Renewables in America: Lessons from Germany’s Energy Transition
“You have to take with you all of the people in your community – not just the university but coal miners as well.”
– Mayor Bernd Tischler, City of Bottrop, Germany
Germany is well recognized as an international leader in renewable energy today, but that wasn’t always the case. Their transition from coal and nuclear power started two decades before the first major renewable energy policy initiatives were passed.
From Germany’s dramatic renewable energy transition to their recent decision to reduce support for renewable energy, their experience can teach California some valuable lessons.
History behind Germany’s Energy Shift
The first notable shift in the way Germans think about energy occurred in 1973 when a proclaimed oil embargo by the Organization of Arab Petroleum Exporting Countries (OPEC) caused prices to spike rapidly and created an oil crisis around the world.
The German Federal Environmental Agency was formed partially in response to growing interest in reducing energy dependence. A second oil crisis in 1979 generated further interest in energy conservation to reduce the risk of more energy price hikes.
Germany’s long history around nuclear power was another key factor in fostering the move to renewable energy sources. The 1986 Chernobyl nuclear disaster sent radioactive rainfall over Germany, sparking public concerns about the safety and potential fallout of their own nuclear power plants.
These fears erupted again in March 2011 after the Fukushima Daiichi nuclear disaster in Japan. Within a matter of days, the German government announced that it would close all of its nuclear plants by 2022. Eight of the 17 operating reactors in Germany were permanently shut down following Fukushima.
Germany has had a number of progressive environmental policies that have set the stage for their transition to renewable energy: Building efficiency standards and a green certification program in the late 1970s; financing for building retrofits, solar roofs and the first feed-in tariff program in the late 1990s; and an”eco-tax” on gasoline and fossil-based electricity in 2000.
All of these policy actions have helped to establish Germany’s leadership in the global green economy but arguably the biggest driver of their energy transition has been the Renewable Energy Act adopted in 2000, which includes an updated Feed-in Tariff guaranteeing full-cost compensation to cover the actual cost of a specific renewable energy investment.
Utilities are required to purchase renewable energy first, and rates offered are guaranteed for 20 years starting in the year of installation to protect investments – providing investment security for all investors. The rates drop for newly installed systems each year to put price pressure on manufacturers to lower costs as the market increases for renewable energy.
The results have been an exponential increase in renewable energy from Germany that has gone from 3% renewable power at the beginning of the 1990s to more than 27% in 2014 and 32% in 2015 -from wind power, biomass and photovoltaic in particular.
The Renewable Energy Act is instrumental in shifting German dependence on coal and nuclear power to renewable energy. This Act did more than simply change the energy mix of the country – it has also had a dramatic effect in democratizing energy.
Power for the People
Unlike caps – such as California’s ambitious Renewable Portfolio Standard, which regulates large utilities to reach a certain level of renewable energy and incentivizes utilities to meet the cap through the most affordable technologies available – Germany’s Renewable Energy Act stipulated that the little guy’s power has priority over corporations.
German feed-in tariffs have helped produce community ownership, thereby simultaneously reducing NIMBYism and increasing acceptance levels for renewables, according to an Heinrich Böll Foundation report. Germany’s four largest energy suppliers now make up the smallest share of renewable ownership and a decreasing amount of the overall energy supply.
A major motivating factor for citizen investment in renewable energy is financial. The feed-in tariff guarantees that costs are recovered and a certain price will be paid (one expert estimates that consumers are getting a 5% return on their renewable investment).
This democratization isn’t just for wealthy individual building and landowners. Germany has seen a rapid increase in energy cooperatives (Figure 4) where a share can be purchased for less than 500 euros in two-thirds of the cooperatives – with the minimum amount less than 100 euros in some cases.
As the head of Germany’s Solar Industry Association (BSW-Solar) puts it, “Energy cooperatives democratize energy supply in Germany and allow everyone to benefit from the energy transition even if they do not own their own home.”
Overall, it is estimated that “energy cooperatives” – community-owned renewables projects – had leveraged more than 1.2 billion euros in investments from more than 130,000 private citizens in 2013.
Citizen ownership also has helped to increase and embed political support for renewable energy.
A City Case Study: Energy Innovation in the Ruhr
The national energy transition in Germany is playing out in industrial cities across the country.
The City of Bottrop, in west central Germany, is notable for it’s proactive efforts to be a model for the energy transition. Located in the Ruhr industrial area, Bottrop has been a mining center dating back to the 1860s. With the adoption of the Renewable Energy Act and the phase-out of coal (the last coal mine will close in 2018), it was clear that Bottrop’s economic base and future prosperity, and that of similar communities across the region, was at risk.
