Environment | The Big Fix
Sun and Wind Alter Global Landscape, Leaving Utilities Behind
Germany’s Offshore Wind Push
Video Credit By Erik Olsen on
Publish Date September 13, 2014.
HELIGOLAND,
Germany — Of all the developed nations, few have pushed harder than
Germany to find a solution to global warming. And towering symbols of
that drive are appearing in the middle of the North Sea. They
are wind turbines, standing as far as 60 miles from the mainland,
stretching as high as 60-story buildings and costing up to $30 million
apiece. On some of these giant machines, a single blade roughly equals
the wingspan of the largest airliner in the sky, the Airbus A380. By
year’s end, scores of new turbines will be sending low-emission
electricity to German cities hundreds of miles to the south.
It
will be another milestone in Germany’s costly attempt to remake its
electricity system, an ambitious project that has already produced
striking results: Germans will soon be getting 30 percent of their power
from renewable energy sources. Many smaller countries are beating that,
but Germany is by far the largest industrial power to reach that level
in the modern era. It is more than twice the percentage in the United
States.
Germany’s relentless push
into renewable energy has implications far beyond its shores. By
creating huge demand for wind turbines and especially for solar panels,
it has helped lure big Chinese manufacturers into the market, and that
combination is driving down costs faster than almost anyone thought
possible just a few years ago.
Electric
utility executives all over the world are watching nervously as
technologies they once dismissed as irrelevant begin to threaten their
long-established business plans. Fights are erupting across the United
States over the future rules for renewable power. Many poor countries,
once intent on building coal-fired power plants to bring electricity to
their people, are discussing whether they might leapfrog the fossil age
and build clean grids from the outset.
A
reckoning is at hand, and nowhere is that clearer than in Germany. Even
as the country sets records nearly every month for renewable power
production, the changes have devastated its utility companies, whose
profits from power generation have collapsed.
A
similar pattern may well play out in other countries that are pursuing
ambitious plans for renewable energy. Some American states, impatient
with legislative gridlock in Washington, have set aggressive goals of their own, aiming for 20 or 30 percent renewable energy as soon as 2020.
The word the Germans use for their plan is starting to make its way into conversations elsewhere: Energiewende,
the energy transition. Worldwide, Germany is being held up as a model,
cited by environmental activists as proof that a transformation of the
global energy system is possible.
But it is becoming clear that the transformation, if plausible, will be wrenching.
Some experts say the electricity business is entering a period of
turmoil beyond anything in its 130-year history, a disruption
potentially as great as those that have remade the airlines, the music
industry and the telephone business.
Taking
full advantage of the possibilities may require scrapping the old rules
of electricity markets and starting over, industry observers say —
perhaps with techniques like paying utilities extra to keep conventional
power plants on standby for times when the wind is not blowing and the
sun is not shining. The German government has acknowledged the need for
new rules, though it has yet to figure out what they should be. A
handful of American states are beginning a similar reconsideration of
how their electric systems operate.
“It’s pretty amazing what’s happening, really,” said Gerard Reid, an Irish financier working in Berlin on German energy projects. “The Germans call it a transformation, but to me it’s a revolution.”
The
potential payoff for getting the new rules right is enormous: a far
greener electricity system that does not pump as much greenhouse gas and
other pollution into the atmosphere. Yet as the German experience
shows, the difficulties of the transition are likely to be enormous,
too, and it is still far from clear whether the system can be
transformed fast enough to head off dangerous levels of global warming.
“I
am convinced that wind and sun will be the central sources of energy,
not only in Germany but worldwide,” said Patrick Graichen, who heads a
think tank in Berlin, Agora Energiewende, devoted to studying the shift. “The question is: How can we turn the energy transition into a success story?”
Plummeting Prices
One
recent day, under a brilliant California sun, saws buzzed as workers
put the finishing touches on spacious new homes. They looked like many
others going up in Orange County, south of Los Angeles, but with an
extra feature: Lennar Corporation was putting solar panels on every
house it built.
