“Yes, we can” – The «Energiewende» (energy transition) is taking shape

“Yes, We Can” was the slogan of young senator Barack Obama in the 2008 U.S. presidential campaign. These words of hope and vision for many who longed for a new beginning, after the eight year presidency of George W. Bush and his team of cynics and lobbyists such as Dick Cheney (CEO of the oil company Halliburton), Donald Rumsfield (CEO of the pharmaceutical company G. D. Searle & Company, later Monsanto) or John Ashcroft (on the board of directors of the security and military company Constellis) in the face of a growing social divide and ecological unreasonableness they fostered, two wars with heavy losses and the worst financial and economic crisis in 75 years. Obama’s firm belief and great hope was that America could always improve for the better, even in dark times. The “audacity of hope” was to define his eight-year presidency.

Globally, we have long experienced a fatal tension between an impending existential climate crisis and our growing, no less fundamental need for energy, which determines the prosperity of humanity and nothing less than the standard of life of each and every one of us. On the part of many economic and political institutions we still hear about financial and economic constraints that make major changes towards a climate-friendly and at the same time secure energy supply difficult. “How far can regenerative energies really go?”, “Is it technologically and economically possible and reasonable to switch our energy supply to them and satisfy our future energy demand in a climate-neutral way)”, they question skeptically.

“Yes, we can”, is meanwhile not only the answer of some eco-fundamentalists to these questions, but has been the official position of the German government since 2001, when the then red-green coalition initiated the «Energiewende», which was not only confirmed and expanded by the CDU-led government in 2011, but has meanwhile also attracted a great deal of international attention and imitation.

In 2020, the share of renewable energy in electricity generation worldwide meanwhile stands at more than one third. The most important source of renewable electrical energy worldwide is hydropower, which covers about 17% of the world’s electricity demand, wind energy provides about 6% of the electricity, photovoltaics 5%, biomass about 2%, and geothermal energy and other forms of renewable energy reach less than 1%. However, this also means that almost 70% of electrical energy is still produced by fossil fuels and nuclear power. However, the picture is quite different when new investments are considered. Today, well over 50% of the newly built capacities for electricity generation worldwide comprise renewable energy sources, and this in roughly equal shares in emerging and developing countries. Even if many do not even have it on the radar screen yet: The trend in recent years has been clearly towards a massive expansion of renewable energies.

Two headlines in the last few days are encouraging and point towards a continuation of this path towards renewable energies:

1. In the first half of 2020, the share of renewable energies accounted for the first time for more than 50 percent of the electricity consumption in Germany.
2. What was completely unthinkable just a few years ago: the German Bundestag has decided to phase out coal.

Both developments are interrelated. In the first half of the year coal-fired power generation declined by 40 percent year-on-year in Germany. One of the main reasons for this was the price of CO₂ emissions in the EU, which has remained stable at around €25 for the past 18 months, after having increased almost fivefold in the two previous years this increasing the price of coal-fired power production. Coal-fired electricity is thus becoming less and less profitable today. This makes it easy for the energy companies to give up their yearlong resistance to the coal phase-out, especially since the German government is sweetening their exit with substantial state aid. The lobby of the coal companies has done a great job, so that their clients are still earning a great deal of money with this exit. German coal companies are to receive more than four billion euros, in view of the market development probably more than double what they would actually be entitled to as compensation. This is because much lower revenues from electricity sales and the rising costs of CO₂ certificates mean that the prospects for coal-fired electricity are far less promising. Unfortunately, on the question, how this number has come about, the Federal Government provides no answer. As with the phasing out of nuclear power, ecological reason still has to be bought at great expense from the energy companies.

However, despite all (justified) criticism about the speed and the costs of the exit from coal, this development should indeed be very welcomed, especially as economic trends and political will act in combination here: regenerative energies are becoming increasingly cheaper and thus more competitive, which makes it easy for political decision-makers to demonstrate ecological reason, something they did not have before, when the costs of regenerative energies have been higher. Meanwhile, the electricity production costs of large-scale photovoltaic power plants, at 3.5-6 ct/kWh, are lower than those of lignite and hard coal (approx. 4.5-8 ct/kWh, 6.5 -10 ct/kWh), while for wind and water the costs are closing in on those of coal, at approx. 7.45-14 ct/kWh and approx. 6.5 ct/kWh, respectively

The potential of renewable energies has long been recognized by international financial investors, of whom one cannot say they invest their money following some idealistic principles. Meanwhile, they invest almost 300 billion dollars a year in renewable energies, be it wind or solar parks, new waterworks, biomass plants or geothermal energy. PV systems and (onshore) wind turbines account for the largest share of these investments. Private equity investors in particular (who in 2003, the then SPD leader Franz Münterfering still hailed as money-grabbing “locusts”) have discovered wind and solar parks as attractive return generators and are now investing more than one billion euros per year into “green energy”. According to industry veterans, growing technological efficiency, coupled with increasingly sophisticated financial structures to mitigate financial risks, make wind and solar portfolios an attractive investment proposition.

China is currently the largest investor in renewable energies and at the same time the world leader in the production and use of wind turbines, solar cells, and smart grid technologies. But the major Anglo-Saxon investment houses are also launching a significant investment initiative. In the USA, in this third year of the Trump presidency, in which renewable energies were hardly given much political attention, record investments were still made into these.  Conversely, in the two years after the self-declared coal fan Donald Trump took office, 50 coal-fired power plants had been announced for decommissioning. “The fate of coal is sealed, the market has spoken,” say the local energy experts.

Meanwhile, a complete decarbonization of the power supply by 2050 is no longer a question of technological feasibility, nor of economic profitability. With some political good will on top, there is nothing to stop the energy revolution that is so important for our climate.