What American utilities can learn from Germany’s Energiewende

The Solar Electric Power Association (SEPA) fact-finding mission to Germany is on the ground in Dusseldorf and already immersed in workshops with German energy leaders, talking about the country’s Energiewende, or energy transition, from fossil fuels and nuclear to renewables.

CEO Julia Hamm and the SEPA team have planned a heavy itinerary of meetings, with a little sightseeing and socializing thrown in, for the 34 utility and solar executives who are on the fact-finding mission.

At a kick-off dinner Sunday evening, energy executives from the across the U.S. shared the questions and issues they hoped to discuss over the coming days.

And with impeccable timing, a comprehensive overview of the progress Germany has made in its transition to renewables and the challenges ahead, especially for the country’s utilities, appeared the same day in the New York Times.

On its way to an ambitious goal of generating 80 percent of its power from renewables by 2050, Germany may soon get 30 percent of its power from clean sources, such as wind and solar, according to Times reporter Justin Gillis. The transition has had a huge impact on German utilities’ business models — with profits from power generation plunging.

But, according to Oliver Schäfer, president of the European Photovoltaic Industry Association, the utilities’ problems are part of a larger, more complex picture and not all linked to renewables.

German utilities overinvested in fossil fuel generation, relative to growth in energy demand, which dropped during the recession of 2008-10 and has not yet fully recovered, Schäfer told the SEPA group. Similarly, power companies also put significant money into nuclear, investments they now have to write off due to the German government’s decision to curtail and eventually close down nuclear energy production after the Fukishima disaster in 2011.

Cheap coal imported from the U.S. also played a part, fueling an over-reliance on coal-fired power plants as opposed to natural gas-fired generation. Coal does not have the fast-ramping capabilities of natural gas, making it harder to ensure grid reliability as more and more intermittent wind and solar are integrated into the system.

Renewables’ main contribution to the situation is their impact on energy prices, driving down power demand — especially at times of peak electricity consumption when rates are higher — which in turn has depressed energy wholesale costs. German utilities were also slow to start investing in renewables.

Certainly, power companies across the U.S. have closely tracked developments in Germany, which have been a spur for many of the debates over solar incentives and utility rate structures now under way across the U.S.

As part of the mission, U.S. energy executives will share some of  the new business models they have developed during a session with German energy leaders.

At least one lesson learned from the German experience is the need for long-term policy certainty, with sufficient, predictable support to create a sustainable solar market.

Equally important is the strong public support for renewables in Germany, even at the cost of higher power prices — as Gillis points out in his article. Rather than slowing the transition down, as the government is now trying to do, the majority of Germans want it to continue.