The
prices of the panels have plunged 70 percent in the past five years.
That huge decline means solar power is starting to make more economic
sense, especially in parts of the United States with high electricity
prices.
At
about 100 Lennar subdivisions in California, buyers who move into a new
home automatically get solar panels on the roof. Lennar, the nation’s
second-largest homebuilder, recently decided to expand that policy to
several more states, starting with Colorado. The company typically
retains ownership of the panels and signs 20-year deals to sell
homeowners the power from their own roofs, at a 20 percent discount from
the local utility’s prices.
“It’s
so simple when we tell a customer, ‘You’re guaranteed to save money,’ ”
said David J. Kaiserman, president of Lennar Ventures, the division
overseeing the solar plan.
The shifting economics can largely be traced to China,
by way of Germany. Over the past decade, the Germans set out to lower
the cost of going green by creating rapid growth in the once-tiny market
for renewable power.
Germany
has spent more than $140 billion on its program, dangling guaranteed
returns for farmers, homeowners, businesses and local cooperatives
willing to install solar panels, wind turbines, biogas plants and other
sources of renewable energy. The plan is paid for through surcharges on
electricity bills that cost the typical German family roughly $280 a
year, though some of that has been offset as renewables have pushed down
wholesale electricity prices.
The
program has expanded the renewables market and created huge economies
of scale, with worldwide sales of solar panels doubling about every 21
months over the past decade, and prices falling roughly 20 percent with
each doubling. “The Germans were not really buying power — they were
buying price decline,” said Hal Harvey, who heads an energy think tank in San Francisco.
The ripple effects drove some American panel manufacturers out of business, prompting complaints
about Chinese government subsidies to the manufacturers who seized much
of the market. But the decline also created an opportunity for American
homeowners and for companies like Lennar.
Wind
power, too, has come down sharply in price in recent years, and it is
now competitive with the cost of new coal-burning power plants in parts
of the United States.
A Threat to Business
The
decline in the cost of renewable power spells potential trouble for
companies that generate electricity. They make a lot of their money at
times of day when demand for power, and therefore power prices, are
high. Solar power, even a small amount, could be especially disruptive,
shaving wholesale prices during those peak periods.
Though
growing rapidly, solar power still accounts for less than 1 percent of
American power generation, so the disruption has not yet been seen on a
large scale in the United States. But some utilities, fearful of losing
out as the power mix changes, have started attacking rules that encourage solar panels. Others are taking the opposite tack, jumping into the solar market themselves.
Nipping
at the heels of those utilities are fast-growing start-up companies
that are putting tens of thousands of panels on rooftops and leasing
them to homeowners for no money down, with Wall Street banks providing
the financing. The hot spot is California, which is aiming for 33
percent renewable power by 2020 and seems increasingly likely to get
there.
In
Germany, where solar panels supply 7 percent of power and wind turbines
about 10 percent, wholesale power prices have crashed during what were
once the most profitable times of day. “We were late entering into the
renewables market — possibly too late,” Peter Terium, chief executive of
the giant utility RWE, admitted this spring as he announced a $3.8
billion annual loss.
The
big German utilities are warning — or pleading, perhaps — that the
revolution cannot be allowed to go forward without them. And outside
experts say they may have a point.
The
Achilles’ heel of renewable power is that it is intermittent, so German
utilities have had to dial their conventional power plants up and down
rapidly to compensate. The plants are not necessarily profitable when
operated this way, and the utilities have been threatening to shut down
facilities that some analysts say the country needs as backup.
The
situation is further complicated by the government’s determination to
get rid of Germany’s nuclear power stations over the next decade, the
culmination of a long battle that reached its peak after the 2011
Fukushima disaster in Japan. As that plan unfolds, shutting down a
source of low-emission power, Germany’s notable success in cutting
greenhouse gases has stalled.
