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The Expensive Dream of Clean Energy: Will High Costs Kill Merkel's Green Revolution?

Chancellor Angela Merkel's vision of completing Germany's conversion to renewable energy by 2050 is bold and ambitious. But she has remained silent about the risks and the tremendous costs the green revolution will entail -- for Germany and all of Europe. By SPIEGEL Staff

Photo Gallery: The True Cost of Green Energy Photos
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Germany's dream of an energy revolution has already come true in the small town of Morbach, nestling between wooded hills in the southwestern Hunsrück region. Morbach boasts 14 wind turbines, 4,000 square meters of solar panels and a biogas plant, all located on the site of a former military base straddling a hill above the town. Together, they produce three times more electricity than the 11,000-strong community needs.

Politicians and corporate executives from all over the world have visited the site. "They all want to see how it's done," says Morbach Mayor Gregor Eibes, a member of Chancellor Angela Merkel's conservative Christian Democratic Union (CDU) party. Morbach has already achieved what Merkel is now planning for the whole of Germany.

She wants to lift Germany to Morbach's levels in just four decades, after which Europe's largest economy will meet most of its energy requirements from the sun and the wind, biomass and water. Drawing on the inexhaustible supply of energy on land and at sea would help combat global warming. And it would mean an end the dependence on Arab oil and to fears of nuclear accidents and of the mood swings of Russia's gas suppliers.

The government laid out this bold, green vision in its draft energy plan earlier this month. It wants to increase the share of renewable energy from 16 percent today to 80 percent by 2050.

Silence on True Cost of Energy Plan

It will mark the end of an energy system that has been based almost exclusively on fossil fuels -- coal, oil and gas -- for the last two centuries. The steam engine, the light bulb and the automobile have immeasurably improved the lives of billions of people. But the collateral damage has been high. The polar icecaps are melting and the share of greenhouse gases in the air is increasing because humans each year burn energy supplies that took millions of years to create. Renewable energy offers the only way to lead the world into a green future. That is why Merkel keeps on emphasizing the scale of the revolution Germany faces. But she is keeping quiet about the huge cost this will entail.

For a start, new power lines need to be built to transport the growing amounts of wind power from the north and solar power from the south. The power industry estimates that constructing these power motorways -- the lines, switching stations and transformers -- will cost some €40 billion ($53 billion) in the coming 10 years.

The wholesale refurbishment of this energy infrastructure is just one example of the massive cost of the green revolution: new grids and power storage sites, solar plants, wind turbines, biomass power plants will be needed, not to mention vastly expensive efficiency improvements in buildings and homes. Hardly anyone has fathomed the dimensions of the task.

"At the moment the customers don't yet see the wave rolling towards them," Hartmut Geldmacher, a management board member of power company E.on Energie, recently told a conference. "We face higher electricity prices."

Manuel Frondel, an economist at the RWI economic institute, said: "It will get so expensive that we will have a vigorous public debate about the price of power."

Real estate owners are particularly worried about the enormous costs. Last week the real estate sector, brokers and property owners' associations warned that many people may be unable to finance the necessary heating insulation and other efficiency improvements the government is seeking.

It is slowly dawning on people what tremendous changes the reconstruction of Germany's power sector will cause: for the 200,000 people who work for the four big power firms, for the 850,000 employees in the agricultural and forestry sectors who increasingly see themselves as energy farmers, and above all for the millions of consumers, many of whom have until now paid little attention to electricity bills.

The Era of Cheap Power is Over

Throughout human history energy has been a scarce and expensive resource, but consumers never paid the true price. The bills didn't include the environmental cost of burning coal, oil and gas and splitting the atom. This cheap era ended when it became evident that the planet can't go on like this indefinitely, and that the world has to wean itself off fossil and nuclear fuels.

The center-left government under Chancellor Gerhard Schröder took an important first step a decade ago by passing the Renewable Energy Act that required power grid operators to give priority to feeding in green power. The results are visible across the country today. Germany has more than 21,300 wind turbines and almost 13 million square meters of roofs and fields are covered in solar panels. The 16 percent share of renewable energy sounds like a fantastic achievement, but it also highlights how much more needs to be done. And the rest of the way will be far more difficult and expensive.

The strategists at RWE, Germany's biggest power company, estimate in an internal study that Europe will require a staggering €3 trillion ($4 trillion) of investment just to convert its power generation to green energy. That doesn't include the necessary spending on networks and storage. The price of electricity production would increase rapidly in the coming 25 years to up to 23.5 cents per kilowatt hour in a worst-case scenario, if Germany were to switch to complete self-sufficiency in energy production, from 6.5 cents now, RWE estimates.

This is doubtless an extreme scenario, and even RWE has significantly lower rates based on the assumption that the life span of nuclear power stations will be extended. Other experts have completely different estimates. It is impossible to arrive at precise forecasts for the cost of the green revolution over the next 40 years. Besides, most scenarios don't factor in the problems that could arise in terms of arduous approval procedures, legal disputes and public protests.

But six main factors can be identified that can help to determine whether a renewable energy system can work reliably and what cost levels can be expected.

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