The Future of German Energy Markets: The Battle between Fossil Fuels and Renewable Energies



INSIGHT INTO GERMANY’S ENERGY TRANSITION


We want to give the reader a brief overview of the prospects of Germany’s energy transition, in as far as national strategies in Germany’s energy transition can be identified at all.



1. THE ENERGY TRANSITION HAS BECOME EMBEDDED IN GERMAN SOCIETY…


With a growing sense for the environment, a German experiment of truly gigantic proportions began that was unknown in industrialized countries – on this scale. Germany decided to increase the production of renewable energies and to reduce the consumption of fossil fuels. Large energy companies like E.ON and RWE had to adapt to this new energy world.

This was in part a consequence of the nuclear disaster in Fukushima and the nuclear crisis in Chernobyl, which had a significant impact on large energy companies that were heavily dependent on fossil fuels such as coal and uranium for power generation. In Germany, it did not take long for the stock market shares of these listed companies to fall to historic lows, and the use of wind and solar parks has increased dramatically since then.


2. GERMAN ENERGY SCARCITY IS IN PART THE RESULT OF GOVERNMENT INCENTIVES.


Germany has coal deposits, and although anthracite coal has been mined in the western part of the country for more than a century, coal mining is no longer profitable. But lignite is still abundant and available in large quantities in eastern Germany. It was German environmental protection that set an end date for opencast coal mining in East Germany. This has to do with the fact that coal emits more CO2 than other fossil fuels such as natural gas.


3. NORDSTREAM 2: THE GEOPOLITICAL ALTERNATIVE TO GERMANY’S ENERGY DILEMMA.


The energy transition in Germany is based on the continuous supply of reliable, inexpensive energy to households and industry. This includes the import of LNG from Qatar and Texas, USA as well as the supply of Russian natural gas from the Russian Federation. Germany may have to decide to abandon the North Stream 2 project, even if it could be implemented. At present, Germany’s energy security depends to some extent on Russian energy exports. These energy exports are made through an extensive network of natural gas pipelines that stretch from Russia to Western Europe. Nordstream 2 would significantly increase supply capacities to Central Europe.


4. RENEWABLE ENERGIES TRUMP ALL OTHER FORMS OF ENERGY. THEY RELEGATE NUCLEAR ENERGY TO A DISTANT SECOND PLACE.


Different types of energy sources could balance the intermittent supply of solar and wind energy. To name just one example: France continues to supply electricity to Germany because France is not dependent on renewable energies.

Due to its northern latitude, Germany has a variable climate, which does not always allow a timely supply of renewable energy when industry and commerce need it most. At certain times, when the wind is not blowing and the sun is not shining, there can be an undersupply of renewable energy. This can be the case especially in winter.

A reliable and stable power supply has certain advantages. For example, French nuclear power plants can help to support the German power grid. This seems to be a long-term option and would offer the German energy transition a certain margin of error. 


5. RENEWABLE ENERGY SHOULD BE SEEN AS A COMPLEMENTARY FUEL SOURCE. RENEWABLES ADD TO THE EXISTING FUEL SUPPLY.


Municipal utilities are considering the use of geothermal energy, which should be made readily available in the northern part of the country. Geothermal energy can make its contribution to maintaining the grid frequency. This is a small contribution to the electricity grid. But it is another step towards energy independence. Geothermal energy and hydropower can reduce our dependence on weather-dependent renewable energy sources.


6. GERMANS DEPEND ON INDUSTRY AND EXPORTS. THIS WILL MAKE NORDSTREAM VERY ATTRACTIVE GIVEN GERMAN RELIANCE ON RENEWABLE ENERGY.


From today’s perspective, it is unlikely that Germany will change its dependence on renewable energy sources in favor of a more balanced energy supply. On the other hand, too great an effort has been made to build an industrial giant that exports goods to the rest of the world. Nobody wants to give up what was once considered the golden goose of the German economy, export.


Many thanks for the shared interest in the energy world!



Disclaimer:


This article is just meant to inform the reader of recent developments in the energy industry at large and to share knowledge and insights with a wider audience. The author does not put forth investment recommendations. This article should not be taken as investment advice and the author cannot be held to account for investments made. For more information, please refer to the Legal Disclosure and Privacy Policy, which you can click on or find at the top of this page in the menu bar. 


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