Renewable Energy Politics In Germany

BERLIN, GERMANY: There’s still Russian graffiti from 1945 on the walls of the German parliament. In a room listing Germany’s past lawmakers, a black space marks where Hitler’s name would be. But in a building filled with such history, the energy future is being created.

A long week of intermittent severe storms broke long enough for Barack Obama’s Thursday visit to the reunified capital city, which was hot on everyone’s lips.

But this American was more interested in Germany’s Renewable Energy Sources Act and other goings-on under the clear glass dome of the Reichstag building.

German Renewable Energy

The first thing to understand is that while all politics is local, energy affairs are the most pervasive global concern these days.

Energy prices and uncertainty are driving inflation in fuel prices, food, and “core” consumer price indexes that account for everything from tennis balls to ball bearings. The rise and fall of national and personal fortunes can be linked to power costs, and that’s a trend that will only gain momentum with time.

In Germany, where there are still major imbalances from east to west (not far outside of Berlin, the unemployment rate reaches 15%—double that of places like Frankfurt and former West Germany).

So to create jobs in states like Sachsen-Anhalt, where I paid a visit to one of Germany and the world’s most successful green energy companies on Wednesday, the government has introduced tax credits and feed-in tariffs, which guarantee a fixed above-market price for people and companies that install renewable energy generators like solar panels.

If you’re German, putting a solar array on your roof means you stimulate production in factories down the road where old Soviet-backed industries collapsed in the early 90s and left tens of thousands of skilled workers without jobs.

It also means you get guaranteed income from national utilities for a predetermined amount of time, and for a fixed price of 8.49 eurocents per kilowatt-hour.

I’ve seen first-hand how that commitment has turned the factory floors of the old East into hotbeds of renewable energy development. In 1989, right as the two parts of Cold War Germany were about to become one again, the German government passed its “100 MW of wind” support program, which later turned into a 250 MW target.

Germany now produces about half of all the wind turbines in the world, and a third of all solar PV cells. The government says that since 2000 solar technology has gone from a 450 million euro-per-year business to a 4.9 billion euro money machine in Germany.

Re-investment levels are high, and more than 50,000 Germans have jobs from the highest research levels down to factory support staff.

But even given the obvious benefits of renewable energy in Germany, my contacts in government and industry point out that there’s still plenty of playing politics in Berlin’s decision-making bodies.

Renewable Energy Politics in Germany

The automotive industry (DaimlerBenz and BMW) in Germany is very strong in its lobbying efforts, as is the energy-intensive coal sector. Both were vocal in their opposition to this month’s fresh renewable energy and carbon limit legislation.

The law passed in the Bundesrat (Germany’s upper house of parliament) on July 4^th puts the renewable energy target for total generation up to 30% by 2020.

That’s up from 14% today, and far beyond the “20% by 2020″ plans passed in even the most progressive green energy hotbeds.

Germany’s carbon cuts are also ahead of the pack, with a 40% reduction from 1990 levels targeted by 2020. The broader European Union target is 20% reduction.

When the parliament comes back from summer recess, another major package is expected to pass that focuses on consumption reduction in private homes.

As we’ve always said at Green Chip Stocks, consumption reduction should be first in the order of operations for bringing us into a new energy reality, since renewable advances will be for naught if we don’t bring down our appetite.

Germany’s parliamentary factions have some disagreement on how rapidly feed-in tariffs should come down, to take the training wheels off the renewable energy industry. This because of the rapidly declining costs of renewable energy, making them even more competitive with traditional sources—a phenomenon known as grid parity.

As it stands, between 7% and 10% cuts are set for each of the next few years, so residential and corporate clients are locking in their fixed rates now if they can.

On the corporate end, the reduction means we’re about to see a shakeout of companies that can really make it without a government crutch. At Green Chip International, we think we’ve found just that kind of company in Germany.

Speaking frankly, this company is the largest manufacturer of solar panels in the world, will be one of the first to reach grid parity, and will be one of the first solar companies to join the gigawatt club, when output climbs to over 1,000 MW next year.

Of course, its revenues are slated to grow just as quickly.

Posted in Categories: Commodities, Contributor, Eurozone, External Research.

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Comment by bongo

2008-07-27 19:28:26

renewable energy in a Price System is pretty much a joke. A political price system quantifies and measures things in money only. We live in a closed system. Bad choices pile up.
Now we are on the brink on ruin… and it is obvious that a science based system is needed and not a political system.
Obama is controlled by the same special interest groups as McCain. Energy Accounting - Wikipedia, the free encyclopedia

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Comment by green energy guy

2008-07-31 10:20:09

I agree with bongo…
In order to move to green energy resources, we must change the way it is done. The place to look for the change is in private scientific and technological investements.
We need to exclude politics out ofthe equation, by allowing private hands to increase the use of clean energy, without governmental intervantion. The only role the politicaians should play, is by legislation that will encourage uninterapted research of the field.

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Comment by Calvin C.

2008-07-27 22:39:17

We should follow Germany’s example.

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