What’s the Secret Behind Germany’s Clean Energy Success?
The US may never beat them in soccer, but we can in renewable energy
Last month, Germany was in the news for all the wrong reasons: in addition to crushing all would-be challengers in the World Cup, Germany and the US are in the midst of a serious diplomatic crisis after the CIA was caught spying on Germany’s intelligence agency, actually paying agents hard cash in return for state secrets.
It is worth pondering whether, in the course of its spying, the CIA noticed that Germany has made itself much more secure, safe, and sustainable by greening its economy and energy production at a breakneck speed. We could use some actionable intelligence to replicate Germany’s Energiewende (or “Energy Transition”), as if the world depends on it. Because it does.
photo by rafael, on Flickr
Even more astonishing than Germany’s recent World Cup win is the fact that earlier this summer – on June 9 – 50.6 percent of total electricity demand was met by solar alone. The US defense establishment and media should be asking why Germany – which is not known for its sunshine – is decades ahead of the US in solar. In fact, Germany increased its share of renewables from 6 percent to nearly 25 percent in only ten years. Why is Germany, a land of only 80 million people and without anything remotely resembling an innovation epicenter like Silicon Valley, so embarrassingly ahead of the United States? How is it that in 2012 Germany had 400 Megawatts of solar power capacity per million people, but the US only has 25 MW per million people? Even in sunny Arizona, our top solar state (per capita), they only obtain 167 MW per million people.
Why can’t we do better than that? There are three big reasons that merit reflection.
Without an Imperial Military, Germany Can Afford It
The first reason is that the United States is fiscally kaputt, whereas Germany is the economic engine of Europe. Germany is number two in trade surpluses; the US is number one in trade deficits of all countries. Further, the ratio of government deficits compared to Gross Domestic Product of each country (negative 4.6% in the US and positive 0.2% in Germany) shows that Germany is doing a much better job of fiscal managment than the US. Some in the United States would attribute this to our spending on social programs. But that argument falls flat when you look at how lavishly Germany supports its middle class with government programs: Kindergeld (money for having children), free college, excellent public transit, incentives for renewable energy, and the world’s oldest social national health insurance system. In Germany, middle class taxpayers get a lot more for their money.
How then is the US spending itself into fiscal ruin? Not because of clean tech, or a social safety net. By far, the largest expenditure – when you include interest costs on past and current wars – is “defense.” Twenty percent of the US budget goes directly to defense, 6 percent goes toward interest payments (mostly because of past wars), and veterans benefits account for another 3.5 percent, which makes defense related spending the largest expenditure. Since there are only so many dollars to go around, and defense spending effectively crowds out other valid national priorities like green tech that would serve the long term interests of the majority of its citizens. In fact, we spend more on our military than the next 13 largest military spenders combined. (Interestingly enough, Germany has particularly benefited from our security umbrella since World War II.)
Some have lamented that the cost of the Energiewende could cost Germany as much as 2.5 percent of GDP every year for 50 years. Yet detractors of the Energiewende don’t give the numbers the proper context: the US spends 4.8 percent of its GDP on its military. Our recent misadventure of the War on Terror has proven to be the longest war in US history, costing as much as $5 trillion, and has revealed itself as a short-sighted geopolitical blunder. In contrast, the total cost of Germany’s Energiewende has been estimated at anywhere from $1.825 trillion during the next two decades to as much as $4.5 trillion for the full cost of the program to 2050. Certainly, it’s not cheap. But in the long term, resolarizing one’s economy seems to be better bang for the buck than a bloated military.
Some would point out that the United States is nominally ahead of Germany and only second to China in how much it spends on clean energy investments. Sure, in 2012, the United States spent $40.3 billion and Germany spent “only” $22.4 billion on renewable energy investments. However, relative to the size of their economies, Germany has a higher clean energy investment to GDP ratio (0.65%) than the US (0.25%).
How can the US be so far behind a country that hasn’t even made it to the moon?
Germany Has Smart Environmental Policy
The seed that has led to today’s blossoming was the German Renewable Energy Act in 2000. There is a fixed guaranteed price that renewable energy producers receive, a so-called “fixed feed-in tariff.” Not only are small producers given access to the grid and the wider electricity market, renewable electricy sources have a guaranteed price and also take precedence over nuclear, coal and gas. Interestingly, it is revenue-neutral for the government, meaning that renewables aren’t paid for by direct subsidies (i.e. taxes), but are instead spread out over the entire electricity market and onto consumers. Much of Germany’s energy transition is based on a dual approach that involves both regulation and open markets, which realigns the incentives. All-in-all, these policies have leveled the playing field so that small, renewable enterprises can compete with more established and centralized energy sources.
Yet, it goes deeper than just the Energiewende. In addition to extensive public transit (I think I got in a car only once when I lived in Germany for a year), German households recycle everything with a level of meticulousness that even drives some Germans crazy. Even the bottles in which your beer is stored have been washed and reused repeatedly instead of being melted down and made into bottles again. Many of the best green policies don’t cost a penny, such as the impending country-wide ban on hydraulic fracturing, or the wise banning of bee-harming pesticides.
