Energy policy in Germany has worrying flaws

By Hans-Werner Sinn  / 

Mon, May 27, 2019 - Page 7

French President Emmanuel Macron thinks an overhaul of Germany’s economic model is overdue. As far as energy is concerned, he is probably right.

While France produces more than 70 percent of its electricity at nuclear power plants and is trying to convert to electric vehicles (EV) running on nuclear energy, Germany relies on wind farms and other forms of green energy, and plans to phase out nuclear power by 2022 and coal power by 2038. Yet the attempt to turn the wheels of German industry with wind faces growing political resistance, as the country is already littered with so many wind turbines — some of them nearly 250m high — that even its most beautiful vistas are coming to resemble industrial landscapes.

Farmers and forest owners, of course, have welcomed the opportunity to convert their land to industrial sites. Usually, only landowners on the outskirts of big cities enjoy such windfalls, but with legislation facilitating the erection of wind turbines in rural areas, German farmers and forest owners have struck gold.

Nonetheless, the expansion of wind turbines is stalling, owing to a growing chorus of citizens who object to the destruction of the natural environment. Protest movements against what is seen as environmental vandalism are sprouting like mushrooms. Even the German Nature and Biodiversity Conservation Union is beginning to reconsider its position on wind turbines, owing to the loss of insects, birds and bats on a massive scale.

While solar energy and biogas plants still represent potential alternatives to wind, they are also facing limits, given that Germany is not a sun-kissed country and the table-or-tank problem — whether to use land to grow food or fuel — represents a serious ethical dilemma.

The main problem is the volatility of wind and solar energy. Sometimes there is too little electricity and sometimes there is too much. If the wind is not blowing and the sun is not shining, conventional power plants must shore up the electricity supply. Hence, no matter how many wind and solar-powered plants Germany builds, it still cannot dismantle its conventional plants.

Moreover, when wind and solar generate too much electricity, they regularly drive the price of electricity below zero. These distortions will grow dramatically if the market share of wind and solar power, currently at 25 percent, increases beyond 30 percent, because production spikes will then begin to overshoot electricity demand.

Worse, as the market share of directly usable wind and solar power approaches 100 percent, so, too, does the proportion of surplus energy. Even if Germany and its neighbors were to create a perfect electricity network stretching from the Alps to Norway, with as many pumped-storage plants as geologically possible being built in the participating countries, the market share of wind and solar power could not surpass 50 percent without ever-larger portions of the excess current peaks being dumped or degenerated by a change in the entropy level, or conversion into heat or gas.

Confronted with this problem, many people point to electric vehicles as a solution. There can be little doubt that EVs are the future, given the EU’s massive regulatory interventions in the automobile market — at France’s urging — to make it so.

However, far from alleviating Germany’s energy problems, EVs will make them even worse.

Drawing an ever-greater proportion of their energy from green sources, German households already pay the highest electricity prices in Europe, ahead of Denmark, which also relies heavily on wind power. If the German transportation sector is forced to become electric, the resulting increase in power demand will lead to further price increases, inflicting sustained damage on the country’s industrial base.

If Germany wants to keep energy prices constant, it must temper its green ambitions, but without further reducing its carbon dioxide emissions, it will miss its binding EU targets for reducing greenhouse-gas emissions and have to pay fines.

There are only two ways out of this quandary:

The first is to convert existing coal-fired power plants into gas plants, which produce only half as much carbon dioxide. That, at least, would allow Germany to reduce its annual carbon dioxide emissions. This option would require new gas pipelines similar to Nord Stream 2, a joint German-Russian project that already faces stiff resistance from the European Commission and particularly France. Indeed, just a week after signing a new Franco-German friendship treaty in January, Macron suddenly stopped supporting German Chancellor Angela Merkel’s effort to block the EU asserting control over the pipeline, even though it crosses no other member state’s territory and would not normally be subject to EU regulations.

Germany’s second energy option is to buy foreign nuclear power or start building new nuclear power plants on its own territory. Germany would tacitly accept the former, but for the latter to happen, it would have to undergo a politically painful process of returning to reality and retiring the generation of politicians who have insisted on a nuclear phase-out.

In 2009, Sweden, the first European country to abandon nuclear power after the Three Mile Island accident in 1979, reversed its decision. Germany might have to do the same at some stage. While it has already lost most of its own nuclear expertise, the country would not have to look far for new nuclear-power plants: They are available for purchase from France.

Hans-Werner Sinn, professor of economics at the University of Munich, was president of the Ifo Institute for Economic Research and serves on the Advisory Council of the German Ministry of Economic Affairs.

Copyright: Project Syndicate