In
fact, the problems with the Energiewende (pronounced in-ur-GEE-vend-uh)
have multiplied so rapidly in the past couple of years that the
government is now trying to slow down the transition. “I think we need a
little bit of time,” said Jochen Flasbarth, a deputy minister of the
environment.
But
the German public is not taking that well. Marching down a Berlin
street with thousands of other protesters one recent day, Reinhard
Christiansen, the head of a small company focused on renewable energy in
the town of Ellhöft, said, “We are afraid they are trying to put the
brakes on the energy transformation.”
A visit to the Aller-Leine-Tal, one of
many energy cooperatives that have contributed to the success so far of
Germany’s Energiewende, or energy transition.
Technological Innovation
As
renewable energy sources start to cause gyrations in power supplies and
prices, experts contend that clever new market rules could keep the
costs reasonable.
Some
of the innovations they recommend are already in use to some extent —
pioneered in the United States, with Germany avidly studying them. They
include regular payments to persuade utilities to keep some fossil-fuel
power plants on standby for times when renewable sources lag.
“It’s
like a retainer you pay your lawyer to keep her around in case you need
her,” said Jay Apt, an electricity expert at Carnegie Mellon
University.
But the larger innovations are likely to focus on how people use electricity, rather than on how it is supplied.
Techniques
to manage demand have been in limited use for decades, but new
technologies are enabling a far more ambitious approach. Apple and
Google, for instance, are investing billions
in businesses designed to capitalize on the new opportunities, such as
by helping homeowners manage their power use with devices like digital
thermostats.
Electricity
prices, instead of being averaged over a month, could theoretically
vary in real time, at least for willing customers. Price spikes would
encourage conservation. Conversely, smart chips built into appliances
like dishwashers or water heaters could switch the devices on when power
was plentiful and prices low. American tests of this approach have been
promising.
Other
methods could help, too. More high-voltage power lines could link wind
farms and solar panels in disparate locations, smoothing out the
variations. This is politically difficult, but some such lines are being
built in both the United States and Germany.
For
Germans, the unpredictability of onshore renewable power explains the
appeal of offshore wind. The stiff, steady breezes in the North Sea and
the Baltic Sea mean that turbines built there will produce far more
power than land turbines.
That
is why three utilities have virtually seized control of the tiny resort
island of Heligoland, renting out one hotel for 10 years straight. It
is the most convenient body of land to use as an operations base for the
huge wind farms they are installing, with long-range plans to go as far
as 125 miles offshore.
The
streets of the island are thronged with well-paid workers. “Really, all
areas on Heligoland are profiting,” declared Eike Walenda, the manager
of a local outfitter and fueling station.
The
costs of building in the sea are far higher than on land, of course.
The price tag of up to $30 million per turbine is not just for the
machine itself, but also for power cables, installation and many other
items. To induce utilities to go forward, the government has had to
guarantee them power prices of several times the market rate.
But,
just as with earlier forms of renewable technology, the Germans expect
the costs of harnessing offshore wind to drop sharply as the market
grows over the coming decade. If that happens, the United States could
be a big beneficiary. Studies have shown that offshore wind could supply
as much as 15 to 20 percent of the power needed by East Coast cities,
and construction is about to start on a handful of American projects.
For
now, the German offshore farms are adding billions to the costs
consumers are already bearing for solar panels, onshore wind turbines,
biogas plants and the rest of the transition to renewable energy. Polls
suggest it is a burden they are willing to carry.
“Indeed,
the German people are paying significant money,” said Markus
Steigenberger, an analyst at Agora, the think tank. “But in Germany, we
can afford this — we are a rich country. It’s a gift to the world.”
Follow Justin Gillis on Twitter: @JustinHGillis Erik Olsen contributed reporting from Berlin, Matthew L. Wald from New York, and Chris Cottrell from Heligoland, Germany.
Gut für Deutschland! Ich mag die Revolution.
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