The Effects of Re-Usable Green and Clean Energy on Germany and Its Economy

The Effects of Re-Usable Green and Clean Energy on Germany and Its Economy.

Introduction.

There is increased advocacy for the use of re-usable green and clean energy as an alternative to non-renewable energy sources and as a means of combating climate change (Heal 3). In Germany, environmentalists have been on the forefront in endorsing, publicizing and advocating for use of environmentally-friendly energy sources with great emphasis being placed on clean re-usable energy. However, German economists have stated that reliance on renewable energy exposes the German economy to energy instability due to the intermittency of such energy sources (for instance, wind power and solar power) and the insufficiency of their current storage technologies that cannot overcome the instances of intermittency. According to these economists, if complete decarbonization of the current German economy will necessitate the need for use of nuclear power and CSS (Carbon Capture and Storage) to maintain energy efficiency, and the use of these energy sources does have economic implications. Moreover, efficient and innovative energy storage technologies are still non-operational (Scheer 110).

Other economists support use of renewable energy due to their favorable projected market dynamics, easy incorporation into existing energy systems and their uncomplicated conformity into the matrix of energy economics (Scheer 117).

Energy Economics.

Energy and economy do interact to bring into being a new field termed energy economics. Since re-usable green and clean energy is considered as a source of energy, its effects are bound to have economic implications which are covered in energy economics.

Energy economics is a complex matrix that encompasses input from political sciences, energy engineering, ecology, economic realities and geology. In Germany, its energy economics encompasses the following concerns (Sickles 45):

1.      Sustainability of the current energy sources.

2.      The government climate policy with reference to global climate change.

3.      Environmental and energy policies.

4.      Analysis of the stability of current energy supplies, and energy elasticity.

5.      Current and forecasted demand for energy and energy derivatives.

6.      Current state of the energy market elasticity with reference to regulation, deregulation and market liberalization.

7.      Overall national economic growth.

Based on the above aspects of energy economics, Germany has prioritized its energy needs and supply dynamics vis-à-vis energy sources (Kitasei & Mastny 39). This has led the nation to create a viable renewable energy sector that has been able to generate over 20% of the total electricity output. This has led to increased investment in renewable energy thus making Germany a notable renewable energy economy. The commercialization of renewable energy has revealed the potential of the renewable energy market, with the major challenges being in the network capacities for power generation, transmission and storage. The government has taken interest in renewable energy due to its potential of creating employment, increasing industrial productivity, optimizing economic output and fostering innovativeness in the energy sector. This has led the government to re-orient its energy policy from the centralized demand and supply model to one that fosters energy efficiency. This new policy has enabled Germany to surpass the renewable electricity target set by the European Union (EU) (Preuß, Höhne & Stein 83).

Renewable Energy Sources.

Both the public and private sector have identifiable several viable renewable energy sources that are worth investing in as they do have a significant impact of the economy. Renewable energy is a collective term that describes a specially defined classification of sources of energy that are derived from continuously replenished resources such as wind, tidal waves, geothermal energy and rainfall. Renewable energy were initially harnessed in large-scale in order for them to be economically viable, but currently due to advancement of energy technologies, clean energy can be produced in small-scale facilities and still remain economically viable (Baietti, Shlyakhtenko, La Rocca & Patel 131).

The individual sources of re-usable green and clean energy are discussed hereafter in reference to their impact on the German economy.

1.      Wind Power. 

Wind power has been identified as a viable renewable energy sources by several major players in the private sector such as Siemens, Enercon, Repower, Nordex and Fuhrländer. The energy producing unit of a wind power plant is the wind turbine which requires airflow to operate. Thus, wind farms must be located in areas which have constant airflows such as high altitudes and offshore locations. Offshore locations have airflow rates that are almost double the rates in the mainland. Hence, in Germany, the preferred locations are situated in the North Sea and the surrounding areas. A utility-scale wind turbine has a capacity of producing 600-5000 Kilowatts (kW). These two abovementioned capacity factors influence the total amount of energy that can harvested from wind energy. However, the cost of setting up offshore wind farms is substantially greater than the cost of setting these wind farms in the mainland. This explains why the government still prefers to build wind farms on the mainland (Witzel &‎ Seifried 197).

Currently, over 22,000 wind turbines have been built in the federal area with more projected to be built in the coming years. On the whole, Germany is estimated to have an installed capacity of over 30,000 Megawatts of wind power, which contributes a total of about 10 % of the total electricity output (Stolten & Scherer 75).

