An academic’s perverting perspective on Germany’s Energy transition

I like the Energy Institute at Haas blog.

I don’t expect it to produce poorly researched and/or deceptive posts, as they’ve done with Maximilan Auffhammer’s Exiting Coal.

Here’s one sample of intellectual dishonesty which will lead nicely into the real world impact of actual economists: Auffhammer states of solar in Germany, “capacity continues to grow – 2014 installed capacity was 113% above that in 2010 suggesting a 21% growth rate p.a.” I suggest this is deliberately misleading: his link shows (on page 7) annual capacity figures, and the data indicates annual growth of:

  • 70% in 2010 (7,378 MW)DEsolarPV
    42% in 2011 (7,485 MW)
    30% in 2012 (7,604 MW)
    10% in 2013 (3,304 MW)
    5% in 2014   (1,899 MW)

An intelligent look at the data betrays the falsehood of Auffhammer’s narrative.

Here’s a better storyline:

  • In 2008 studies appear questioning the jobs benefits of the renewables studies, including one concluding, “Without the expansion of the international market the renewable energy industry cannot contribute a large employment benefit to the German economy.”
    In 2009 the recession leads to misplaced home enriching feed-in tariff offers will strengthen the economy, leading to a big jump in solar installations
    Late in 2011 the well-respected German Council of Economic Experts flags the enormous liabilities committed to – “The main problem of the Renewable Energies Act is thus the costs associated with its (apparent) success…the 20-year guaranteed minimum remuneration period at the prices valid at the time of constructing the renewables plant means that the renewables structure currently in place will continue to involve very high payment obligations for a lengthy period… In this way additional costs had already been incurred by the year 2010 vis-à-vis expected future electricity prices amounting to a present value of over 80 billion euro.”
    feed-in tariff offers were subsequently capped and price digressions attached to capacity corridors.

These are events explaining the rise, and fall, in the rate of solar capacity additions.

Auffhammer is promoted as an expert on “environmental and energy economics.” If you, think, as I do, that the adjective “environmental” is increasingly used as a synonym for “not actually”, this piece will deepen your cynicism.

  • “no one can argue with the fact that the installed cost of PV has come down by 66% in a decade.” -except the growth in German PV cited in the blog came because FIT pricing was raised too
    “the average German household now pays about 260 Euro per year to subsidize renewables…about the equivalent of a Starbucks latte twice a week” -might be impactful to people who don’t have multiple lattes every week

Auffhammer does stumble into some interesting territory, but the issues he fumbles with have been apparent for years.

The following graphic is displayed to facilitate the explanation: “This means that we may not need the always-on baseload (coal and nuclear in most places).”

The grey area in the 2020 chart is literally a grey area

It is 3 ½ years since I opened Germany’s Will to Power quoting a figure prominent in Auffhammer’s article, Sigmar Gabriel:

“If someone declares publicly that nuclear power would be needed in the baseload because of fluctuating energy from wind or sun in the grid, he has either not understood how an electricity grid or a nuclear power plant operates, or he consciously lies to the public. Nuclear energy and renewable energies cannot be combined.”

This is well understood.

What is not understood is that grey area in the graph of 2020, which is surmised might be “Pumped storage” (no longer financially viable)), coal and gas, or nuclear (which it can’t be after 2022)… or something else.

The issue is dispatchable generating capacity. 2 years ago I wrote in Electricity Sector Lessons from Ontario and Germany:

Ontario’s recent history suggests the next price increases in Germany will not be directly associated with adding more renewable capacity, but the complementary production capacity required

Germany has avoided that pitfall thus far, but it’s unclear how they intend on meeting demand in 2020 and beyond. Capacity markets, or auctions, and/or strategic reserves loom as possibilities throughout Europe, even as the European Commission looks carefully at subsidy implications of all capacity schemes.

Auffhammer seems to miss most relevant political aspects of the current German situation. He mentions Sigmar Gabriel often without mentioning Gabriel is the senior statesman of the junior partner in a grand coalition government. Great Britain’s recent election serves as the latest warning for junior coalition partners. In Gabriel’s case, his party’s base is the coal north, and his party has no strength in the nuclear (and solar) heavy south.

It is not clear to me Merkel wants the Energiewende to have a good couple of years as much as she might desire the ability to hang bad years on Gabriel.

Gabriel has never held a low emissions position – only an anti-nuclear one.

Interesting.

Also interesting is the politics of rich Germany within the European community. Again returning to the period of Germany’s 2011 decision to exit nuclear;

“The cap-and-trade system in Europe… will prevent the shutdown of nuclear plants in Germany from leading to increased reliance on coal.”  (reference)

2015 will be primarily about posing for Paris’ climate conference, but I expect Germany will eventually return to the theme on European caps – making emissions more problematic for less productive economies.

I think it needs to be stated that attributing the reduction in solar panel prices to Germany rather than countries that contain manufacturers of lower cost panels should be dismissed as a distasteful prejudice. Whatever Germany did, it did not do for the rest of us.
And while we are being wary of our prejudices, let’s review Auffhammer’s:

I want us to keep our eye on the prize. What we should shoot for are drastic global reductions in CO2. Germany and California are small. If what comes out of our policies is a way to drive coal and natural gas up the merit order in places like China and India, this would be the real success.

Neither German nor California are low emissions jurisdictions: both get over 50% of their domestic generation from fossil fuels.

China and India could find far better role models or, as strange as this may sound to too many, even find a better way themselves.

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