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Germany: The Canary for Renewables

January 7, 2014

It’s difficult to evaluate the effect of renewables on electricity rates in the United States, in the abstract. People opposing wind and solar predict that rates will increase substantially, while proponents reject these assertions.

That’s why Germany can be useful in demonstrating the actual effects of renewables on electricity rates.

The motivation behind Germany’s drive for increasing renewables is the elimination of CO2 emissions.

Germany’s goal is to have 80% of its electricity from renewables by 2050.

Whether Germany is succeeding in cutting CO2 emissions is an interesting debate, since it’s increasing the use of coal so as to replace the electricity being lost due to the closing of nuclear power plants.

Copenhagen Wind Farm Photo by D. Dears

Copenhagen Wind Farm Photo by D. Dears

What is clear is that Germany is currently producing around 22% of its electricity from renewables, which is a far cry from its 80% goal, while having considerable difficulty in integrating renewables into the grid. For example, Germany must build transmission lines to bring electricity generated by wind in the north, to southern Germany. There is considerable backlash against building these transmission lines through forests, etc.

Nearly 3,000 miles of new transmission lines will have to be built.

DC transmission is a must due to the distances, yet people are objecting to the expensive converter stations required at each end of a DC transmission line.

One report said, “More than 700 citizens’ initiatives have been founded in Germany to campaign against what they describe as ‘forests of masts’, ‘visual emissions’ and the ‘widespread devastation of our highland summits.”

To a large degree, opposition to transmission lines is also a problem in the United States as efforts are made to bring electricity from wind farms and solar power plants to where it can be used.

Germany’s 2008 Renewable Energy Act (EEG), referred to as Energiewende, provides the legal basis for levies on consumers, businesses and industry to support renewables.

It’s been reported that these levies will increase again in 2014 to around $0.80 per kWh for residential customers, which is a 20% increase from 2013. In total, it’s been reported that this amounts to approximately $32 billion being drained from the economy.

Residential rates for electricity have doubled since 2000.

It should be noted that the renewable levy for residential and business customers is about 25% higher than for industrial customers.

This is because the government fears industry will leave Germany because of the high cost of energy.

Eni SpA (ENI) Chief Executive Officer Paolo Scaroni said, “In the EU, companies pay three times the price of gas in America, and twice the price of power.”

At least one German chemical company has said it will expand in the United States rather than in Germany.

It’s clear that renewables in Germany are having an impact on people and industry, and that residential electricity rates, already three to four times higher than in the United States, will increase further as the levies behind these rates increase, and that electricity rates for industries will also increase.

Policies in the United States, such as net metering, are similar to those in Germany, and are forcing the further adoption of wind and solar. Why should the effect on electricity rates be any different than in Germany?

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10 Comments leave one →
  1. donb permalink
    January 7, 2014 2:47 pm

    Germany is the canary. However, a canary in a coal mine only reveals it is unsafe when the canary dies. Must Germany “die” economically before we know whether it’s unsafe?

    • January 7, 2014 4:33 pm

      Good observation. My thought was that failure of wind and solar in Germany would be a warning. Not sure if the economy has to die, but only be damaged with people hurt economically. How to measure failure is a good question.
      Will it be blackouts? Possibly not: Too many coal-fired power plants are being built. An inability to cut CO2 emissions by the required 80%? Maybe, but no one will admit it, and besides this is too far in the future.
      An indirect political measure would be if people voted out the Greens, as they did in Australia. Germany is different, because it has a history of extreme politics, so it’s hard to predict what will happen politically.
      If AGW becomes discredited, then the whole push for renewables in Europe would likely crash. Europe, however, has drunk the KoolAid, so that’s not likely.
      Other indirect measures would be continued high unemployment and declining GDP growth.
      The one direct measure is the price of electricity.
      We need to be smart enough to recognize a combination of events as the warning: Events such as a few blackouts, higher electricity prices, an inability to meet the 2020 CO2 target, stagnant GDP and signs of unrest in the population.

  2. January 8, 2014 7:19 pm

    Hey Donn, I thank you again for your time and the hard work that goes into your always informative columns.

    Here’s one from a Georgia PSC commissioner. You’ll find it supports much of what you say here:

    http://www.fortnightly.com/fortnightly/2013/10/energiewende?authkey=a1c2b86550d43faafa9f237294025d03815259c1d45776f49dd2205ace0fef95

    I’ll be linking this (your column) to my blog, too.

    Cheers!

    JCD

    • January 9, 2014 8:17 am

      Thanks for your comment. It’s true I spend a great deal of time making certain my articles are as factually accurate as possible.
      The article, for which you provided the link, is excellent. I hope more people will read it.

  3. January 10, 2014 12:05 pm

    I asked my power industry friend about the debate going on now, especially in Germany, about overloading the grid with renewable power sources and the cost of managing all that. I specifically asked if curtailment (draining off excess power, thus wasting it, so as to not overload a grid) is a waste and a sign of grid and energy policy mismanagement. I had sent him that Georgia PSC Commissioner’s column on the German solar policy, and related columns. Here’s what he wrote:

    Curtailment is a net waste at the front end but a net gain at the back. It’s just a co-optimization. You don’t build a grid to be able to handle production peaks that occur 1 or 2 or 3% of the time. That would be more expensive that simply throwing away that 1 or 2 or 3% of electricity.

