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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.

Alemanha x Argentinaphoto by rafael, on FlickrGermany vs. Argentina, 2014

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.

CIMG0221photo by majorbonnet, on FlickrSolar array in the Black Forest

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.

Das Ende

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.

Björn Philip Beer
Björn Philip Beer is writer, in Charlottesville, VA. Follow him on Twitter at @BjornPhilipBeer

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“Lignite is not replacing nuclear, by the way”

Ceteris paribus, if Germany had not closed some nuclear plants, lignite plants could not have produced as much as they did in 2013.

By Dissenter on Tue, August 19, 2014 at 12:06 pm

Wow, is there a lot of misunderstanding and blind swallowing of anti-renewable propaganda nonsense in this comment section.
Some clarification from the country itself:

Electricity prices:
Firstly, most of the industry that uses a lot of electricity doesn’t pay the renewable surcharge, or a number of other add-ons to the basic wholesale price of electricity (grid fees, VAT etc.) They’re paying little more than the wholesale price, which is falling rapidly thanks to the renewables and current overproduction(more on that below) and it mostly stays below 0.04 Euro per kWh these days. That’s why energy-intensive industry like aluminium recycling in the other European countries is complaining that German factories have an unfair advantage. In practice, this works out to a hidden industry subsidy to keep heavy industry (metal working, car manufacturing, etc.) in the country. And it’s working - there have been no big companies leaving Germany. Yes, industry spokespeople are complaining about the Energiewende, but that’s just pre-emptive threats of leaving so they won’t lose their electricity privileges.
Because obviously, normal citizens and small businesses are rather pissed that they have to pay more to make up for heavy industry not pulling their weight. And that anger is making politicians nervous, hence the current nonsensical law-changes. (Most people don’t see so far as to understand that the current system is better for the economy than to lose a lot of jobs and so make increases in social security payments and taxes necessary instead.)

But also, lower electricity prices for the average consumer were never the goal of the Energiewende. On the contrary, one of the main goals is to reduce the energy consumption of the population as a whole by quite a lot until 2050 - because you simply can’t replace the huge amount of energy-dense fossil fuels Western society uses right now with the slow trickle of what is technically possible to harvest at any given moment from the energy of the sun. So we have to increase energy efficiency by an order of magnitude, if we want to keep anything close to our current standards of living in the era post fossil fuels. And how do you encourage people to conserve energy and buy more efficient household appliances? Right, by making electricity expensive. Consumer prices in Germany may be 3 times as high as in the US, but households don’t actually pay more on their monthly bill than people in most US states. Because people in Germany have learned how to live a comfortable life without wasting quite as much energy as people in the US. (Though some of that is climate luck, of course. For example there is rarely a need for AC in Germany. But when the temperatures do go up to 85-100°F in the few months of high summer, people just bear with the heat, and make do with passive cooling methods, like well-insulated walls and window shutters.)
As a nice bonus, as long as people have an incentive to buy the newest, most efficient appliances/lightbulbs/whathaveyou, you avoid market saturation of technical products, and the economy keeps rolling. (Thus keeping more people in work, giving them the money to upgrade to the newest generation of appliances, and so on.)

Coal plants:
Yes, the Big Four electricity providers in Germany did start to build quite a lot of coal plants in the early/mid 2000s, which are coming online now. (It takes about 6 years or more to plan and build a coal plant, so this had nothing to do with the decisions made in 2011 regarding the accelerated nuclear phase-out. As far as I know, there have been no new coal plant plans started since Fukushima.) The electricity provider in most of Western Europe did the same thing around the same time. The reasons for this sudden buildout phase were complicated, partly resulting from some legal chaos in the period before (so companies waited to build any new plants for a while until the politics had been settled, and then they suddenly started all building at once), but mainly it had to do with some EU emission standards that are coming into effect between 2016 and 2022, which most of Europe’s old coal plants couldn’t hope to fullfill. The German providers could have built large renewable plants instead, but back in the early 2000s, they didn’t believe it was possible to replace so much capacity with renewables. They are bitterly regretting their decision to back the wrong horse right now. They’re loosing money on those new plants (especially on gas plants, but also on hard coal plants), because even though they nominally increase capacity (GW), they just aren’t running much of the time (TWh). Because they need a wholesale price above 0.04 Euro to earn a profit, and the renewables (which have no fuel costs after all) are pushing the wholesale price in Germany below that threshold on most days. The big electricity companies actually have applied to the overseeing government agency to be allowed to shut down and mothball a few dozen fossil fuel plants - with another 3 just added to the list a few days ago - but that agency usually takes a year or more to make a decision about whether or not a plant can be shut down without endangering the local grid stability. And of the 20 or so fossil fuel plants that had still been in the planning/building phase in 2011, all but 6 have been scrapped. 

