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10/10/2012 06:06 PM

Merkel's Blackout

German Energy Plan Plagued by Lack of Progress

By SPIEGEL Staff

Germany plans to abandon nuclear power by 2022, but its government hasn't been doing enough to ensure that the project succeeds. Needed infrastructure and technology is lacking, and coordination is a mess. Meanwhile, weary consumers are paying more for electricity, and the supply is in jeopardy.

German Economics Minister Philipp Rösler is standing in the boiler room of a row house in the town of Hönow, near Berlin. He doesn't look at all pleased with what he's seeing: an un-insulated heating pipe. What a waste of money and energy!

The owner of the building, Petra Röfke, 54, and her partner Hartmut, 58, look embarrassed. But the minister has some good advice for them. Wrapping a little foam insulation around the pipe would help save a lot of energy, he says, adding: "I have the same kind of pipe in my house."

In fact, says Rösler, he has a good mind to drive to the local hardware store and take care of the matter himself, along with replacing the old, inefficient light bulbs he saw while touring the house. He also didn't fail to notice the antiquated tube television set in the living room. "A lot can be done here," says the minister, giving the couple his final verdict.

With the government driving up the price of electricity, Rösler seems to feel an urge to make himself useful by dispensing advice on how to save money and energy. On Monday, grid operators announced a significant increase in electricity prices in Germany, prices that are already the second-highest in Europe.

The price hike is the result of an assessment under the Renewable Energy Act (EEG), a sort of green-energy solidarity surcharge that is automatically added to every consumer's electricity bill. Under the agreement reached in the last round of negotiations, the assessment will increase from 3.6 cents to 5.4 cents per kilowatt hour.

With the new rates, German citizens will be paying a total of more than €20 billion ($25.7 billion) next year to promote renewable energy. This is more than €175 for an average three-person household, a 50 percent increase over current figures. And then there are the additional charges a consumer pays for the electricity tax, the cogeneration assessment, the concession fee and value-added tax.

The development is an embarrassment to Germany's coalition government, made up of Chancellor Angela Merkel's center-right Christian Democratic Union (CDU), its Bavarian sister party, the Christian Social Union (CSU), and the pro-business Free Democratic Party (FDP). In recent months, the government has denied claims that the gradual transition to green energy could cost German citizens a load of money.

Broken Promises

In a government statement issued in June 2011, Chancellor Angela Merkel promised that prices would remain stable. "The EEG assessment should not increase above its current level," she told the German parliament, the Bundestag. Economics Minister Rösler said that there could even be "room for decreases." The environment ministers, first Norbert Röttgen and then Peter Altmaier, behaved as if Germany's phase-out of nuclear energy was not going to cost anything, even as they handed out billions in subsidies to owners of homes with solar panels and wind-farm operators.

Merkel must now deal with the consequences of her statement that the energy turnaround was to be the most important domestic project in the legislative period. Within a few hours after the nuclear reactor disaster in Fukushima in March 2011, she had transformed herself from a proponent into an opponent of nuclear energy. At the time, most Germans supported the chancellor. But now, more than a year later, they are losing confidence in her ability to get it right. German politician and EU Energy Commissioner Günther Oettinger says that he doubts "whether German consumers will accept rising electricity prices resulting from the energy turnaround in the long term."

The rising cost of electricity is also a burden on businesses. According to Oettinger, energy costs now represent the biggest liability for Germany as a place to do business, especially in light of the marked increase in the number of blackouts and voltage fluctuations in the grid.

Consumer advocates view the electricity price as a social issue, not unlike the price of bread in ancient Rome. The Paritätischer Gesamtverband, an umbrella association for social-welfare groups, estimates that about 200,000 recipients of benefits under the Hartz IV welfare reform program for the long-term unemployed saw their power shut off last year because of unpaid bills. The VdK, Germany's largest welfare organization, uses the term "electricity poverty" and is sharply critical of what it sees as a "glaring violation of basic social rights." According to the VdK, it is unfair that citizens are being asked to bear much of the burden of costs and risks associated with the energy turnaround.

Wasted Time and Money

This Wednesday, Environment Minister Altmaier plans to unveil a proposal on how to move forward with legislation designed to promote green energy. Members of the Bundestag from the ruling coalition want to exempt a growing number of companies from the green energy assessment. FDP parliamentary floor leader Rainer Brüderle is calling for a moratorium on new roof-based solar modules and wind turbines. Meanwhile, the center-left Social Democratic Party (SPD) and the Green Party are discussing whether energy providers should be compelled to offer special rates for low-income customers. Economics Minister Rösler, whose visit to a boiler room in Hönow marked the beginning of a new promotional campaign, wants to encourage citizens to conserve energy.

