How expensive is an energy transition? A lesson from the German Energiewende

Abstract

The Paris climate agreement of December 2015 is generally considered a breakthrough on the way to a sustainable future for mankind. In particular, the agreement calls for fundamental transitions in the energy systems worldwide, since more than 80% of CO2 emissions stem from the use of fossil fuels in the energy supply. Considering such energy transitions, in any country there will certainly be technical issues, there will be debates as to which political instruments are most suitable, and others; but there is no doubt that the question of cost is one of the most crucial issues in the course of such a long-term project. After all, the expected financial burden on the national economy and its stakeholders is the most convincing argument for putting in energy transition off or for slowing it down. There is also no doubt that the German Energiewende, at first sight, does not serve as an encouraging example in this respect: The cost bill - in the sense of the direct, perceptible financial effects - has already run up to almost € 500 billion, and the German private households as well as many businesses pay significantly more for electricity than in most other OECD-countries. As a consequence, in Germany there is a growing opposition against going forward with the Energiewende as planned, and also in the international media, the initially positive image of the German project has suffered. A closer look at the costs of the German energy transition, however, reveals that around 75% of them are due to two particularities of the Energiewende that do not hold true for other energy transitions: the politically enforced nuclear phase-out and the fact that Germany massively expanded renewable energies at a time when they were still very expensive. Therefore, the real lesson of the German example is the opposite of what it may seem: The transition to renewable energies in the electricity sector in a highly industrialized country can be quite affordable.