The German Energiewende is the largest undertaking in the world to transition to renewable energy. Rightfully it is getting a lot of attention. There already many lessons to be learnt of what to do and also some of what not to do.
Smaller in magnitude but also well worth paying attention to are two American versions of Energiewende. One is a state, Hawaii, and the other is a city, Fort Collins, Colorado.
To eliminate or to radically reduce the use of fossil fuel in electric power production while maintaining reliability and keeping costs affordable is not a trivial task. In most parts of the world “coal power” is reliable and low cost. The success stories of large scale renewable energy are all in countries and provinces with a high amount of hydro power, e g
- Norway, 96 % hydro
- Iceland, 70 % hydro, 30 % geothermal
- Costa Rica, 68 % hydro, 15 % geothermal
- Quebec, Canada, 99 % hydro
- British Columbia, Canada, 95 % hydro
In most of these cases the retail electricity costs are also very low. For example Quebec is at 5.4 – 7.8 c/kWh (2012).
In the U.S.A. a small but benchmarking caliber example is the city of Burlington, Vermont. Last year they reached 100 % renewables while keeping costs at 13.7 cents/kWh. Most of the power is hydro and biomass. (See blog Burlington, Vermont, Beats Germany’s New Renewable Record.)
The German Energiwende targets to achieve 80 % of electric consumption to be from renewables by 2050 and to have reduced greenhouse gases (GHG) by 90 % compared to the 1990 levels. Germany has limited amounts of hydro and basically all has already been built out. Added to the challenges was the decision in 2011 to exit all nuclear power by 2022. Relying on its only domestic fossil fuel of significance, brown coal (lignite,) that decision has resulted in an increase of power from coal plants and increased GHG. However, Germany insists it will be temporary and their target for 2050 remains.
The approach has been to use various types of strong subsidies to enable a fast and massive growth of wind and solar. The most significant subsidies are the feed in tariffs for solar and wind, 17.3 cents/kWh for solar on buildings up to 30 kW and 25.5 cents/kWh for offshore wind (2014). The feed-in-tariffs are planned to be reduced by roughly 30 % this year.
By the end of 2014 Germany had over 38 GW of installed (nameplate) capacity of solar and close to 36 GW of wind. Combined it represents about 42 % of the total installed power generation capacity. However, in terms of energy production wind and solar stood for 9% and 7 % respectively, while brown (lignite) coal and hard coal (anthracite) produced 27 % and 18 % respectively.
The Energiwende has a very high initial price tag. The accumulated (2014) out-of-pocket cost is $468 billion. The dominant part of this “bill” is picked up by the residential customers. They have some of the highest rates in Europe, 45 c/kWh. Half of that are taxes, which include about 6.2 cents/kWh for the surcharge, the so called Umlage, funding the feed-in tariffs. However to keep the German industry competitive the industrial energy users are mostly exempt and paying close to wholesale electricity prices.
The net cost effects are subject to many, often conflicting, discussions, but clearly there are winners and losers. The biggest losers are the “Big Four” utilities (E.ON, RWE, EnBW and Vattenfall), who own most of large centralized power plants, both nuclear and fossil fuel fired units. Losing revenue from these plants has hit the earnings. Just E.ON and RWE had by August 2013 lost 76 % of the $200 billion market cap they had in early 2008.
Winners are the wind and solar equipment suppliers and installers. An estimated over 200 000 new jobs have been created since 2004.
The local utilities are also winners, at least for now. There are some 800 load serving entities, including many municipal utilities, so called Stadtwerke, serving specific cities. The German wholesale prices are among the lowest in Europe thanks to the low cost coal and the feed-in tariffs for wind and solar. However, as identified by Gabriel Camus in analysis (published in EnergyPost 2014) the reduction in wholesale prices was kept by the load serving entities and was not passed on to the residential consumers. Nevertheless, even without any relief on the retail prices for residential customers, there seem to be a broad political support for the Energiewende.
So far (2013) Germany has reached 25.4 % of renewables and an estimated 23.8 % reduction of GHG. Moving forward towards the 2050 goals will be very challenging. By 2020 the goals are to reach 35 % renewables and a 40 % reduction of GHG. For 2030 and 2040 the goals are 50 % and 65 % respectively of renewables, and 55 % and 70 % respectively of GHG reduction. A key component for reaching the targets is a dramatic improvement of energy efficiency. Expressed in % of 2008 primary energy consumption the goal is to have achieved a 50 % reduction by 2050. The goal for 2020 is a 20 % reduction, but so far only 3.3 % reduction has been achieved.
