung (KAS), 2013: Wahrnehmung der deutschen Energiewende in Schwellenländern (Perception of Germany’s Energiewende in emerging markets – only available in German).
http://www.kas.de/wf/de/33.34940/
McKinsey in cooperation with Siemens, 2013: Chancen für die deutsche Energiewende (Opportunties for transformation in Germany – only available in German).
http://www.siemens.com/press/pool/de/events/2013/corporate/2013-06-energiewende-dialog/studie-­energiewende-dialog-d.pdf
Neuhoff, K. et al., 2014: Europa ist nicht allein (Europe is not alone); DIW Wochenbericht No. 6. (only available in German).
http://www.diw.de/documents/publikationen/73/diw_01.c.436814.de/14-6-1.pdf