German energy transition (Energiewende) and what politicians can learn for environmental and climate policy

Rudolf Rechsteiner

doi:10.1007/s10098-020-01939-3

Abstract

The German Energiewende (energy transition) started with price guarantees for avoidance activities and later turned to premiums and tenders. Dynamic efficiency was a core concept of this environmental policy. Out of multiple technologies wind and solar power—which were considered too expensive at the time—turned out to be cheaper than the use of oil, coal, gas or nuclear energy for power generation, even without considering externalities. The German minimum price policy opened doors in a competitive way, creating millions of new generators and increasing the number of market participants in the power sector. The fact that these new generators are distributed, non-synchronous and weather-dependent has caused contentious discussions and specific challenges. This paper discusses these aspects in detail and outlines its impacts. It also describes Swiss regulations that successfully launched avoidance technologies or services and asks why exactly Pigou's neoclassical economic approach to the internalization of damage costs (externalities) has rarely worked in policy reality, while sector-specific innovations based on small surcharges have been more successful. Based on the model of feed-in tariffs, a concept for the introduction of low-carbon air traffic is briefly outlined.Graphic

Highlights

The continuous increase in greenhouse gases in the atmosphere is a cause for concern to many people engaged in environmental policy
The following essay is written by an economist who, as a member of national and cantonal Parliaments for 30 years (1988–2018), has tried to put economic instruments at the heart of environmental policy
Additional impacts can be expected from sector coupling where power delivery to electric vehicles, heat pumps or heat stores is structured in a supply-oriented way. All of these new designs may enable wind and solar power generators to increase their market value, while they serve as a cheap source of clean energy for their customers

Summary

Introduction

The continuous increase in greenhouse gases in the atmosphere is a cause for concern to many people engaged in environmental policy. From 1990 to 2020, solar photovoltaic (PV)2 and wind power generation changed from being two of the most expensive technologies to being the least expensive energy sources worldwide (Fig. 1). Even old, depreciated coal, gas or nuclear power plants can be undercut by new solar and wind farms’ low costs, expenses for storage, and included frequency control (BNEF 2020).

Results

Conclusion