Bottrop Mayor Bernd Tischler said his city decided a decade ago to play on its strengths as an energy supplier evolving toward renewable supplies in line with the national energy transition. This was no small task as everyone in the community had some connection to the coal industry, but industry and citizens alike saw the need for a new vision that fit the new national policy environment.
“You have to take with you all of the people in your community – not just the university but coal miners as well…We don’t stay in city hall, we go to people’s homes” Tischler said.
In fact, five years ago an industry-driven competition – “InnovationCity Ruhr” – was created to aid in the regional transition. With support of over 20,000 residents who signed onto the community transition, Bottrop beat out 14 cities in the region to become the model InnovationCity.
“Winning the competition was crucial to give people something to hold on to – a new vision from the 150-year tradition of coal mining. Now people are encouraging each other to look forward. But make sure to integrate the past into the new vision,” added Tischler.
Since 2010, Bottrop has reduced greenhouse gas emissions by 38% and seen 291 million euros in public and private investment as a result of its commitment to a more sustainable future. The city’s unemployment rate is now lower than the national average.
Building energy upgrades has been an instrumental part of Bottrop’s strategy. The City started a retrofit program to pay for up to 25% of the cost of an energy retrofit if they reduce greenhouse gas emissions by 25% (the average rebate is 14%) through a very simple program that only requires the homeowner to get a quote from an approved contractor and submit a receipt for the work.
The City has also developed a website where residents enter in their address and get a list of personalized energy-reduction measures based on 21 housing types in the city (which accounts for such factors as size, year built, detached/attached) with average costs associated with the measures.
As a result of these efforts, 3% of the city’s buildings have been upgraded (compared to .8% nationwide) primarily through private investment. For every 1 euro in public investment and subsidy, they have seen 7 euros of private investment.
Model projects, including net-energy buildings, have helped to show both residents and companies that, if it can work in the pilot, it can work all over the region and around the world.
Lastly the City, under leadership and ongoing involvement of the mayor, continues to meet every two weeks with a roundtable of stakeholders, which includes representatives from their 62 industry partners, 26 science partners and 21 intergovernmental partners.
Is Germany Backsliding?
Now that it has dramatically shifted a third of its energy to renewable sources, the German federal government is now trying to slow down the rate of additional progress. Recently, they put forward plans to overhaul the Renewable Energy Act, including switching from feed-in tariffs to auctions.
The current target goals of increasing the share of renewable electricity (40-45% in 2025, 55-60% in 2035 and at least 80% by 2050) remain, but the program changes will limit how much renewables capacity may be added annually. This shift reflects an attempt to stabilize the growth and help plan for infrastructure improvements needed to keep up with the shift in energy sources but will effectively put the brakes on the current pace of growth in renewable energy and make it harder for community members to participate in supplying clean energy. It also doesn’t incentivize efforts to use renewable energy for other purposes beyond those such as advancing electric vehicles.
Anna Leidtreiter of the World Future Council expects the switch from feed-in tariffs to auctions will weaken investment opportunities for small investors, energy cooperatives, farmers and enterprises, and have detrimental impacts on the economy.
“Citizens are essentially the backbone of the energy transition in Germany,” Leidtreiter said. “Energy cooperatives alone have invested about 1.3 billion euros in renewable energy projects, thus generating revenues for communities, regions and citizens.”
Lessons for American Communities
While the future of the German energy transition may be in question with recent changes to its Renewable Energy Act, California can take several good lessons from the dramatic shift they’ve successfully driven to date.
- Policy and pricing mechanisms (Germany’s feed-in tariff guaranteed prices for 20 years) are critical to provide investment security especially for smaller investors, as German individuals, farmers and community cooperatives experienced.
- Democratize energy: Community ownership and empowerment can greatly increase investment and political support. In Germany’s case, providing grid access and stipulating that utilities purchase renewables first (in addition to the guaranteed prices) made it possible for smaller providers to enter the renewable-energy market and led to exponential growth in community energy investment.
- Community leadership: Throughout Germany, cities have set ambitious climate-reduction goals, and cities like Bottrop are showing that the transition from coal dependency to renewable energy leadership is not only possible but also profitable.
As Americans pursue our own energy transition at the state and federal levels, it is instructive to learn from those further ahead of us and remember that, as leaders, we must be vigilant in advancing progressive policies and innovative projects – and we must also guard our successes.