On March 11, 2011 I was sitting in a coffee shop in Berlin, dressed appropriately in a black turtleneck and leather jacket, reading about the terrible Fukushima Daiichi Nuclear disaster. The next day I read that the German government was pushing for “Atomausstieg,” which is German for “let’s retire all nuclear generating capacity.” 80% of Germans surveyed were in favor of this move. The nine remaining German nukes are being phased out and the last one will shut its doors by 2022.
The Energiewende Law, which was proposed only months before the Fukushima disaster, was enthusiastically approved in 2011 and has led to rapid growth in the penetration of solar PV and wind power across Germany, as the advertising below indicates.
While there is no way to establish causality here, no one can argue with the fact that the installed cost of PV has come down by 66% in a decade. And the creation of the German market could have had something to do with this. In 2012 Germany (1.1% of the world’s population) had 32% of installed solar capacity globally, according to government figures. And capacity continues to grow – 2014 installed capacity was 113% above that in 2010 suggesting a 21% growth rate p.a. This has come at a cost. While owners of PV installation have to pay for some of the cost of the solar panels privately, the average German household now pays about 260 Euro per year to subsidize renewables, which is nothing to sneeze at. But it’s also not the end of the world as some have suggested (about the equivalent of a Starbucks latte twice a week, which unlike the renewable subsidy, does not come with a green halo). The Energiewende enjoys less, but still strong, public support. So now the government is starting to contemplate what to do next to achieve its ambitious emissions reduction goal of 80% by 2050.
Sigmar Gabriel, who is Angela Merkel’s Energy minister, has started talking about something called “Kohleausstieg” (German for Coal Exit). When visitors from Germany to the Energy Institute lunch table mentioned this, I thought I misheard. But I did not. There is a slowly emerging vision of the German energy system, which will no longer have domestic baseload generation. Just say Nein to coal and nukes. This is fascinating. Let’s take a look at what estimated power supply looks like in May 2012 versus 2020:
What we are seeing here is the huge variability in generation of renewables, which of course does not line up quite as beautifully with demand as has been pointed out elsewhere. This picture also shows nicely that by 2020 renewables are generating more power than is demanded (at least on the weekends). And if the installation trend continues, this will be true for most weekdays, too.
This means that we may not need the always-on baseload (coal and nuclear in most places). In one version of the world you use fossils that ramp up quickly to meet residual demand (e.g., gas from Russia). In a second version of the world you use clean hydro power from Northern Europe instead. In a third version, which is the one Elon Musk would like you to consider, you use a giant battery in your house, which stores renewable power at times when there is plenty of it to be had for cheap (requiring a pricing revolution).
I am a confessed hip-/techie. I like the last version of the future. But I have some questions.
- Is Germany this bold since it can always buy cheap nuclear baseload from France if things go terribly wrong? What if you are a country like the US, where you do not have this type of backup at scale?
- What about the political economy of a coal exit? Coal mining unions are very powerful and this would put a lot of people in poor areas out of jobs. And miners will not go into installing PV panels on people’s roofs, since the sunny rich areas are not usually where the coal mines are.
- How much storage do we need to make this work? I can see a residential model, where Elon Musk sells me a battery or my car serves as storage. But what about BMW, Porsche, and Intel? Will we come full circle where firms will have their own fossil backup generation (which is the case for most manufacturers in China currently)?
- What if the major players exit coal? That shift in demand, drives down price and leads to consumption elsewhere. In order to make this work you would have to exit coal and find a way to leave what you don’t consume in the ground.
While writing this blog post I was surprised by how similar California’s and Germany’s energy policies and challenges are. Both places are pushing hard for an almost fossil free future using a combination of market based policies and huge number of competing standards. Both places have political leadership proposing radical long range policy targets, which we do not necessarily know how to achieve. Both places are relatively wealthy. Both places have industries that have been at the forefront of technological innovation, especially in the STEM fields.
Germany, specifically, has been at the forefront of pushing new distributed generation technologies and shouldering much of the cost of the global energy transition. This is laudable. California is along for the ride and doing its part. It looks like we might be the ones leading the charge on designing cost effective storage. Thanks Elon. While I don’t think a coal free Germany is necessarily an unrealistic idea, I want us to keep our eye on the prize. What we should shoot for are drastic global reductions in CO2. Germany and California are small. If what comes out of our policies is a way to drive coal and natural gas up the merit order in places like China and India, this would be the real success.
Maximilian Auffhammer is the George Pardee Professor of International Sustainable Development at the University of California Berkeley. His fields of expertise are environmental and energy economics, with a specific focus on the impacts and regulation of climate change and air pollution.