    What I’m always trying to impress upon you is that we don’t need to reinvent the wheel. We’ve already designed and built an incredibly robust grid. We already have operational tactics that can be adapted to wind and solar. Before too long we’re going to start realizing that Solar and Wind are much less of a challenge to the grid than nuclear power plants are. Germany is seeing peak events of over 50% wind + solar. For me that’s clear evidence that things are controllable. Yes they’re shipping power to their neighbors but there’s a whole lot of reasons why that is. Big picture is it’s cheaper to “spill” the coal over the border than it is to back down the units even though it’s technically possible to back down the units. Once Coal prices go back up to where they were just a two years ago the economics will be considerably different. The armchair analysis we’re getting from Germany doesn’t mention these details.

    PV would be curtailed electronically. All you do is have the inverter pick an operating point that is off the Maximum Power Point by some measure. For a wind turbine you just pitch the blades a little. For a hydro plant what I do is press some buttons which literally spill water around the turbines. We have spillways that are built for this. Spilling is built into the system by design with hydro. We don’t consider a few weeks of shaving production to be a waste. It’s just how the system runs. Co-optimizations are the norm – not the exception.

    There’s are lots of co-optimizations like this in the electricity world. Wind in Germany for example. Most of the wind resource is in the North but if you only build in the North you’ll be regionally oversupplied. The solution isn’t to build more transmission lines. The solution is to build in a co-optimized location in the first place – more optimized for the grid (in this case more wind in the south) but less optimized for the wind generator.

    The wind turbine itself is co-optimized. The designers are learning that you don’t build a turbine to make a maximum number of kWh in a year. You build the turbine to make a maximum VALUE of kWh in a year.

    We’re seeing some of this with solar. Normally you install facing due south. That way you make the most kWh. But what if electricity is cheap during part of the day and more expensive in another? Well then you’d point the solar panels to make electricity when it was expensive even though it may mean sacrificing some kWhs.

    * * * *

    Later, he noted how this knowledge must be learned: “I didn’t know any of this stuff before I became a system operator. I thought nuclear was the most reliable form of power on the planet. I was promptly informed that nuclear plants present a significant risk to the system because when they go down they can cause what’s called a cascading outage that drops the whole grid. You have to establish safety reserves in case this happens.”

    • January 10, 2014 4:04 pm

      There is some truth in what your friend says, but it all boils down to cost and reliability, something he doesn’t really address.
      My article today demonstrates that wind has no value when the wind doesn’t blow, and that huge amounts of backup are required to keep the grid working … and that backup is expensive.
      It’s true that Germany has had intermittent peaks of wind and solar at over 50%, but that’s not for long periods of time. Germany had 22% of wind and solar for the year.
      The cost of wind and solar is far greater than NGCC power plants. The cost of transmission lines is far greater.
      Here is how a world renowned expert would describe the situation.

      “First, if you shut down wind and solar power when it is not needed, then the already pathetic capacity factor goes down and the cost of the power that is actually sold goes up.
      “Secondly, if you get into large scale wind and solar power, then you need to build huge transmission systems that can carry the output – or most of it – when the sun is shining or the wind is blowing. But because capacity factor is very small, the economic return on the transmission lines is not good.
      “Thirdly, if you had a 10,000 MW system and wanted to run it entirely from wind power, you would need 30,000 MW of installed wind capacity and 20,000 MW of pumped storage that can store water for days and weeks and even months. Power cost would be at least three times that from a nuclear system backed up with pumped storage.”

      It all gets back to why the push for wind and solar. They are demonstrably more expensive and create reliability problems, some of which I will highlight in next week’s article. (It’s about how the grid approached its maximum peak in the North during the recent cold snap, and previously, in 2011 during a heat wave, where wind couldn’t be relied on to provide the needed power. Blackouts were a real concern, but coal came to the rescue in 2011.)
      The only reason for increasing cost and reducing reliability is to prevent CO2 emissions.
      If that’s the real objective, then why not use nuclear that doesn’t emit any CO2 and is demonstrably reliable with over a 90% capacity factor.
      I still maintain, keep an eye on what happens in Germany. Will the cost of electricity ever be as low as in the United States? It’s currently 3 to 5 times greater.

  4. January 10, 2014 7:15 pm

    Very interesting. I will ponder your words. I don’t know enough about back-up sourcing costs to feel confidence assessing all this. In the meantime, here’s a piece that discusses some of the points you raise (geez, this stuff gets complicated real fast!):

    http://theenergycollective.com/schalk-cloete/324836/effect-intermittent-renewables-electricity-prices-germany

  5. January 11, 2014 6:33 pm

    Here’s an interesting debate that centers on Germany:

    http://www.economist.com/debate/days/view/1030

    • January 12, 2014 9:49 am

      Thanks.
      Interesting link.
      We should still watch what happens in Germany.
      In addition, we should watch what happens here on very cold days and very hot days when the grid nears peak demand.

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