The central question in all of this is whether the money coming from electricity consumers is being spent wisely. If the federal government wants to have all of Germany's nuclear power plants phased out by 2022, why is it doing so little to ensure that the project will succeed?

Billions are currently being spent on the unchecked expansion of solar energy -- a technology that contributes the least to a reliable power supply in Germany, which isn't exactly famous for abundant sunshine. The comparatively efficient building renovation programs, on the other, have come to a standstill because the federal and state governments have been quarreling over funding for more than a year now. There is far too little storage capacity to serve as a buffer against the fluctuating supply of wind and solar energy. In addition, there are no conventional replacement power plants in the works. In fact, energy utilities are thinking about shutting down existing plants.

A Massive Mess

Instead of agreeing on a concept for the energy turnaround, the parties in the ruling coalition are arguing over who is responsible for the program. Economics Minister Rösler, of the FDP, is laying claim to the expansion of the grid. Environment Minister Altmaier, of the CDU, sees himself as being in charge of renewable energy projects -- as if the two things could function without each other. And then there are Transportation Minister Peter Ramsauer (CSU) in charge of site planning, Research Minister Annette Schavan (CDU) heading up storage-technology efforts, and Agriculture Minister Ilse Aigner (CSU) looking after biofuel issues. Vanity and proportional representation are also factors in the mix.

Meanwhile, Germany's 16 federal states are developing their own concepts, some of which are at odds with each other. Bavarian Governor Horst Seehofer says that his state plans to develop a self-sufficient energy supply. But David McAllister, the governor of the northern state of Lower Saxony, has a plan based on supplying Bavaria with large amounts of electricity from wind farms off the North Sea coast.

What some grid operators, power plant owners and scientists are doing today is nothing short of flabbergasting. There are power plants that are not connected to the grid, power masts without lines, and power lines leading to nowhere.

"There is still quite a lot to do here," Rösler said when he emerged from the boiler room in Hönow. Petra Röfke, the owner, nodded. Rösler added that he couldn't have imagined so much waste. "It's crazy, isn't it?"

Grids: Connection Problems

For centuries, people have been drawn to places with cheap energy. First, they searched for firewood and peat. Later, they built their mill wheels along rivers and streams. When they discovered large coal reserves in the regions along the Ruhr and Saar Rivers, they built the first industrial plants there.

It is a bold step for the federal government to be making the energy supply of the future dependent on offshore wind farms in the North and Baltic Seas. In the coming years, hundreds of wind turbines will be rammed into the sea floor far off the coast. When everything is finished, the offshore wind farms are expected to satisfy one-sixth of Germany's electricity needs.

Unfortunately, the electricity is not needed as urgently along the thinly populated coast, but rather in the distant southern states of Baden-Württemberg and Bavaria. The two states have large populations and industry, as well as a number of nuclear power plants scheduled to be shut down soon. For this reason, the federal government's decision to expedite the expansion of offshore wind power means that new power lines will have to be built, at a cost of €20 billion to €37 billion -- the most expensive infrastructure project since German reunification.

A master plan already exists. It can be found on a wooden shelf in room H 5015 at the Federal Network Agency in Bonn, and it consists of six ring binders and a large number of accompanying folders. All of the power masts and corridors that are to be expanded or newly built in the next 10 years are marked on foldout maps.

The problem is that the southern states are not particularly excited about receiving electricity from the wind farms in northern Germany. Bavarian Governor Seehofer talks about self-sufficiency and investing billions in the regional energy supply, including solar, hydroelectric and biofuel plants. Even Russian energy conglomerate Gazprom is being considered as a possible partner in the development of what Seehofer calls a "Bavaria plant."

Owing to such remarks, RWE and the other large electric utilities now believe that the first north-south lines may not even be needed anymore when they go into service in a decade. They argue that Bavaria and Baden-Württemberg will not be importing nearly as much electricity as the federal government's expansion plans envision. Indeed, one of Germany's biggest infrastructure projects could become one of its biggest "bad investments," says Lorenz Jarras, an energy expert at the RheinMain University of Applied Sciences. In other words, the carefully devised master plan could prove to be overpriced and inefficient.