Private energy-producing firms have placed a particular emphasis on offshore wind farms in order to maximize their revenues, create employment opportunities, optimize their capacity for energy generation and test their novel inventions and innovations. The government also considers offshore wind farms as a prudent investment opportunity, but it is currently focused on building wind power plants in Germany. This is based on cost-benefit analysis feasibility studies (Baietti, Shlyakhtenko, La Rocca & Patel 173).

The major challenge facing wind power generation is insufficient network capacities which constrain power transmission from the North Sea to the industrial heartland of the nation (Siebert 41).

2.      Solar Power.

Energy derived from the sun does contribute about 3% of the total industrial electrical energy output. The solar energy reaches earth as radiation energy which can be used to heat engines (utilized as concentrated solar power) or generate electricity directly by striking photovoltaic cells (in solar panels). German solar technologies have been classified as either active or passive depending on the way they capture, transduce and utilize solar energy. Most passive technologies are being used by private firms while the government concentrates mainly on active solar technologies. Active solar technologies involve solar thermal collectors and photovoltaic panels to collect and harness the solar radiation. Thus, solar parks have to be established in order to generate commercially viable electrical energy. Such parks are built in areas with adequate sunshine, and thus the land used is unavailable for other economic activities. Hence, before a site is selected for installation of solar parks, it must be evaluated for its economic potential and the probability of using alternative energy supplies. There are several solar parks in the country, for example the Erlasee Solar Park (Scherer 37).

            Currently, the installed cumulative solar power exceeds 30 Gigawatts (GW), comparable to the energy produced by about 20 nuclear power plants. Most of it this solar energy is derived from photovoltaic panels installed in individual homes. Hence, solar power can provide over 50% of electricity needed for domestic purposes nationwide. Current market analyses forecast increased use of solar electricity and decrease in the cost of installation, thus making it a viable renewable energy source. Moreover, solar energy can be captured and harnessed as solar fuel in automobiles and industries (Scherer 59).

The economic viability of the solar energy market is illustrated by facts that it has reduced the cost of producing electricity while concurrently creating employment in the burgeoning solar industry (Brown & Sovacool 127).

3.      Geothermal Power.

There is a geothermal power plant situated at Neustadt-Glewe in the North of Germany. Geothermal power is derived from thermal energy which is stored deep in the earth. The geothermal gradient maintains continuous conduction of the thermal energy though rocks from the core of the earth to the surface. Geothermal energy can be collected at specific locations on the surface of the earth (Witzel &‎ Seifried 114).

In specific locations, geothermal energy does heat underground water which later emerges through fissures as hot springs which can drive turbines to generate electricity. The government has enacted laws to benefit generation of electricity from geothermal sources. These laws do guarantee a feed-in tariff scheme; and, this has led to the construction of new geothermal power plants with some of them becoming operational (Mendon 96).

4.      Hydroelectricity.

Water is considerably denser than air, thus a slow flowing water stream could produce considerable energy. However, water energy can be collected at specific sites only. This energy can be harnessed as hydro-electric energy or micro-hydro systems (Witzel &‎ Seifried 54). In Germany, the installed capacity exceeds 5 GW, thus contributing over 3.5% of the total industrial electrical energy output.  The economic turnover of the hydropower sector is estimated to be about €1.23 billion. Moreover, the sector has created employment opportunities for over 9,000 people (Jordan-Korte 43).

5.      Biomass.

According to statistics, both biofuels and biomass account for 70% of the total renewable energy and 30% of electricity generated from renewable energy sources in homes. However, its contribution to industrial or large-scale electricity generation is minimal.

Biomass is can be considered as a store of solar energy. It can be used as a source of energy if the energy extraction rate is less than the production rate (Witzel &‎ Seifried 112). This requires complex and intricate technologies that could enhance the efficiency of energy extraction. Such technologies are possessed by wealthy private German firms which can therefore produce energy from biomass. However, due to the high cost of installation and operation of biomass energy plants, they are not used commonly, with preference being given to biofuels and unprocessed biomass. Nonetheless, the bio-based economy does create employment opportunities, and it also promotes disposal of organic wastes in an economically-viable way. It is projected that the bio-based economy would double in value by 2017 (Sovacool 147).

6.      Biofuels.

Biofuels are derivatives of biomass. They exist in three forms: solid fuels, liquid fuels (such as bioalcohols and biodiesel) and biogases (such as landfill gases, synthetic gases and biogas) (Witzel &‎ Seifried 152).

