The scale and cost of the project are comparable to the fall of the Berlin wall, but market analysts and skeptics wonder whether the country will be able to handle the transition.
The energy transformation to renewables, also known as ‘Energiewende‘, guarantees that all surplus energy that is produced by private wind and solar farms, is sold to the grid at a fixed price for 20 years.
Since the initiative was introduced, many farmers, co-operatives and even homeowners have taken advantage of the scheme. Around 1.3 million renewable energy producers not only generate their own energy, but they also have priority access to the grid, before big utility companies do.
It will not come as a surprise that thanks to this transformation to renewable energy, 22% of the country’s electricity for 2012 came from these sources. And the numbers are expected to grow in the coming years.
Small farm villages are increasingly becoming equipped with solar panels and wind turbines, while the big cities like Berlin, are developing new ways to take advantage of the incentives. There are whole apartment blocks with in-built energy systems, which control the intake of warm air from the kitchens and showers, and recover up to 90% of the heat.
The annual return of the investment is projected on to the consumers’ energy bill. However, what is not fully realized yet is that although the bills seem much lower, around 50% of an average bill is made up of taxes for renewables.
Some economists claim that the law on renewables will bring up the electricity prices, and place the industrial base of the country’s economy in danger. The main argument they use is that the incentives have resulted in too many renewable sources, which overwhelm the grid on sunny or windy days.
Big utility companies suffer from this the most, as the large gas- and coal-fired stations are put on hold until the renewable energy farms stop producing energy. In order to account for their losses, these companies are now using the cheapest electricity sources, such as brown coal or lignite, resulting in a drastic increase in carbon emissions.
This ultimately led to numerous complaints by CEO’s of big utility companies. In their view, the subsidies are not market-based, and the result could well be an over-production of subsidized power.
Nevertheless, the policies are clear. The government is strictly behind Energiewende, setting a 40% reduction target in energy consumption by 2050 and 50% of renewable energy supply by 2030.
But there is an increasing fear that the initiative might lose acceptance among the society. The prices of the transition are foreseen to increase, and there is not much that can be done to stop this given that there will be a strong financial support until the mid-2020s.
However, one thing is certain. Moving to green energy is the only way to create moral economy, which should be the ultimate goal of any modern government.