Renewables Squeezing Out Fossil Fuels

Over the course of the last two winters, the Energiewende’s opponents have warned in the shrillest tones that relying so heavily on PV and onshore wind would cause blackouts and power outages, leaving German industry prostrate and German citizens freezing in their homes. None of this came to bear, and Germany posted a new overall export record in 2012 and also exported more electricity than ever before.

Coal and wind

Pushing big coal out of the market: Wind power and a coal power plant in Lower Saxony (Photo by missresincup, CC BY-NC 2.0)

Industry is largely exempt from renewable energy taxes and has access to electricity at a competitive rate, in fact lower than in several neighboring countries. Moreover, claims that renewable energy surcharges above all were driving up energy prices also proved thin.

While the renewables levy has gone up, the cost of imported fossil fuels has risen more. As the Reuters analyst Gerard Wynn noted: “Germany (and Nordic countries) benefit from low marginal cost renewable power, while Britain is stuck with increasing imports of expensive gas and coal, while its more isolated grid means it can import less electricity from its neighbors.”

Renewable energy taxes were just one relatively minor factor in the total equation, which includes transmission grid charges and other taxes.

The real motive behind the onslaught was the fact that renewables are slowly but surely squeezing fossil fuels out of the electricity market. Because cleanly generated electricity receives priority grid access (and because its marginal costs are less than those of fossil fuels) it is first in the merit-order line at the energy exchange. Thus every kilowatt of renewable energy fed into the grid is one less that the conventional energy utilities will sell.

The former “Big Four” have all posted enormous losses since Fukushima and will continue to as the share of renewables in Germany’s energy mix continues to increase.

Thus while most of the country cheered when on April 18 Germany generated 50 percent (36,000 megawatts) of its total energy consumption for the first time ever on a working day, the fossil fuel suppliers experienced it as their blackest day yet. Since they aren’t investing significantly in renewables (with the exception of the beleaguered offshore wind power sector), their days are numbered.

As Susanne Treptow, director of the Stadtwerke Hameln, told the Hannoversche Allgemeine Zeitung: “No one needs the big utilities with their enormous power plants anymore – the future lies in decentral generation in smaller units. e.on won’t be around in 10 years.”

By Paul Hockenos, journalist and author, “Going Renewable” blog. This article first appeared on the German Council on Foreign Relations’ website.

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Paul Hockenos

Paul Hockenos is a Berlin-based journalist and author of the Going Renewable blog.

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