Even the Federal Network Agency has its doubts. In one report, the agency concludes that smaller, decentralized plants will generate far more energy than large power plants in the future.

In an expert opinion, the German Institute for Economic Research (DIW) suggests that more thought should be given to the connection of offshore wind farms to the onshore power grid. The report recommends more effective coordination between government planners in the north and the south. Instead, says Jarras, "anything that generates electricity is being connected without regard for the economic costs."

In fact, Germans are even expected to pay for connecting offshore wind farms that aren't producing any electricity. To make investing in these projects more attractive, the federal government has issued new liability rules. If there are delays in connecting a wind farm to the grid -- for example, owing to a lack of cables for use in deep waters -- electricity consumers will now be footing the bill instead of the companies. The costs of such delays are already estimated at about €1 billion. Sources in the government say that weather-related issues are expected to cause more problems this winter.

Wind : Resisting Change

Richard Lübsen, 69, a farmer from Wangerland in northern Germany's Friesland region, has long believed in the power of nature. In 1993, Lübsen had a wind turbine erected next to his farm. The 500-kilowatt, 54-meter (177-foot) turbine attracted a lot of attention, and on the day it went into operation, Lübsen served sausages and sauerkraut to curious onlookers.

The investment has paid off for Lübsen. The money he made by selling electricity at highly subsidized rates helped him survive a mad cow disease crisis. "It's a good feeling to look out the window in the morning and see the rotor turning and hear it humming," he says. Not surprisingly, many of his neighbors have followed suit and installed their own turbines.

But now the pioneers of the energy revolution are standing in the way of progress. Wangerland Mayor Harald Hinrichs would like to build a new wind farm with significantly more powerful turbines. The proposed project would produce at least two-and-a-half times as much electricity as the turbines in place today.

But the condition is that the old turbines have to be dismantled first, a process known in the industry as "repowering." The goal is to install the most efficient wind turbines available in the best locations for wind power, which makes sense. The costs are comparatively low, and the adverse effects on the landscape would not be excessive, even though the new wind turbines would be taller.

But a few owners of old turbines in Wangerland are refusing to cooperate because the old turbines are profitable and have already been paid for. This makes Lübsen and his neighbors skeptical, even though they would receive a bonus for installing a new turbine. "It's very difficult to reconcile the interests of the owners of the old turbines, the landowners, the local residents and us," says Mayor Hinrichs, referring to the local government. The mood is toxic in the village, with some residents only communicating with each other through their attorneys.

Marcel Raschke, a lawyer with Repowering InfoBörse, a Hanover-based information exchange on upgrading wind turbines based, can name many other examples. He provides advice on behalf of the German Association of Towns and Municipalities and the federal government, a challenging task. "Unfortunately, repowering is much more costly and tedious than building new facilities on undeveloped land," he says.

The planning process isn't made any easier by the fact that Environment Minister Altmaier is responsible for the wind turbines while the turbine sites themselves are the responsibility of Ramsauer, the minister of transport, building and urban development. As a result, the most cost-effective and efficient way to produce green energy is making no headway. According to a survey by the consulting firm Deutsche Windguard, some 13,750 old wind turbines in Germany are candidates for repowering. In the first six months of this year, all of 15 were replaced with 10 new ones.

Efficiency: Ignored and Delayed

When EU Commissioner Oettinger gets upset, he tends to speak so quickly that he swallows syllables. On a morning a few weeks ago, he was eliminating entire words when the attendees at a convention heard him sputtering things like "nothing but people getting on their soapboxes," "constant opposition" and "rarely seen anything like it."

Oettinger is upset about how much energy is wasted in Germany, especially in buildings. Under an EU directive, member states are supposed to renovate 3 percent of their public buildings a year. But Germany isn't playing along, as states and municipalities are balking at the expenses. They are important players, as they own thousands of buildings and residential units.

The sad truth is that Germany spends billions on wind turbines and solar panels, only to see a significant portion of the energy lost through poorly insulated windows.

The roughly 18 million residential buildings in Germany represent a substantial potential for energy conservation. About 70 percent of these structures were built before 1979, that is, before Germany's first ordinance on thermal insulation came into effect. Most of these buildings lack insulation in outside walls, floors and ceilings. If they were retrofitted, their energy consumption could be reduced by two thirds, estimates the Munich-based Research Institute for Thermal Insulation (FIW).

