IN DEPTH: Germany's new energy era

“The entire world is looking at this country,” says Sigmar Gabriel, as he sits beside Chancellor Angela Merkel in front of the German press.

“If this experiment goes wrong, then the failure of the Warsaw climate conference is the smallest problem we have in the world.”

The Social Democrats (SPD) leader and key partner in Germany’s new coalition government believes that if the national energy transition to renewables fails, no other country will attempt such a move, with potentially disastrous long-term consequences for the climate. It is the country’s “biggest technological, economic, social and ecological challenge since German unification [in 1990]”, he says.

Gabriel knows full well the difficulties he faces as the new “super minister” for economics and energy. He has to strike a fine balance: to keep soaring energy prices under control, to ensure that renewables have enough financial support — and to placate the energy-intensive heavy industries that are so vital to the German economy.

The coalition contract between Merkel’s Christian Democrats (CDU) and Gabriel’s SPD promises cuts to onshore wind, a downsizing of offshore ambition and the introduction of a cap on the country’s rapid build-up of renewables capacity.

Yet despite these efforts to reduce support, the German renewables industry seems far from despondent and some heavyweights in the sector are actually encouraged by Gabriel’s appointment.

As environment minister under Merkel’s first grand coalition with the SPD, from 2005-09, Gabriel built a reputation as a strong supporter of the renewables industry and a firm believer in the need for green energy.

At the time, the CDU (and particularly its Bavarian sister party, the Christian Social Union [CSU]) wanted to drop the previous SPD-Green coalition’s 2001 pledge to exit nuclear power. But Gabriel didn’t budge. Merkel had to wait until 2010, when the CDU entered into coalition with the Free Democrats (FDP), to reverse the policy — only to reinstate it a year later when the Fukushima disaster turned public opinion firmly against nuclear energy.

“As environment minister, Gabriel promoted the build-up of renewable energies very much,” says Fritz Brickwedde, the president of Germany’s renewable-energy federation, BEE. Although the BEE has criticised the coalition’s plans to cap the renewables expansion to 45% of electricity output by 2025, Brickwedde remains supportive of the SPD leader.

“I knew Sigmar Gabriel when he was state premier [for Lower Saxony from 1999-2003]. He understood the importance of wind energy early on,” Brickwedde says.

Another plus for Gabriel is his excellent standing with Merkel, who after her landslide election victory in September is more powerful than ever. Although Merkel says she would have preferred to continue the centre-right coalition with the FDP, it is no secret in Berlin that she actually gets along much better with Gabriel’s SPD. She respects Gabriel as a tough but fair negotiator from the coalition talks and the previous grand coalition.

Until Gabriel took up his post, responsibility for energy had been shared between CDU environment minister Peter Altmaier and FDP economics minister Philipp Rösler, who constantly torpedoed Altmaier’s plans.

As well as heading the new “super ministry” of economics and energy, Gabriel will be vice-chancellor, making him the nation’s second-most-powerful politician. This will guarantee renewable energy a prominent place on the government’s agenda.

The power of Gabriel’s new ministry, Merkel’s backing, the absence of the FDP, and the new government’s massive majority of almost 80% of seats in the Bundestag, should ensure a stable energy policy over the next four years. That will be a relief after the upheavals of 2013, when Rösler and Altmaier lobbied for retroactive cuts to renewables support, and the FDP campaigned against the feed-in tariff (FIT) system and for a moratorium on new wind and solar plants.

Stability is particularly vital for offshore wind, where project costs often exceed €1.5bn ($2bn). The new coalition has agreed to cut Germany’s offshore ambitions from 10GW to 6.5GW by 2020. But the industry hadn’t really expected to be able to install more than 7GW anyway, and it also got a two-year extension of the current, favourable “compression model” for offshore FITs it had demanded.

“Offshore wind energy hadn’t advanced as planned in Germany due to investment insecurity,” says Andreas Nauen, chief executive at REpower, which has already erected more than 100 offshore turbines globally. “With the adapted expansion targets, politics is finally setting achievable goals.”

The extension of the FIT model until the end of the decade gives the offshore sector the certainty it needs to embark on further innovation and industrialisation that will push prices down over the long term.

The onshore wind sector, however, is nervous.

In their coalition contract, the CDU/CSU and SPD have determined that onshore FITs will be cut, mostly at strong-wind locations where support may have been on the high side. But they haven’t revealed by how much. At the same time, Merkel says the new government wants to grant privileges to good wind sites over “not-so-good locations”, but without clarifying what those might be.

For some time now, manufacturers and developers have been betting on an expansion of onshore wind in moderate- and low-wind sites in southern Germany, which has so far been a wind-power laggard. If support for those locations is cut too much, the inland expansion could be brought to a halt.

The exact size of cuts will be determined in a reform of Germany’s renewable energy act, EEG, which the government wants to bring to parliament by Easter and get approved before the summer recess. Given the complexity of the legislation, that is a highly ambitious schedule.

Sylvia Pilarsky-Grosch, president of Germany’s wind-energy federation, BWE, fears that plans to cut the onshore FIT will massively limit the build-up of onshore wind capacity and thus end the energy transition, or Energiewende.

Although the BWE represents 3,000 wind companies, when asked individually, some of the major players in the industry are less gloomy. According to Andreas von Bobart, GE’s general manager for renewable energy in Germany, there is a “fair chance that low-wind sites will be promoted and still be feasible”.

Wind turbine maker Nordex tells Recharge it believes that onshore wind will continue to be one of the pillars of the Energiewende, and points out that it is the cheapest way to produce green electricity.

“It’s important that the EEG reform will be brought to the market with care in order to safeguard investment security,” an official says.

After steep cuts to FITs in a 2012 reform, the solar sector faces no big further changes, but the coalition wants homeowners with grid-connected rooftop PV installations to share in the rising costs of the network infrastructure, a measure the solar association BSW-Solar rejects.

The BSW would also have liked the government to increase its annual cap of 3.5GW of new PV. But 3.5GW would still mean one of the fastest solar build-ups in the world, and BSW general manager Carsten Körnig acknowledges that the coalition contract assigns a fundamental role to solar.

Gabriel has in the past spoken of the Energiewende as a “third industrial revolution”, Körnig says. “Now he can push ahead with this vision.”

Further complicating Gabriel’s task is the powerful coal lobby within the SPD and parts of the CDU. And he also needs to appease heavy industries that want to keep their exemptions to the renewables surcharge on power bills — a payment made by consumers to help fund green energy.

The coalition contract states that exemptions should only be given to energy-intensive business that are exposed to international competition, such as steel and chemicals. However, the EU is probing these exemptions and may rule that they are illegal state subsidies.

The Energiewende has to be socially and economically compatible, Gabriel warns, otherwise it could become a burden on the population and lead to a “dramatic damage of Germany as an industrial and economic location”.

So it is clear that the minister has a difficult task ahead of him.

But given Merkel’s backing, his assertive nature and past credentials in renewables, he may just be the right man for the job.