Ethanol can undergo combustion, and as such it has been used as motor vehicle fuel and as gasoline additive. Bioethanol can also be used for similar purposes. Bioethanol is derived from starch crops and sugar, and this has created dilemma among policymakers regarding its place in the environmental, agricultural and economic policy frameworks (Witzel &‎ Seifried 157). Economists have argued that land used to grow crops for biofuels in Germany could have been put to better, economically-rewarding alternative uses. On the upside, several German companies have developed technologies that allow them to extract bioethanol from cellulosic biomass. The production costs of bioethanol are commensurate to the energy benefits (Brown & Sovacool 47).

Biodiesel is derived from animal fats and vegetable oils by the chemical process of trans-esterification. Recycled greases have also been used to produce biodiesel. The main use of biodiesel is as an additive to diesel. It can also be used as motor vehicle fuel. Biodiesel is more commonly used in Germany than bioethanol (Witzel &‎ Seifried 158).

The major setback against utilization of biofuels is that better (renewable energy sources) alternatives exist. Moreover, the EEA (European Environment Agency) has stated that biofuels do contribute to global warming by increasing the content of hydrocarbon combustion products in the atmosphere. However, Germany has enacted the biofuel quota act which aims to blend petroleum with biofuels by 2014 (Kitasei & Mastny 93).

Industry and Clean Energy.

One of the significant effects of re-usable green and clean energy on Germany and its economy has been the growth of the renewable energy sector as described below.

Germany has developed the most successful, efficient and innovative renewable energy sector in the globe. World-class wind power industries such as Siemens, Enercon, Repower, Nordex and Fuhrländer have established energy production plants in Germany, with some of the industries having their headquarters in German cities. Multinational solar power industries that have established bases in Germany include Conergy, SolarWorld and Q-Cells. The establishment of industrial plants by these companies has consolidated the German energy market while strengthening the overall German economy by stabilizing and securing energy supplies. This has enabled Germany to have a competitive edge in the international market especially against its sophisticated market competitors who include the US, China and Japan in the solar energy market, and the US, Spain and Denmark in the wind energy market (Jordan-Korte 55).

Statistics show that the clean energy sector does provide employment to about a million people. This number is projected to increase as the government strives for greater contribution of clean energy to the overall energy market (Lehr1& Lutz1 6).

The economic viability of clean energy has led large multinationals such as Siemens to create new portfolios that are focused on renewable energy. An example of such a portfolio is Siemens environmental solutions which generated about €27 billion in 2011, and is projected to generate €40 billion in 2015. Siemens has even downgraded its involvement in the nuclear industry with preference being paid to the adoption of green technology (Stolten, Detlef  & Scherer 87).

Energiewende.

Another significant effect of re-usable green and clean energy on Germany and its economy has been the adoption of a comprehensive energy policy termed Energiewende which is discussed below.

In 2010, policymakers within the German government decided to review the energy policy of the nation with particular emphasis placed in clean renewable energy, energy conservation and efficiency in energy usage. This necessitated the reorientation of the energy policy away from demand-supply market dynamics and a centralized energy production and distribution model to a policy that favors energy conservation, adequacy of energy generation(while concurrently minimizing overproduction) and efficiency in energy utilization. This policy was formulated and its documentation was complete by September 2010.  The policy was designated as Energiewende which can be translated into English as Energy transition. The legislature supported the adoption of the policy in 2011(Stolten, Detlef  & Scherer 111).

The basic precepts of Energiewende are reductions in greenhouse gas emission by over 80% by 2050, increased share of renewable energy to about 60% of the total energy by 2050, efficiency in electricity and energy consumption by 2050; and, increased commitment of resources to research and development of renewable energy sources (Stolten, Detlef  & Scherer 113).

Since the federal government embraced the Energiewende, there has been an expansion in the renewable energy sector due to the various incentives adopted, enacted and/or provided by the government to private commercial entities. For instance, tax and tariff benefits have increased investment in the geothermal sector. This is because a fixed feed-in tariff lasting for duration of 20 years does guarantee the potential energy producer of a fixed income within the same period.  Energy co-operatives were created and the federal government favored decentralization of market control and capital flows. This led to large energy industries to have an inordinately minor share of the clean energy market in comparison to their overall market value. Increased energy output from the clean energy sector has led to closure of several nuclear power plants with nine other operational plants being slated for closure before their planned time of decommissioning (Stolten, Detlef  & Scherer 121).

