American clean energy advocates like to tout the latest European energy accomplishments as proof that the United States is falling behind. Clean energy provides 25 percent of Germany's energy demand! Germany has the greatest share of wind and solar among the G20 countries!
These are important accomplishments, to be sure. But this rapid growth has come at a cost: the highest energy prices in Europe. Are there ways we can achieve the milestones that Germany has reached while avoiding the economic downside of high costs? A new report by the respected German newspaper Der Spiegel provides some hard truths, and a look at three important lessons for us in the United States:
Lesson 1: Nuclear free is not a clean energy option.
In the immediate aftermath of the Japanese tsunami and disaster at Fukushima, the German government decided to scrap its nuclear power plants. In just over two years, Germany has phased out nearly 30 percent of its nuclear power generation – 7 percent of total electricity generation.
The government envisioned nuclear capacity would be replaced by solar and wind energy. But like it or not, the truth is that nuclear power creates electricity that constantly flows at a steady volume, price and cost. Solar and wind, like other intermittent sources, create energy that streams onto the grid in potentially unpredictable patterns, sometimes in a flood and other times in a trickle. Without extensive energy storage or far smarter grids to capture and store intermittent renewables, another baseload energy source must come in to replace shuttered nuclear capacity, and it's generally coal or gas.
While Germany's amount of electricity from renewable energy rose 10.2 percent in 2012, electricity generated by coal plants also grew by 5 percent. So even with all of the growth in renewables, the bottom-line need for baseload generation means that total carbon dioxide emissions increased from 2011 to 2012.
The U.S. should learn from Germany's pollution-increasing shutdown of its nuclear fleet by improving its regulatory environment and loan programs for nuclear power. While the U.S. isn't shutting down nuclear power stations by the handful, as is happening in Germany, low natural gas prices combined with solar and wind subsidies have led some companies to decommission plants.
In Third Way's PowerBook of federal energy policy options, we propose shortening the approval process for new reactor designs and license renewals and expanding the nuclear loan program, which would help reduce the costs of borrowing, making nuclear reactors less expensive to build. This is an important step to keep nuclear as a viable zero emissions option for American electricity.
Lesson 2: If you want to save money, synchronize national energy incentives.
German consumers pay the highest electricity rates in Europe, and rates are set to grow. Many factors contribute to this, including more than 4,000 different subsidies, credits, taxes and fees intended to help add more renewable energy to the grid.
While these subsidies are creating growth, not all of it is useful. Sometimes these policies are doing little more than subsidizing waste because of an inherent lack of planning behind the incentives. Germany doesn't have the energy storage or smart grid technologies in place to capture the intermittent energy created by wind, solar and other renewables. So when the German grid produces too much electricity, wind turbines shut down and consumers pay for the energy they could theoretically produce. When the grid produces too little, some German factories shut down and consumers pay for the lost profits industry could have earned were it allowed to operate. Not only that, but the most expensive clean energy technologies in Germany also receive the highest subsidies, so German consumers pay more than necessary to access clean energy.
The U.S. also has many different loan and grant programs, subsidies and credits that promote clean energy. Well designed, these help put our country on a cost-effective route towards using less energy. Poorly designed, however, they cost consumers too much in unnecessarily high electricity rates. As the U.S. creates new energy policies, we should ensure we synchronize these proposals within the current clean energy landscape so that new generation matches new transmission – unlike in Germany, where expensive offshore wind farms stand unconnected to the grid. The Department of Energy has begun to embark on this type of cross-sector analysis with its Quadrennial Technology Review, and could do it in an even more comprehensive way as it embarks on the first national Quadrennial Energy Review.
Lesson 3: It's important to coordinate energy storage and renewables.
One of the generally accepted truths when adding more intermittent renewable energy to the grid is that the grid must either gain more capacity to store energy or become “smarter” to better match supply and demand. Germany has been a leader in energy storage, boasting almost two dozen pumped storage hydroelectric plants. One of the largest, Niederwartha, has been in operation for over eighty years. During times of low electricity demand and prices, the plant uses cheap energy to pump water into storage. When peak prices hit during times of high demand, the plant releases pent up water, generating electricity and profit.
Sounds ideal, and it is, as long as the timing is right — but oftentimes it isn't. Too often, pumped storage plants are timed to release energy during peak daylight hours, when they end up competing directly with subsidized solar energy generation. And so Niederwartha, profitable for many years, may be shut down. Without this previously compelling business model, new designs slated for construction may never be built, despite a need for future energy storage.
Energy storage is a critical part of integrating renewables on the grid. This is made easier with the deployment of smart-grid solutions that can synchronize sources of energy and optimize their efficiency and use. Several U.S. utilities and companies are forging ahead to develop and deploy smart grid technologies, and the right policies can spur faster development and help avoid the unintended consequences Germany is now struggling to resolve. One critical idea, included in the PowerBook, is to require the Federal Energy Regulatory Commission to compensate utilities in all regions for demand reduction, not merely generation. This would more equally incentivize generation and efficiency, and in so doing help spur the adoption of smart grid technologies that more effectively integrate renewables and their storage systems.
International markets are often good sources for policy ideas – this includes both the many things other countries are doing right and learning from the mistakes they endure. Increasing solar and wind capacity is critical to generating clean energy and reducing pollution. Just as important, however, is using the right policies to make sure that the generation technologies, grid management and incentives all line up to help us get more affordable, clean energy. This is a critical lesson as the U.S. continues to work on what our 21st century electricity system will look like.
Ingrid Akerlind is a fellow for Third Way’s Clean Energy Program.
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