Lignite is the only abundant domestic source of fossil fuel Germany still has (domestic hard coal has been more or less used up). As such, electricity from lignite is unfortunately much cheaper to produce than electricity from imported hard coal or gas. Thus, gas and hard coal become uneconomic first, as the wholesale price falls, and lignite replaces gas as an energy source. (It’s not replacing nuclear, by the way: Since 2011 the renewables have seen an increase in actual annual TWh produced that’s larger than the loss of production from the closed nuclear plants.) If you’re asking Germany to leave the lignite in the ground and buy expensive gas instead, you’re asking them to do what no other nation in history ever has done before without being forced by military power: act against its own economic interests and increase its energy dependence on others. Also, most of that gas would come from Russia, and Germany’s dependence would give Putin more power in international politics.
However, obviously we don’t want to burn that lignite if we can avoid it. And we wouldn’t need it, either - or at least not the recent uptick in TWh produced from lignite. Since the renewables have grid access priority, all that newly added renewable electricity gets used in Germany. We won’t be exporting that until we hit more than 100%, and currently renewables make up only 31% of Germany’s electricity use (actual TWh produced, not installed GW of capacity). However, Germany’s electricity exports have exploded over the last few years. In 2013, it was about 33 GWh, making Germany far and away the largest net exporter in the world. That is the uptick in electricity production from lignite. Countries like the Netherlands and France buy it, because it’s cheaper than their domestic electricity production (from gas or nuclear). If you want to shame someone into stopping to use lignite, tell these countries to stop buying it and creating the demand that keeps these lignite plants alive in Germany.
Also, I get the feeling people think Germany is a planned economy when it comes to electricity production. That is not the case. Unlike in many other European countries, the Big Four electricity providers in Germany (and the 3 grid operator companies, too, for that matter), are NOT state-owned, and so the government can’t just force them to shut these plants down. (The nuclear plants were a special case, with special laws allowing for a forced shut-down in case of dangerous security risks or malfunctions. There are no such laws controlling the much older, much better connected coal industry.) Or, well, they’re not state-owned by the German government. The company that mines and burns most of the lignite is Vattenfall, which is wholly owned by the Swedish government. For the German government to directly interfere with their business would come across as a declaration of war on Sweden. And unfortunately Vattenfall doesn’t care about the destruction it causes. Even in mining areas where the people living there collect double the amount of signatures against another mine destroying another village than Vattenfall can collect in favour of digging (there are always some people in favour, because these areas have few other job opportunities), somehow the mine still gets licensed by the local politicians in the end. It’s obvious that what’s going on isn’t so much “the will of the people”, as either blatant corporate bribery or political pressure from Sweden to Germany and from the German federal goverment to the local governments.
Also, as mentioned before, a lot of these old lignite plants will have to close down in a few years due to the new EU emmission standards. (Upgrading the old plants with new technology would cost too much.) So the companies try to make as much money with them as they still can in the meantime, burning 24/7 and dumping the electricity on the international market. There can’t be much of a profit margin in it with this much overproduction (also a reason for the low wholesale price), but apparently it’s still a profit if you’re burning cheap lignite.

By Violet on Tue, August 19, 2014 at 7:45 am

Nonsense, of course the big electricity companies are working to undermine the Energiewende by lobbying/buying politicians. That’s why the government just changed the laws so that new renewable installments will be much less possible for communities and small businesses than for big businesses in the future. In the previous few years, the big companies just didn’t take the renewables and the efforts by citizens to make their own electricity seriously as a threat to their business practices, so they weren’t paying attention. Now that it’s become obvious that the renewables indeed are a viable alternative to fossil fuels, the big companies have started a propaganda war against the Energiewende. And they are winning.