This is precisely how much Deutsche Bank has been saving since it renovated both towers of its headquarters building in Frankfurt. The renovation cost about €200 million, and now the façade is triple-paned, a solar heating system generates hot water for heating purposes, and a computer controls the lighting.

The latest amendment to the German Energy Savings Regulation (EnEV) of 2007 shows how little attention politicians pay to efficiency. The amendment merely includes a minor tightening of requirements for new construction. A draft bill that would allow house and apartment owners to deduct the costs of renovating old buildings from their taxes has been held up for the last year in the Mediation Committee, which acts as an intermediary between the Bundestag, the lower chamber of Germany's parliament, and the Bundesrat, the upper chamber representing the interests of the states. Fearing the loss of tax revenues, the states have blocked the bill.

Energy Commissioner Oettinger argues that the lost revenue would be more than offset by the additional revenues for state governments generated by the work involved in renovating old buildings. For Oettinger, a member of the center-right CDU, the quarrel over the issue between the Bundestag and the Bundesrat is "almost embarrassing."

Power Plants: Forced to Lose Money

A kaiser still ruled Germany when the Franken 1 power plant generated electricity for the first time, almost 100 years ago. The plant was in fact slated for closure, but because of the energy turnaround, Franken 1 has been allowed to remain in operation.

This coming winter, on days when the sun isn't shining and there is no wind, Bavarians could very well count themselves lucky that the old plant is still connected to the grid. The plant can produce more than 850 megawatts of electricity on short notice, says plant manager Wolfgang Althaus, albeit at a high cost.

Franken is part of the so-called cold reserve of the German energy supply. As long as there isn't enough storage capacity, virtually every solar plant and every wind turbine has to be backed up by a conventional power plant. Without this double structure, the power supply would collapse.

At the same time, however, the boom in subsidized renewable energy is ensuring that conventional power plants are no longer profitable. Since the law requires that preference be given to green energy, if it's available, gas-, oil- and coal-fired power plants frequently have to be shut down to avoid overloading the grid. This reduces their revenues while increasing costs because powering plants up and down consumes a lot of fuel and inflicts additional wear and tear on the equipment.

In the past, power plant operators were able to charge higher electricity prices around midday. But now there is more competition from solar plants at this time of day. On days when there is a lot of wind, the sun is shining and consumption is low, market prices on the power exchange can sometimes drop to zero. There is even such a thing as negative costs, when, for example, Austrian pumped-storage hydroelectric plants are paid to take the excess electricity from Germany.

The prospects are so poor that energy providers have little interest in building new power plants. Under current conditions, even the most modern and efficient combined steam and gas power plants are not recovering billions in investment costs.

"It's hard to justify building new conventional power plants in this difficult transitional phase," says RWE CEO Peter Terium. If companies had their way, they would also demolish old plants like Franken 1.

The Economics Ministry is drafting a new regulation under which power plant operators could be forced to keep their old plants connected to the grid. But the companies won't stand for that. Although they are willing to make short-term compromises, they are not about to keep any power plants connected to the grid in the long term if "they don't recover their capital costs," Terium says.

What this amounts to is that companies will be compensated in the future for keeping their backup power plants up and running. As the government considers writing a bill to this effect, electricity consumers will once again be the ones to foot the bill.

Energy Storage: Too Little, Too Expensive

When workers at the ArcelorMittal steel mill dump a load of scrap iron into the blast furnace, yellow and white flames shoot out of the furnace, producing an infernal noise. The enormous amount of energy being consumed is almost physically palpable. The plant, in Hamburg's Finkenwerder district, consumes a billion kilowatt hours of electricity a year, or about as much as 250,000 four-person households. That number could become relevant in an emergency, like the one that occurred at the beginning of February.

With extremely cold temperatures gripping large parts of Europe, there was a spike in power consumption. Hamburg was on the verge of a blackout, says plant manager Lutz Bandusch. To keep the lights from going out in the city, he shut down the blast furnaces and rolling mills in Finkenwerder.

Instead of making money by producing steel, the plant operator was compensated for not producing it. It was a profitable arrangement for the steel mill. "It has to be worthwhile from an economic standpoint," Bandusch admits, even though he felt that it was somewhat odd to be getting paid to do nothing.

