Energiewende – the transition to carbon-free power generation as a challenge in market design
What’s at stake: Managing Germany’s highly ambitious plans for a transition to electricity generation from renewable sources will be a main task of the incoming German government. The aims for the “Energiewende” in the new coalition agreement are for renewable energy to account for 40-45% of energy consumption in 2025 and 55-60% in 2035. A key challenge will be to implement a new market design in the electricity market that allows a cost-effective integration of energy from renewable sources, as the current subsidy scheme is coming under increased pressure, both from domestic consumers and companies for its costs and from the European Commission for its compatibility with state aid regulations.
That’s amazing, the Germans actually have a word for what my survey is trying to find out about who should pay the cost of environmental protection. There is a lot to play for because German energy costs are the highest in Europe and are now starting to slow economic activity. America looks to have the industrial competitive advantage with Shale Gas. No wonder America hasn’t signed up for Kyoto!!!So far it looks like the German Taxpayer has been subsidizing industry through clean energy subsidies, but the money is drying up. Germany is now considering reinventing cheap Coal to balance the cost of expensive clean energy. But how can it still meet its ambitious 2025 and 2035 emissions targets, if its burning more Coal? Energiewende doesn’t seem to add up.
Please don’t forget my own “Energiewende” survey.