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Drawing Lessons and Lines from the German “Energiewende Paradox”

November 14, 2017

As Chancellor Merkel was continuing to forge a coalition government following the September elections, Germans overall remained strongly supportive of the goal of Energiewende, or energy transition. An August 2017 poll found “95 percent of Germans support further expanding renewable energy” [1]. Still, in Germany and abroad, Energiewende faces criticism for not delivering enough greenhouse gas emission reductions for the given level of investments [2].

Much of this criticism is legitimate, while some is misleading. A pro-nuclear “ecomodernist” political advocacy group based in Berkeley, CA called “Environmental Progress” has published on their website an alarming line chart – reproduced below in the left box of Figure 1 – showing a straight-line increase in German greenhouse emissions from 2009 to 2016. Along with the chart appears the associated claim by Environmental Progress: “German emissions have been rising since 2009” [3]. But this graphic and claim are prime examples of statistical sloppiness, and are misleading at best. What does the data really say? Aside from pedantry about line graphs, what does the empirical evidence reveal about general lessons on holistic energy policy?

(Image: A cautionary example of how not to present time-series data. Your supposed “trendline” is probably not statistically robust if shifting the starting point by one year backward or forward makes your graph go in the opposite direction – and even with greater magnitudes! (Original plot shown in black border). Source: Environmental Progress)

(Image: A cautionary example of how not to present time-series data. Your supposed “trendline” is probably not statistically robust if shifting the starting point by one year backward or forward makes your graph go in the opposite direction – and even with greater magnitudes! (Original plot shown in black border). Source: Environmental Progress)

Using 2009 as the baseline year for comparison should raise a red flag for anyone remotely familiar with economic history. The Great Recession caused severe GDP declines, crushed financial markets, and led to substantial human suffering, including being associated with at least ten thousand “economic suicides” in Europe and North America [5]. Figure 2 clearly illustrates that 2009 was not any conventional year, and comparisons to 2009 alone are likely suspect. In particular, 2009 was the only year out of the past decade when German real GDP saw negative annual growth.

(Image: If claim energy statistics claims hinge on a year (2009) when macroeconomic variables are in a funny-looking dip, it might be a good idea to figure out what happened during that year – rather than draw a two-point line using this data point. Source: St. Louis Fed)

(Image: If claim energy statistics claims hinge on a year (2009) when macroeconomic variables are in a funny-looking dip, it might be a good idea to figure out what happened during that year – rather than draw a two-point line using this data point. Source: St. Louis Fed)

Figure 3 shows the actual data series of German emissions according to Agora Energiewende (the same source that Environmental Progress consulted) – there has been a clear declining trend since 1990 levels. Since around 2009, the data in no way shows any statistically robust increasing trend implied by the misleading Environmental Progress graph. In fact, for Germany to have continued its GDP growth while keeping emissions steady or slightly declining means that the country has consistently decoupled economic growth from energy-related pollution. At the same time, the economic uniqueness of 2009 as a data point highlights the still-strong correlation between economic growth and energy consumption – this precisely highlights the importance of energy efficiency in reaching climate mitigation goals. End consumers respond to policies and prices, and the power of the demand side should not be ignored.

(Image: Germany's economy-wide emissions. Source: Agora-Energiewende)(Image: Germany's economy-wide emissions. Source: Agora-Energiewende)

Figure 4 further shows the electric power sector emissions breakdown in Germany, which only account for about a third of total emissions. This fact underscores the importance of energy efficiency in other sectors. While power sector emissions decreased consistently (if perhaps slowly) in recent years as Germany’s economy grew, “the results of climate protection are nowhere to be found the industrial, heating and transportation sectors” according to Patrick Graichen, director of Agora Energiewende [8]. Greater emphasis on these other sectors may prove crucial: the atmosphere does not care whether carbon dioxide molecules originate from power generation or from home heating. On the other hand, the seeming difficulty in consistent progress in these other sectors may suggest advantages in achieving “environmentally-beneficial electrification” [9]. In general, emissions mitigation in the power sector can come from switching between entirely different fuel sources; this may be an advantage compared to emission reductions elsewhere, which must rely on incremental efficiency gains upon the same underlying technology. For example, improving the fuel efficiency of a natural gas-fired boiler used for home heating may be harder than switching over to an electricity-based heat pump [10]. (Image: Germany's power sector emissions. Source: Agora-Energiewende)(Image: Germany's power sector emissions. Source: Agora-Energiewende)