Several companies are currently negotiating with the Federal Network Agency over how much they will be paid to shut down their equipment in the event of an electricity shortage. Germany unfortunately doesn't have enough storage capacity to offset the fluctuation. And, ironically, the energy turnaround has made it very difficult to operate storage plants at a profit -- a predicament similar to that faced by conventional power plants.

In the past, storage plant operators used electricity purchased at low nighttime rates to pump water into their reservoirs. At noon, when the price of electricity was high, they released the water to run their turbine. It was a profitable business.

But now prices are sometimes high at night and low at noon, which makes running the plants is no longer profitable. The Swedish utility giant Vattenfall has announced plans to shut down its pumped-storage hydroelectric power station in Niederwartha, in the eastern state of Saxony, in three years. A much-needed renovation would be too expensive. But what is the alternative?

Batteries are also part of the government's plans, and €400 million in public funds have already been earmarked for related R&D. The industry also has high hopes for battery technology. But it this realistic?

For the fun of it, Florian Schlögl, director of the regenerative power plant department at the Fraunhofer Institute for Wind Energy and Energy System Technology (IWES) in the central German city of Kassel, calculated how large a battery would have to be to supply a city like Munich (pop. 1.38 million) with electricity for two or three days.

The answer, says Schlögl, depends on which battery technology is available. A cube-shaped lithium ion battery, such as the ones used in cell phones and laptops, would be 53 meters (174 feet) long on each edge. This would make it as tall as the roof of the Allianz Arena, where FC Bayern Munich plays its home games, and it would weight 250,000 metric tons. The dimensions would be even larger in the case of a lead acid battery, such as those used in cars. A cube-shaped battery would be 93.3 meter long on each edge -- and Munich would have a new signature landmark.

Experts Agree on Goal but Question Path

The eastern state of Brandenburg has already created a similar landmark for itself. Last week, Germany's biggest solar park was inaugurated in the Märkisch-Oderland administrative district, sandwiched between Berlin and the Polish border. It can produce enough electricity to power 48,000 households, at least when the sun is shining. But, regrettably, it won't be generating electricity just yet because the project isn't connected to the grid. The power lines and transformer station won't be finished for a few more months.

There is a method to this madness. To maximize government subsidies, the operator of the solar park wanted to be finished before the end of September. This guarantees him 20 years' worth of subsidies under the old law, so waiting a few months before being connected to the grid doesn't make much difference to him.

In the next few years, electricity consumers will pay for more than €100 billion in subsidies for solar power. Additional billions will follow. Like its predecessor, the current CDU/CSU-FDP government has also bowed to the solar lobby. The latter's business model is still based on collecting as many subsidies as possible rather than on feeding as much usable electricity as possible into the grid.

Experts believe that the energy turnaround will be a failure if this continues. The committee tasked by Chancellor Merkel with monitoring the progress of the energy turnaround will present its first report in December. Initial statements suggest that its verdict will be highly critical.

When Andreas Löschel, the chairman of the committee, rides his bike to work at the Center for European Economic Research (ZEW) in the southwestern city of Mannheim, he passes an ancient power plant. Last winter, the chimneys there were belching smoke once again. The power supply would have been in trouble without the plant.

Löschel and his colleagues in the monitoring group believe that more solar roof panels and wind turbines make little sense as long as there isn't enough storage capacity. They warn that subsidies could end up distorting business decisions and result in mismanagement of the system. In their view, it is a questionable practice to saddle electricity consumers with the costs and risks, which in turn reduces public acceptance of the project. Georg Erdmann of the Technical University of Berlin, another member of the monitoring group, has calculated that the EEG assessment will increase to up to 10 cents per kilowatt hour unless the government does something about it.

Despite all the criticism, the experts still believe that the energy turnaround is the right thing to do. It just has to be done correctly, says Löschel.

When Environment Minister Altmaier was traveling this summer, he was often asked about the nuclear phase-out. In these conversations, his English-speaking counterparts matter-of-factly used Energiewende, the German word for the energy turnaround. The term has apparently become established worldwide.

Altmaier was pleased. But it remains to be seen whether talk of Germany's Energiewende will be taken as a compliment in the future, just as kindergarten and autobahn have entered the English language as largely positive terms, or whether Energiewende will become more of a derisive term, like "German angst."

REPORTING BY FRANK DOHMEN, MICHAEL FRÖHLINGSDORF, LAURA GITSCHIER, ALEXANDER JUNG AND ALEXANDER NEUBACHER

Translated from the German by Christopher Sultan

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