By Violet on Tue, August 19, 2014 at 7:43 am

50% of total electricity needs for 5 minutes, 5 hours or even 5 days is a totally bogus statistic (unless if you can time your need for a hospital or a furnace—electricity at the power grid scale cannot be averaged).  The Fraunhofer Institute’s latest report shows that while there are many wind and solar megawatts installed, the power comes from ever increasing coal and lignite. As for cost, Germany has the privilege of having the second most expensive electricity in Europe, right after Denmark.  The reason? Guess.

By archaeopteryx on Sat, August 09, 2014 at 8:14 pm

That is not a smart investment, the price signals being sent are not sustainable.  Government fiat will not reduce the post of sustainable energy, as Germany continues to phase out coal and abandons nuclear the cost for Germans will continue to increase (prices for Germans are not going down).  If Germany gets to its goal of renewables its energy costs will be 4 to 10 times the rest of the industrial world (and that assuming improvements in energy efficiency)impoverishing German citizens and hurting its economic competitiveness.

By ASM on Fri, August 08, 2014 at 9:31 am

Problem is, low carbon renewables are displacing low carbon nuclear,  not fossil fuels, so Germany’s CO2 emissions from energy consumption are actually rising (Eurostats News Release 74/2014).

By prosopon on Fri, August 08, 2014 at 4:56 am

Germany is only really exceptional in installed PV (much better than Alaska) I would not call that a succes however.

By Dissenter on Fri, August 08, 2014 at 4:08 am

It is easy to be a success in business when the government mandates that your product must be used in lieu of your competitor’s cheaper option, and the added cost is added, by law, to your customer’s bill.

It is easy to live well, while someone else carries the cost, in blood and treasure, of defending your freedom from a marauding bear.

Since energy cost seems unimportant to the author, it seems only fair that Germany buy their hydrocarbon energy from its ally (for a slightly higher cost) and cease dealing with the bear.

This article was either written in the PR department, or the sports department.

By R. L. Hails Sr. P. E. (Ret.) on Thu, August 07, 2014 at 6:02 pm

Nice and on point article, but still no cee-gar.

Germany has expanded its coal utilities, and stubbornly refuses to phase out brown coal in the east. This effectively subsidizes green energy and dodges the issue of why nuclear, which is cheaper than PV, has dwindled, when in fact nuclear thermal is the most direct and reliable source of hydrogen—why start with unreliable wind to do this, in the name of ‘storing’ energy, when hydrogen is the replacement for gasoline and oil imports?

Germany has gotten a rap recently as an imperialist puppetmaster of the EU, impoverishing its neighbors. This may be true insofar as the speculative investment in PV had not accompanied a true national electric grid in Europe, or the comparative advantage of building most PV in Spain, Greece and Italy (German politicos seem to obsess over going to North Africa). As a result, not even coal or nuclear are living up to their potential as baseload energy, and North Sea windpower is thrown away.

By jay kalend on Thu, August 07, 2014 at 3:45 pm

Germany charges its citizens 3 times what the US does, that is the simple answer.  If the US was ok with a 300% increase in energy costs for businesses and consumers we would be ahead of Germany.

By ASM on Thu, August 07, 2014 at 3:28 pm

What happens when your country invests in renewable energy : your country becomes energy independent, prices per energy unit go up in the short term, you invest in energy saving techniques, you consume less energy, your total energy bill goes down. Smart, very smart, why do you have to be German to think about that.

By Johannesd on Thu, August 07, 2014 at 3:09 pm

The secret is simple - German burdens it’s citizens with a electricity rate $/kwh three times the US.

Per Wikipedia for 2013:
Germany: 36.25 cents/kwh
USA: 8 to 17 cents/kwh

By elmadster on Thu, August 07, 2014 at 12:44 pm

“A new study completed last month but only released to the public yesterday calculates the actual returns on investments in PV and wind in Germany. The findings are explosive – and explain a lot, though one main question remains.”

By Dissenter on Wed, August 06, 2014 at 8:58 am

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