Germany seeks to fix Merkel's mistakes

This month, Germany’s Bundestag approved legislation that promises the largest expansion of renewables in the country’s history.

This is a crucial step for the government’s 600-page ‘Easter Package’, which it agreed in April to reduce German reliance on Russian gas after the invasion of Ukraine. The Bundestag is the lower house of the German parliament, and the legislation still needs to pass through the upper house, the Bundesrat.

For Robert Habeck, Minister for Economic Affairs & Climate Action, this is not just about Putin's war. It is also a chance for Germany to fix failures in energy policy under the leadership of former chancellor Angela Merkel.

He said this month that “if we had pulled these packages through ten years ago, we would have been in a completely different position”. He argued Germany's energy transition has been too leisurely. This has compounded a couple of big missteps in the country's energy policy over the last ten years.

Merkel’s mistakes

First, the Merkel-led government's rejection of nuclear on safety grounds after Japan's Fukushima disaster in 2011 has stifled efforts to cut carbon emissions, even while wind and solar have growth to 64GW and 59GW respectively in 2021. This is because coal had to replace nuclear power plants, the last of which are set to be shut this year.

Second, German manufacturers have become too reliant on natural gas from Russia, which unions are warning is now putting entire industries at risk. This is forcing the country to restart more coal plants to boost supply and attempt to mitigate the pain of high power prices, which are being felt across Europe.

These are structural challenges that the Easter Package is seeking to address. Putin's invasion has not created these problems, but it has worsened them.

And it is not just homemade problems Germany is facing. It is also exporting a significant amount of electricity to France due to problems at several nuclear reactors, which is a further burden on Europe's electricity network.

In addition, growth in the wind and solar sectors in Germany has been sluggish since the introduction of competitive auctions in 2017. Moving to competitive auctions was an important step for the renewables industry, which could not keep relying on feed-in tariffs set by central government, but their botched introduction stifled development.

None of these Merkel-era problems are easy to fix. However, the government sees the Easter Package as an important step towards more energy security.

This includes plans to produce 80% of electricity used in Germany using renewables by 2030, up from 49% in the first six months of 2022; double installed onshore wind capacity to 115GW by 2030 with the addition of 10GW annually from 2025; and grow offshore wind to 30GW installed capacity by 2030, 30GW by 2035 and 70GW by 2045. The latter goal is included in amendments to the country’s Wind Energy at Sea Act.

Germany is also committing to triple solar power to 215GW by 2030 with an extra 22GW to be added annually from 2026; to set aside 2% of land for wind and solar farms by 2032 at the latest; and streamline the approval process for renewables so that its rollout is seen as an overriding public interest.

Turning point

This package has been welcomed by those in the renewables industry.

It represents a turning point in German wind, where average installations fell from 4.6GW annually between 2014 and 2017 to 1.7GW between 2018 and 2021. The prospect of more orders will also help turbine makers, particularly the Germany-exposed Enercon, and others in the supply chain.

Innovation in Germany could help the sector at large too. It is at the forefront of repowering in the wind sector, so this could open up ways to re-engineer ageing projects. It could also support innovation in the power-to-X sector.

Less positively, an uptick in renewables installations will put more pressure on a grid in dire need of upgrade; and the ‘2% land’ goal could be controversial.

But we should remember that wind is not the only tool at Germany’s disposal. Its government has been a prime mover in encouraging the European Union to label natural gas as ‘green’ temporarily to support the energy transition. The EU backed this move this month, and also applied a similar label to nuclear power – although the debate about nuclear still rages in Germany.

These problems are not easy to fix, but the wind industry hopes that the Easter Package represents a much-needed boost. It's about time.