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Saturday, Dec. 24, 2011

News photo
Wolfgang Blatz (center), a political news editor of the daily Die Rheinpfalz, speaks while two other journalists from Germany — Georg Blaha (left) of Boersen-Zeitung and Horst Klaeuser of Westdeutscher Rundfunk — look on during the Nov. 18 symposium at Keidanren Kaikan in Tokyo. SATOKO KAWASAKI PHOTOS


Germany looks to overcome energy challenges after shift from nuclear

Europe's largest economy also faces difficult eurozone sovereign debt crisis that threatens to derail its own strong performance

Staff writer

Japan's nuclear plant crisis triggered by the March 11 catastrophe led to a major change in Germany's energy policy this year. While the future course of Japan's own energy policy remains unclear, many Germans see more opportunities than risk out of their government's decision to phase out nuclear power.

News photo
Yoshimichi Momose

Despite the relatively solid performance of its own economy, Germany as Europe's largest economy has also been rocked by the region's continuing debt crisis. But Germany will stay the course as a key eurozone economy to support the faltering currency union.

These were among the views expressed by veteran journalists from Germany who took part in a Nov. 18 symposium organized in Tokyo by the Keizai Koho Center and Robert Bosch Stiftung to discuss policy challenges confronting Europe and Germany. Yoshimichi Momose, a news commentator for NHK, served as moderator of the discussions.

When the massive earthquake and tsunami in Japan triggered what was later determined to be core meltdowns at Tokyo Electric Power Co.'s Fukushima No.?1 nuclear power plant in March, Germany was quick to respond by reviewing its own policy on nuclear power, said Wolfgang Blatz, political news editor of the daily Die Rheinpfalz.

It was just a few days after the Fukushima crisis unfolded that German Chancellor Angela Merkel said the belief that risk from nuclear energy was controllable had been shaken by the serious accident that took place in a highly industrialized country like Japan.

After tentatively shutting down seven aging nuclear plants in March, Germany in late May made a formal decision to phase out nuclear power generation in the country by 2022.

That was a big turnaround from a decision made by the same government just several months earlier to extend the lifetime of the country's 17 nuclear reactors by an average of 12 years. At that time, the government's position was to keep using nuclear power — which accounted for about 22 percent of the country's electricity — as a source of energy in transition until the energy supply from renewable sources like wind and solar came into full swing, Blatz explained.

One key feature of the decision, Blatz noted, is that it did not involve changing Germany's existing target of having renewable energy account for 35 percent of the nation's power demand by 2020 — which in theory means that there can be a supply-demand gap if nothing is done.

It has been explained that the 35 percent target in itself is already highly ambitious and that increasing the projected share of renewable energy further would be too costly, he said.

As of 2010, the renewable energy supply reached 17 percent of Germany's electricity generation and topped 20 percent for the first time in the first half of 2011, Blatz said.

One of the challenges confronting Germany's energy policy is the aging of many of its coal and thermal power plants, but construction of new thermal power plants is hotly debated due to concerns about global warming, Blatz said. The use of more thermal power plants may require so-called carbon capture and storage operations to deal with the carbon dioxide emissions from those facilities, but that will also involve many difficulties, he added.

Natural gas-powered plants are gaining attention as another source to bridge the gap before a full-scale shift to renewable energy, Blatz said. However, there are warnings that too much reliance on natural gas — which needs to be imported, particularly from Russia in massive volumes — will result in excessive dependence on foreign energy sources, he said.

On increasing the share of renewable energy, a major hurdle will be increasing the high-voltage electricity transmission network, which in itself will involve tough negotiations with residents in the prospective sites of those power grids, Blatz said.

One of the most promising renewable energy sources in Germany, according to Blatz, is offshore wind power generation in the North and the Baltic seas. However, power generated there has to be transmitted to the central and southern parts of Germany, home to much of the country's industrial sectors, he said.

Existing power transmission networks will not be sufficient to cover an increased supply from the northern areas and construction of new networks will take years — and is expected to meet strong opposition from residents along the prospective routes concerned about damage to the landscape and possible health issues, Blatz said.

One estimate shows that Germany needs to build new power transmission networks stretching as long as 3,700 km if the planned shift to renewable energy, including offshore wind power generation, is to be realized, according to Blatz. Some critics say construction of extensive offshore wind power facilities and such a vast network of new power grids will be unrealistic, suggesting instead that existing wind power turbines be replaced with more efficient new facilities and built closer to where the power will be consumed, Blatz said.

Blatz noted that cooperation among European Union member economies on energy policy remains insufficient, and large-volume transmission of electricity across national borders to supply surplus power from one country to another is difficult. This is because major utility firms in each country have protected their own domestic markets from cross-border competition and the region's market integration has so far been put on the back burner in the area of power supply, although the European Commission is trying to move fast to change the situation, he said.