The counter argument we hear frequently in the US is that these top-heavy regulations could hinder growth. But it is easier to knock that claim out of the field of thought than Germany did to Brazil in the field of World Cup (7 to 1, in case you missed it). Germany is holding up the rest of Europe and is the engine behind the euro zone’s economic recovery. Some people would say the ongoing Wirtschaftswunder – or “miracle economy” – is occurring despite Germany’s green policies. Those people are wrong. In fact, the greening of Germany’s economy is one of the reasons why German economy is every bit as strong as their Fußball team. By some estimates, the German Renewable Energy Act alone has created 380,000 jobs,which is significant in a country of 42 million workers. Although many climate contrarians (like Dane Bjørn Lomborg) criticize German renewable policy for being too successful, that doesn’t seem like such a bad thing: from 1990 to 2005, while US greenhouse gas emissions increased by 16 percent, Germany’s emissions decreased by 18 percent.
Yes, it is costly to consumers, but that is simply the price of being an early adopter and pioneer of one of the biggest changes since the Industrial Revolution.
Money Matters Less in German Politics
The third explanation is less obvious, but it is, in my opinion, the reason behind the other reasons. Americans don’t want green policy any less than citizens in other countries. In fact, according to a Gallup Poll take last year, 76 percent of Americans want more solar power, including 68 percent of Republican voters. Instead, the problem is that our political system is easily hijacked by industries that stand to lose in a re-solarization of our energy production. Put simply, money matters more in our political process than in Germany’s. This explains how established industries actively prevent sane policy in the United States.
Despite a shaky and slow start on the road to democracy, Germany now has a political system that is much less corrupt than ours and much more democratic. Certainly Germany’s “Big Four” utilities initially fought back against the Energiewende. Yet tighter campaign finance laws in Germany mean that entrenched interests can only delay progress so much. Germany is über alles in clean and green tech because it has opted for a political system where money isn’t über alles. Political parties receive public funds, all private donations must be disclosed, there are no Political Action Committees, election season is limited to six weeks, and each candidate has only one ad per election cycle.
“But, what about free speech?” you might ask. Political speech in Germany begins to look very free – an actual bargain – when you look at the $896 million that Obama and Romney each spent on TV ads in 2012. Today, the average US House seat costs $1.7 million and the average US Senate seat costs $10.5 million. There’s nothing free about our speech: more money in politics doesn’t mean more speech. Instead, it means less democracy.
Certainly, private individuals in Germany can financially contribute to the political process. For example, Frank Asbeck, CEO of Solarworld AG in Bonn, Germany, has been criticized for his generous political contributions to numerous political parties in Germany. Nonetheless, from an American perspective, this itself is stunning: Imagine a world where any renewable energy company could even come close to matching the lobbying clout of extractive industries. For example, in 2008, Obama received five times as much cash from the oil and gas industry than from the renewable energy industry. In 2014, clean energy industry groups made $976,663 in federal elections contributions to candidates, parties, and outside groups. In stark contrast, the oil and gas industry alone contributed $27,227,975 already this year, followed by electric utilities at $14,678,978, coal mining interests at $4,732,866, and natural gas pipeline interests at $2,732,211.
photo by majorbonnet, on Flickr
How can you have green policies in the United States when greenbacks matter so much in politics and policy making?
Political corruption is hard to prove (after all, it’s legal in the United States). But it takes little imagination to understand which system offers the most fertile soils for infant industries like clean energy. In a country where currently established industries have a dominant hand in policy and elections? Or in a country where corporate cash plays less of a role and infant industries are proactively fostered based on scientifically informed policy making? Even if you can’t “follow the money” to see its corrosive effects that crony capitalism has on innovation, just think about the staggering amount of time each American politician spends on fundraising. If many American lawmakers spend upwards of five hours per day dialing for dollars, that means less time for sane, sensible, and sustainable policy. They probably don’t have time to read a newspaper to see that what the petroleum and coal industries say can’t be done in the US has already happened in Germany and other countries.
The point here is not to disparage the United States. I cheered loudly for the US against Germany in the World Cup; above my desk is a framed American flag. I know that if we can get our act together, our system of American enterprise, our universities, our innovation centers, and more dynamic economy can make the German Energiewende look like a feeble beginner’s attempt. After all, we have a thing called sunshine. The fundamentals of our system of enterprise reward success, creativity, and innovation – but the incentives have to be there. And, democracy has to work.
As Germany is well on its way to obtain 40 percent of its electricity from renewable sources by as early as 2020, we should re-evaluate our national priorities. Although we frequently are late comers to the fights that matter (see: World War II), there is no reason why the United States shouldn’t and couldn’t be the Weltmeisters of alternative energy.
I hope that US-German relations repair quickly so that the CIA can resume spying; but this time, not on Chancellor Merkel’s cell phone, but instead on the reasons for Germany’s dominant leadership in sustainability. We have something to learn, copy, and eventually outshine. We may never beat them in soccer – but we can dominate the Germans in renewable energy.