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Shift to renewables

Sabine Kinkartz / agDecember 19, 2012

In Germany, the transition to electricity from renewable sources is occuring faster than originally planned. The reform plans are truly ambitious, but their implementation has been anything but plain sailing.

High voltage power masts collapse under the weight of heavy snow near the German town of Münster
Image: picture-alliance/dpa/dpaweb

Germany's fundamental rethinking of energy production and distribution has placed new focus on the high voltage power lines crisscrossing the country. These days, Chancellor Angela Merkel gladly takes it upon herself to inaugurate new segments of the power grid - such as she recently did for the one between the cities of Schwerin and Hamburg in the north of Germany.

An extra 1,834 kilometers (1,146 miles) of line are necessary on the transmission network - particularly the big electricity highways - to create the capacity for transmitting power from renewable sources generated in the north of the country to the south. But not even 250 kilometers of that will be completed by the end of 2012 - a problem that Merkel can't ignore.

Yet, during her inaugural speech in northern Germany, Merkel demonstrated optimism: "Today is the day that shows our efforts have been worth it," Merkel said. This latest addition to the grid would help further stabilize it, and make it possible to channel growing energy production from the northeast of the country "to the consumer areas."

Less joy, more worries

The path toward an energy policy that everyone can agree on is a bumpy one, which particularly economists are increasingly worrying about. The German industrial sector accounts for 24 percent of the gross domestic product; many of its businesses have high electricity consumption.

Every second one of these businesses associates the ongoing energy sector with a decline in competitiveness, according to Hans-Heinrich Driftman, a businessman and head of the Federation of German Chambers of Industry and Commerce.

Driftman said almost all businesses should expect higher electricity bills for 2013, compared to 2012. He said passing on to the consumers the costs for funding renewable energies his company's bill will increase from 300,000 euros ($398,000) to 450,000 euros ($598,000).

"With these amounts of money, as a businessman I have to think about where I can make some cuts," Driftman said.

Parts of the German transmission network near Berlin
Transmission network extension: Less than 250 kilometers done, another 1,600 to goImage: dapd

Expensive turnaround

The global average for the cost of one megawatt hour of electricity is around 23 euros ($31). In Germany, the same runs about 45 euros ($60) - making electricity here the second-most expensive in Europe (after Denmark).

Businesses therefore often attempt to curb costs with strategic energy management, Driftmann explained: "This includes switching energy providers when necessary, signing long-term contracts, investing in independent, consumer-generated electricity, and, of course, boosting energy efficiency." However, should prices continue to rise, Driftmann said that all this would no longer suffice.

There's also growing criticism on the point of reliability. For now, Germany remains the world leader in terms of service security, with a power outage maximum of 15 minutes per year. But dependence on the more fickle solar and wind energy sources may put this into question.

Dirk Spenner, a cement producer, is doubtful - and worried. "Given our electricity consumption, we are not even close to being capable of taking care of ourselves," Spenner said. He explained that with the company's core activity based on a thermal process, any interruption takes 72 hours to resume to normal from a cold start.

Existential problems

Since Spenner's company is registered as an "energy-intensive business," his electricity bill is exempt from the rollover costs of renewable energy production. These costs are made up of government-guaranteed reimbursements to the energy producers based on the amount of electricity they feed into the grid coming from renewable sources.

These extra costs, which shall be passed on to consumers, are estimated to amount to 23 billion euros ($31 billion) for 2013. This means that each electricity consumer will pay an extra 5.28 cent per kilowatt hour.

Wind-power generators near the twon of Klanxbuell on the North Sea
Renewable energy in Germany: growing faster than expectedImage: AP

But Spenner wonders how long the government can afford sticking to its promise of exempting businesses such as his from the extra costs. "We're worried when we see how private households are being maneuvered into opposing energy-intensive sectors. This should not be the case, because if we weren't exempt, we'd be facing an existential problem."

EU Commissioner Oettinger stepping in

Support for this prevailing position among German economic interests comes from EU Energy Commissioner Günther Oettinger. If Germany intends to maintain its industrial production, electricity prices should be capped, he said. After all, current levels are only about half-based on economic considerations; the other half is politically motivated.

Oettinger is also pushing for a "speed limit" when it comes to carrying out energy sector reforms. Further investment into solar and wind power should be slowed down to match the speed of grid extension and electrical storage capacity. The commissioner is also demanding that the German government cooperate more closely with its European neighbors.

According to Oettinger, Germany has to open up and better integrate itself into a European framework for the advancement of renewable energies. This would include a pragmatic approach on defining European CO2 emission goals, together with Poland, Bulgaria and Romania, he said.

EU Energy Commissioner Guenther Oettinger at a press conference
Oettinger: "The price for electricity needs to be capped"Image: AFP/Getty Images

As the former head of the southern German state of Baden-Wuerttemberg, Oettinger prefers to "have 500 million people working together pragmatically in a team, rather than Germany as the goody-goody strutting ahead while others turn their backs."

Oettinger would like to see German renewable energy law completely redone. The EU Commission has given itself until next spring to harmonize individual national targets for renewable energy. This is also the deadline to see if government-guaranteed reimbursement for electricity from renewable sources can endure into the future.