Finally, Figure 5 demonstrates Germany’s moderate but noteworthy success in reducing electricity consumption via energy efficiency. In fact, recent years have seen a rise in net electricity exports to other European countries, coinciding with steadily declining wholesale electricity prices seen in Figure 6 (due to the influx of zero marginal cost renewables). In other words, Germany has been able to decrease emissions overall while supplying an increasing share of electrical energy exports to other countries. To the extent that almost 9% of German electric generation is exported, small yearly fluctuations in emission levels are not entirely the “fault” of Germany’s policies. To the extent that the low marginal cost renewables in Germany are displacing costlier and dirtier electricity generation in neighboring European grid system, Germany’s Energiewende is actually creating beneficial spillover effects on climate mitigation in other countries. These positive spillover effects are not easily captured by simple national-level emissions accounting, and definitely not by naïve line-drawing.
(Image: Germany's electricity generation and consumption. Source: Agora-Energiewende)(Image: Germany's electricity generation and consumption. Source: Agora-Energiewende)

In conclusion, critically examining the anti-Energiewende website’s misleading graph and claim leads to some data-driven policy recommendations, which extend to jurisdictions beyond Germany. First, there must be a focus on efficiency in energy demand, and not only generation. Second, reducing emissions in sectors other than electric power (transportation, industrial, heating) is critical; if these reductions prove too difficult, jurisdictions should work on electrifying these other sectors. Third, exporting clean energy that displaces neighbors’ dirty energy contributes to global climate mitigation, but the benefits of such trading activity are not directly awarded by simple greenhouse gas accounting. Conversely, exporting dirty energy (e.g. coal and LNG exports by the USA) which displaces other, cleaner sources would marginally increase emissions; however, standard emissions metrics do not penalize upstream suppliers for this effect. Policymakers should incorporate international trade effects when assessing energy policies.

(Image: Spot Physical Electricity Index (Phelix) baseload prices for German/Austrian market area on the European Energy Exchange (EEX). Source: BWMI-Energiewende)(Image: Spot Physical Electricity Index (Phelix) baseload prices for German/Austrian market area on the European Energy Exchange (EEX). Source: BWMI-Energiewende)

 

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  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

[1] https://www.cleanenergywire.org/factsheets/polls-reveal-citizens-support-energiewende

[2] https://www.nytimes.com/2017/10/07/business/energy-environment/german-renewable-energy.html

[3] http://environmentalprogress.org/germany/

[4] http://environmentalprogress.org/big-news/2017/1/13/breaking-german-emissions-increase-in-2016-for-second-year-in-a-row-due-to-nuclear-closure

[5] https://www.ncbi.nlm.nih.gov/pubmed/24925987

[6] https://www.stlouisfed.org/on-the-economy/2017/february/unemployment-rate-dynamics-us-europe

[7] https://www.agora-energiewende.de/fileadmin/Projekte/2017/Jahresauswertung_2016/Die_Energiewende_im_Stromsektor_2016_EN.pdf

[8] https://www.agora-energiewende.de/en/press/agoranews/news-detail/news/coal-power-is-on-the-decline-yet-emissions-have-increased-2016-was-a-year-of-mixed-success/News/detail/

[9] http://www.sciencedirect.com/science/article/pii/S1040619016301075

[10] https://www.bmwi-energiewende.de/EWD/Redaktion/EN/Newsletter/2015/09/Meldung/infografik-heizsysteme.html

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