Probably the two biggest challenges ahead will be to phase out the coal power generation and balancing the large and growing amounts of variable resources (wind and solar). The latter is already a big challenge. In reality, thanks to the feed in tariffs, wind and solar get priority and the traditional power generation sources supplement the balance of what is needed to serve the load. The problem is that the coal power plants are not flexible to respond fast enough. Fortunately Germany has strong electric ties to neighboring systems and that way been able to export and import large amounts of power. Going forward it will not be enough. The domestic transmission system will need to be expanded to better balance the wind in the north with solar in the south. There is a plan for a German Supergrid with four HVDC corridors, but it requires a 10 billion Euros investment and is not yet a done deal. (See blog: The Importance of Strong and Nice Neighbors. Europe. ) Germany would also benefit from more storage, both bulk energy storage as well as battery storage. (See blog: A Blue Battery Solving a Green Problem.)
Hawaii Legislature recently passed a bill stating that 100 % of the state’s electricity will be generated by renewables by 2045. Hawaii had early developed geothermal and wind on the Big Island, but in terms of solar was late out of the starting blocks. The base load was and still is served by oil fired power plants. With high oil prices the electricity costs also got very high, by far the highest in the nation, 34 cents/kWh (2012). However, when residential PV took off some five years ago, it became something like a popular revolt. Hawaii is now a leader in solar. One of every eight homes in Hawaii has solar and roughly 10 % of the state’s electricity comes from solar. The state is ahead of its timeline to reach its goal of 15 % of its net electricity sales by end of 2015. The timeline is to reach 30 % by 2020, 40 % by 2030, 70 % by 2040 and 100 % by 2045.
Achieving these very ambitious goals is in one aspect more challenging than for Germany achieving their goals. Since Hawaii is several islands, each island with its separate system, they have not the possibility to work with surrounding systems for export/import of power and for balancing. Instead they look at having substantial amounts of storage, especially battery storage, and flexible gas turbines.
One of the most interesting questions will be how to achieve the goals without increasing the costs for electricity. If costs would go up further and costs for batteries would continue to come down, it gets closer to grid parity, the inflection point for grid deflection. Solar City on its website now offers Hawaii residents for $0 down a “comprehensive home energy solution that will provide off-grid solar equipment”. Installations are expected to begin in the first half of 2016.
The question has been raised if Hawaii would be best served having a municipal utility. The island of Kauai is already served by a cooperative. It will be hard for NextEra/Hawaii Electric, the investor owned utility, to find profitable growth in times of no or negative load growth on the utility side of the meter.
Fort Collins is also targeting to be carbon neutral by 2050. So far the city has only reduced its CO2 emissions about 5 % since 2005. In all fairness the population of Fort Collins has grown by more than 15 % during the same time. However, in a recent study by Rocky Mountain Institute (RMI) eLab (http://www.rmi.org/Knowledge-Center/Library/80 FortCollinsReport-WEB_2014-02) the conclusion is that the timing can be accelerated and the target achieved by 2045. Key elements in the plan are expansion of solar, energy efficiency and demand response. Fort Collins has through its FortZED (ZED = Zero Emissions District) initiative brought together public, private and academic sectors and is already quite advanced in Smart Grid managing peak energy. The single biggest challenge seems to be how to economically phase out the coal power produced by Platte River and replace it with combined cycle gas turbines. While savings are projected ultimately to be in the billions by 2050, the implementation costs will be about $300 million by 2020.
Germany, Hawaii and Fort Collins all have similar ambitious targets to achieve their respective version of the Energiewende. The approaches differ due to differences in magnitude and scope as well the local conditions.
In spite of the differences there are several common denominators:
- It can be done, if there is a political will and popular acceptance.
- The transition takes time.
- The up-front costs are substantial.
- There will be winners and losers.
- Improving energy efficiency and making load flexible (demand response) are key components.
- Markets, both wholesale and retail, will be crucial.
During the next 35 years left to 2050 technology will continue to develop and evolve, most likely more and faster than less and slow. It is hard to predict what may be the next break-throughs, whether it will be in batteries, large scale carbon capture and sequestration (CCS), small “next generation” nuclear or something else. The only thing for sure is that there will be more turns and twists of Energiewende.