Consensus is still elusive among EU countries on how far to push for the use of renewable energy, with some members more skeptical than others on the new energy sources, he pointed out. Poland, for example, relies on coal and thermal power plants for 90 percent of its electricity demand and, as part of its response to global warming, is planning to build two nuclear power reactors at sites about 200 km from its border with Germany, he noted.

An important element to the shift in energy policy will be greater energy-saving efforts, but there will be limits to what Germany alone can do, Blatz said. For example, tightening energy-saving regulations on electric appliances does not make much sense unless it's applied to the whole EU market as a common standard, he said.

Aside from these hurdles, debates continue within Germany on what the energy policy shift will ultimately cost the Germany economy, Blatz said. However, the situation of energy market in the country is no longer what it was before the Fukushima accident in Japan, he added.

E.ON AG, one of the major German utility firms, has announced plans to cut thousands of jobs in the coming years to deal with the fall in earnings. Share prices of major power suppliers fell after the operation at several nuclear power plants were suspended.

One of the reasons for the plight of the big utilities is that large numbers of consumers are terminating contracts with the major firms and choosing to buy electricity from eco-friendly power suppliers, Blatz said. And the major utilities themselves are partly responsible for the current situation because these firms, which account for about two-thirds of power supply in Germany, have neglected to invest much in renewable sources, he noted.

Meanwhile, major firms from other sectors, such as insurance companies, are increasing investments in renewable energy, Blatz said. Given that the renewable energy law implemented just before the turn of the century guarantees fixed prices for electricity generated by such sources, this is increasingly seen as a stable business in an era of continuing financial uncertainty, he pointed out.

Blatz said that overall, "because the Fukushima incident was such a big shock" to most Germans, the country is not expected to waver from its decision to phase out nuclear energy.

At the same time, the change in energy policy is not something that can be easily achieved, and the major question is whether the German society is ready to accept compromises, including on the issue of building new power transmission networks, he said.

Still, Blatz said he believes — and various opinion polls seem to suggest — that many Germans, including those in the business sectors, see more opportunities than risks in the country's energy policy shift.

What was previously considered a niche market of new energy technologies including the so-called smart grid is rapidly gaining importance, and there is a growing view that German companies, by providing "made in Germany" solutions to such problems as resource scarcity and climate change, can turn the challenges into benefits, Blatz said.

While Japan has been hit by the impact of the March 11 disasters this year, Germany was rocked by the continuing eurozone debt crisis. While its own economic performance remains strong, Germany alone cannot support all the other eurozone economies, said Georg Blaha, financial market editor of the Frankfurt-based financial daily Boersen-Zeitung.

Today, Germany is seen as the only country in Europe whose economic machinery is functioning, Blaha said. The main reason is that its "old economy" sectors such as machinery manufacturing, plant maintenance, electric appliances and chemicals — industries that were not considered as "sexy" when service and financial sectors were flourishing worldwide — are thriving, he said.

The "conservative" industrial structure of the nation — whose exports account for 38 percent of its gross domestic product — has helped the country due to growing demand from emerging markets, he noted.

The "sick man of Europe" 10 years ago is now effectively considered the "lender of last resort" with its guarantees to the European Financial Stability Facility, the eurozone rescue fund, increased to ?211 billion in September, Blaha said. However, Germany cannot afford to support all other eurozone members in trouble, he said.

Blaha noted that the German economy has so far weathered the eurozone debt crisis in a fairly good shape, with relatively stable conditions of its corporate sectors and fiscal health. However, the optimism that still prevails over the nation's economy very much depends on the assumption that the region's crisis will not get out of control further, he said.

One estimate shows that if Germany is to shoulder all of the eurozone sovereign debt, its debt-to-GDP ratio will shoot up from the current 84 percent to 314 percent — hardly a sustainable level, Blaha noted.

In the ongoing crisis, what might have been contained as a problem within individual economies such as Greece and Ireland, quickly spread across the region because of the common currency, he said.

And while Germans largely supported the introduction of the euro in the first place, there are divergent opinions within the country as to whether the common currency is entirely beneficial for Germany, he said.

Germany has benefited from increased exports to other eurozone countries, but those are the nations that are currently in the middle of the crisis and needing the region's support, he noted.

But despite the skepticism within Germany toward the euro currency or the European Union itself, it will be out of the question that the country will entertain the idea of pulling out from the currency union, Blaha said.

Horst Klaeuser, a senior reporter with the public broadcaster Westdeutscher Rundfunk, also said such an option is "politically unthinkable." There will be no country other than Germany to support the common currency, and a German pullout from the eurozone will spell the bankruptcy of the whole region and throw in doubt the whole process of European integration that has gone on for decades.

Blaha also said that even the option of some of the troubled economies like Greece leaving the eurozone will be unrealistic. Even though opinions surface within Germany to "kick out" the troubled economies from the currency union, a eurozone member leaving the union is considered merely an academic option that would be virtually impossible given the enormous cost such a move would entail, he said.

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