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US Should Learn from Germany’s Renewable Energy…Mistakes?

While Germany is often lauded for its Energiewende, a new report released by Zurich-based Finadvice for the Edison Electric Institute explains the consequences of its transition, which include high electricity prices, subsidy debts, grid instability, and costly grid upgrades.

“American consumers and policymakers should be aware that the challenges for the energy system increase with fast growth and high shares of renewables,” said Felix ab Egg, managing director at Finadvice. “A number of factors must be considered to ensure a transition to renewable energy as part of a broader energy strategy that does not impact the reliability of the electric grid or the stability of pricing for electricity users.”

The German government established a feed-in tariff (FIT) incentive system, which guarantees long-term fixed tariffs per unit of renewable power produced. The FIT is decreased in stages as the cost of technology decreases. According to the report, Germany underestimated the ultimate cost of the FIT, which to date is $412 billion, including guaranteed and grated rates that have not yet been paid. By 2022, the estimated cost of the FIT program will reach $884 billion, according to German Minister of the Environment Peter Altmaier, and the country will pay $31.1 billion in 2014 alone. 

Though the FIT program has succeeded in bringing a large amount of renewables onto the grid in a short amount of time, the report states that consumers have suffered as a result. Electricity prices in Germany have doubled from $.18/kWh in 2000 to $.38/kWh in 2013.

While consumer prices are on the rise, wholesale prices have dropped from about $121-128/MWh to $50/MWh in 2013. “This has created a large amount of load and margin destruction for utilities that built and financed [fossil] plants,” according to the report, which in turn caused many plants to shutter or require additional subsidies to stay online. While this may seem like success for the Energiewende, the rapid decrease in baseload power and increase in intermittent sources is causing more issues for the grid and expense for the government. From the report:

Grid interventions have increased significantly as operators have to intervene and switch off or start plants that are not programmed to run following market-based dispatching. It is higher amounts of renewables with low full load hours relative to the total portfolio of power production that creates greater variability and strains on the grid. In the case of Germany, it is the large-scale deployment of both wind and solar that has impacted the entire system.

In additional to extra work in running a more complicated grid, as more renewables are introduced Germany must also invest in energy storage technologies. Germany not only has to deal with grid stabalization, it must also invest in expanding grid infrastructure to reach onshore and offshore wind projects. According to the report, these projects are estimated to cost around $52 billion over the next 10 years. 

While many would disagree with this report's claims, its authors suggest that the U.S. and other countries should consider these lessons and calculate the true costs of renewable integration, grid improvements, and other measures to reduce expenses. The International Energy Agency (IEA) also released a report last year with some suggestions for Germany to manage its renewable growth.

“As our research shows,” explained Jeffrey Altman, senior advisor at Finadvice, “the United States has a unique opportunity to consider the lessons learned from Germany in order to achieve positive results from integrating renewable generation into the grid, at lower cost and risk for all stakeholders.”

Lead image: Julia Reschke via Shutterstock

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