Is the German Renewable Energy Industry in Jeopardy?

October 7, 2009

by John Blau, European Contributor
Berlin, Germany [RenewableEnergyWorld.com]

Germany's newly elected government could hinder the expansion of renewable energy in the country with its plans to extend the lifetime of nuclear reactors, warns the German Renewable Energy Federation (Bundesverband Erneuerbare Energie - BEE).

“A lifetime extension of the nuclear plants would slow, if not completely halt, the expansion of renewable energy in Germany,” said BEE spokesman Daniel Kluge. “There’s a simple reason for this: We have more and more renewable energy companies generating and delivering more and more electricity. So letting nuclear reactors stay on the grid longer will only lead to congestion, with too many companies generating too much electricity.” Kluge and others in the industry worry that renewable energy upstarts could be the ones bumped aside.

Not only an overabundance of electricity could undermine the growth of renewable energy, according to BEE, but also the investment strategies of Germany’s big energy companies, which, if given a choice between investing in next-generation green technologies or generating still more profits from amortized nuclear plants, could favor the latter.

Big German energy companies, such as E.ON and RWE, have been investing in wind turbines, most recently in huge offshore wind parks, but have been less enthusiastic about solar energy. Currently, renewable energy accounts for around 15 percent of the electricity generated in Germany, with more than 50 percent still coming from coal.

If the country’s energy giants are allowed to keep their amortized nuclear plants on the grid longer, they stand to make big profits. The state bank WestLB estimates that E.ON, for instance, could earn an extra €8.6 billion [US $12.6 billion] if its reactors were extended an additional eight years. Germany still has 17 nuclear reactors delivering power to its nationwide electricity grid. Several of them are scheduled to be shut down over the next few years.

German energy utilities have long voiced their opposition to a law, passed in 2002 under former Social Democratic (SPD) Chancellor Gerhard Schröder, that ended the construction of new nuclear power plants and required all plants to be shut down by the early 2020s.

Last Tuesday, Jürgen Grossman, chief executive officer of RWE, called for extending reactor lifetimes. “I think one should use (energy) facilities as long as they are safe,” he said on the German public television station ARD. “Nuclear energy is part of…an energy mix. I think it is necessary to talk about extending the lifetimes of all reactors.”

Those remarks came just two days after the general election, which ended a complex coalition government of liberals and conservatives and gave right-of-center Chancellor Angela Merkel an additional four years to govern. RWE is a member of Germany’s Big Four energy producers, including E.ON, EnBW and Vattenfall, all known supporters of the Christian Democratic Union (CDU), its sister party the Christian Social Union (CSU) and their preferred coalition partner, the equally pro-business Federal Democratic Party (FDP).

In the run-up to the election, the parties made their position clear on nuclear energy: It is — and will remain for some time — an essential part of a balanced energy mix. In a television interview following the election, Chancellor Merkel referred to nuclear energy as “a transition technology,” which Germany will require for “a certain time.” Rumors floating around Berlin put the nuclear lifetime extension at between eight and 10 years.

While most renewable energy companies in Germany are worried about the impact of an extension, some energy experts believe it could benefit the sector. One way, according to Claudia Kemfert, an energy expert at the German Institute of Economic Research (Deutsches Institut für Wirtschaftsforschung - DIW), would be for a chunk of the additional profits to go into a special fund or foundation that, in turn, would allocate money to areas such as energy research and infrastructure expansion. Kemfert warns that an extension of the lifetime for nuclear energy “must be connected to certain conditions” such as a fund and how it is allocated. “There has to be a commitment to a sustainable energy strategy,” she said.

Not everyone buys that argument, however. In particular, BEE points out that Germany’s big electricity producers and grid operators are mandated by law to invest in maintaining and expanding infrastructure. “They already collect enough money for their infrastructure obligations,” Kluge said. “And they don’t even spend all of that.”

Kluge argues that Germany’s renewable energy sector doesn’t need additional money but rather a continued commitment to the country’s Renewable Energy Law (Erneuerbare-Energien-Gesetz or EEG). Under the EEG, grid operators must pay a government-set feed-in tariff to companies supplying energy to the grid from renewable sources.

Kluge believes that while the government will look closely at the tariffs for wind, solar and other renewable energy sources, and make necessary changes based on market developments, it plans no substantial changes. German lawmakers across the board, he adds, view renewable energy not only as a means to reduce the country’s reliance on foreign oil and, ultimately, nuclear power, but also as a job machine. Today, more than 280,000 people are employed in the sector. Earlier this year, outgoing SPD Environment Minister Sigmar Gabriel predicted the sector could have as many as 500,000 by 2020.

“I don’t expect the government to change the Renewable Energy Law,” DIW’s Kemfert said. “The only issue that is really disputed is the feed-in tariff for solar, which many argue is too high. I can imagine the new government will seek a market-oriented feed-in tariff.”

John Blau is a U.S. journalist based in Germany. He specializes in business, technology and environmental reporting and also produces extensive industry research. John has written extensively about environmental issues in Germany.

Original story HERE.