Germany Sets New Renewable Energy Record

While the latest green headlines in the U.S. are mostly depressing with growing signs that the Obama administration will approve the proposed Keystone Pipeline and the bankruptcy of Solyndra, at least we have some good news coming from across the ocean. According to a new report by the German Association of Energy and Water Industries (BDEW), the German renewable energy sector broke a new record in the first half of 2011, generating 20.8 percent of the country’s power production.

Not that it is such a big surprise to anyone who follows Germany and its growing use of renewable energy in the last decades, but it’s still an outstanding accomplishment for such a big economy. In the U.S., for comparison, renewable energy made up in the first quarter of 2011 11.7 percent of the electricity supply. In Japan, it’s about 9 percent.

This accomplishment is even more extraordinary given the fact that as Daniele Boese mentioned last year on YaleGlobal Online, Germany is not the most ideal location for renewable energy. It doesn’t have volcanoes like Iceland to generate cheap geothermal energy, long coast with strong winds like Ireland or Great Britain, or as much sunlight as Spain and California.

According to BDEW’s report, the most important source of renewable energy in Germany is wind energy with 7.5 percent (out of the total electricity supply), followed by biomass (5.6 percent), solar (3.5 percent), hydropower (3.3 percent) and waste-fired power plants and other sources (0.8 percent).

So how Germany did it? In one word: Policy. In a report published earlier this year, Deutsche Bank provided some of the ingredients of the German successful recipe: Setting ambitious but attainable binding renewable energy and climate targets, integrating these targets into energy policies and linking the targets to comprehensive energy policy targets, creating incentives (feed-in tariffs for example) to minimize investor risks and drive costs down, and balancing constructive regulatory policy with flexibility by introducing policy incentives that can also be adjusted to reflect changing market conditions (for example, reducing solar feed-in tariff when solar costs are going down). It’s not surprising that the verdict of Deutsche Bank was: “We believe that Germany exhibits best in class climate and renewable energy policy structures.”

Germany’s push for renewable energy was motivated by a desire among politicians to act against climate change and reduce the country's carbon footprint. Then, the growth of the renewable sector brought other incentives like energy security and job creation. Renewable energy garnered widespread political and public support.

There are certainly differences between political parties in Germany when it comes to renewable energy, but they’re relatively minor. The current center-right government of Chancellor Angela Merkel just set a new goal of at least 35 percent of production from renewables by 2020. The opposition parties claim that 40 percent or even more is realistic. Just think what certainty this sort of political backup provides to the market, comparing for example to what we witness in the U.S. where the differences between the parties create a very challenging environment for the renewable energy sector.

Public support is also very important as the growing usage of renewable energy also translates into higher electricity bills – According to Daniele Boese of YaleGlobal Online, electricity prices have soared more than 60 percent over the past decade. Yet, Germans seem to be willing to accept the increases, understanding the benefits from a growing renewable energy supply outweigh in many ways the cost they pay for it. According to a recent survey, 94 percent of the Germans view the development of renewable energy sources as important or very important. 79 percent see the current price of electricity as reasonable or too low and only 15 percent believe they are too high.

A new growth engine for the renewable energy sector is the latest German government decision to stop using nuclear power, following the Fukushima nuclear power plant accident. Already the 8 oldest of Germany’s 17 reactors were disconnected from the grid and there are plans to retire the remaining 9 reactors by 2022. According to the New York Times, to help filling the void, the government is planning to make huge investments in improving energy efficiency in homes and factories as well as in new clean power sources and transmission lines.

The German ambitious plan to stop using nuclear power is not only an opportunity, but also a challenge to the renewable energy sector in Germany as the government believes it has matured enough to become the focal point of the new shift in its energy policy. So now it is transforming very quickly from a promising kid into a responsible adult and it ain’t going to be easy. Another factor that will add pressure is the growing competition from China, which might create a dichotomy between a growing demand for renewables and a dwindling local supply. Yet, the future still seems shining for renewable energy in Germany. Hopefully, it will also be the case elsewhere.

Image credit: Matus Kalisky, Flickr Creative Commons

Raz Godelnik is the co-founder and CEO of Eco-Libris, a green company working to green up the book industry in the digital age. He is also an adjunct professor in the University of Delaware’s Alfred Lerner College of Business and Economics.