The IEA (International Energy Agency) has applauded Germany for the development, adoption and implementation of Energiewende because it has increased energy efficiency while concurrently reducing emission of greenhouse gases. According to IEA, Energiewende is founded on long-term energy investment consideration. Germany is a large nation that is centrally located in continental Europe with a large population, and a robust modern economy. This means that Germany has a stabilizing role in maintaining the existing European energy systems. Thus, further improvement of Energiewende is needed. These improvements would correspond to the national energy policy ambitions vis-à-vis the economy and its penetrance into the continental European energy systems. This would enable the Energiewende to strike a practical equilibrium between market competiveness, product affordability and energy sustainability (Stolten, Detlef  & Scherer 137).

Currently, German energy consumers have absorbed Energiewende-related costs, but there has been debates concerning the economic impacts of Energiewende as the renewable energy share of the market has increased simultaneously with increasing electricity costs. De-carbonization of the energy market requires public goodwill and this entails the stabilization of the retail energy market with the retail electricity costs remaining cheap. However, the current electricity costs in Germany are relatively expensive when compared to European standards despite cheap wholesale energy prices. This has led energy policymakers to favor large-scale commercialization of renewable energy (Stolten, Detlef  & Scherer 150).

Commercialization of renewable energy.

Another significant effect of re-usable green and clean energy on Germany and its economy has been the commercialization of renewable energy as discussed below.

The commercialization of renewable energy involves the utilization of energy technologies (Stolten, Detlef  & Scherer 41). These energy technologies can be chronologically classified as first, second and third generation technologies. First-generation renewable energy technologies are economically mature and possess a competitive edge in the energy market. Examples include biomass plants, solar panels, geothermal power and hydroelectric power. The second-generation energy technologies are ready for the market and as such are being deployed presently. Examples include special photovoltaic solar cells, solar thermal plants and utility wind power plants. Finally, the third-generation energy technologies are undergoing extensive research and development efforts that would mold them to be globally competitive. Examples include ocean tidal energy, advanced biomass gasification and the dry-rock geothermal power (Witzel &‎ Seifried 27 ).

Germany is one of the countries that have invested heavily on third-generation technologies. This can be attributed to the growth of the clean energy sector and governmental promotional incentives and policies. This enabled the German clean energy sector to weather the European financial crisis. Moreover, technological advancement has decreased the cost of producing clean energy due to the benefits of increased market competition and qualitative mass production. The government is currently strengthening the national grid-connected capacity in order to levelise the price of electrical energy which would in turn endear clean energy to the public (Stolten, Detlef  & Scherer 44).

Commercialization of clean energy was necessitated by the need to reduce environmental pollution, minimize climate change and avert energy insecurity. Such commercialization leads to the incorporation of large quantities of clean energy into energy supply portfolio thus reducing German’s dependency of fossil fuel whose supply is fraught with uncertainties such as Middle East politics, terrorism and economic sabotage through disruption of supply routes (Brown & Sovacool 15)

Commercialization of energy sources is significantly influenced by politics and public policy. Thus, in Germany the political leadership and government policymakers are responsible for balancing the market in order to ensure that there is fair competition so that new market entrants can showcase their novel technologies. This has led to an unprecedented level of technological advancement in the clean energy sector, which has increased the efficiency of energy production and utilization. Moreover, these energy technologies can also be used in related economic fields thus maximizing the economic output of Germany. Furthermore, green technology does minimize the rate of climate change, thus stabilizing agricultural output hence shielding the nation from the unpredictable fluctuation of food prices (Siebert 56).

For industries, clean energy has provided them with a dependable, cheap and efficacious alternative to fossil fuels. Moreover, it enables such companies to win acclaim from environmental groups and this in turn improves their market performance. This has led to the consolidation and expansion of the German industrial base (Siebert 65).

Conclusion.

Re-usable green and clean energy has been advocated by economists, industrialists and environmentalists alike as a better alternative to fossil fuels because they cause less pollution minimize climate change and avert energy insecurity. However, some economists do state that reliance on renewable energy exposes the German economy to energy instability due to the intermittency of such energy sources and the insufficiency of their current storage technologies. . The energy economics of Germany encompasses the following concerns: sustainability of the current energy sources, government climate policy with reference to global climate change, environmental and energy policies, energy elasticity, energy forecasts, state of energy markets and the national economic growth. The government has taken interest in renewable energy due to its potential of creating employment, increasing industrial productivity, optimizing economic output and fostering innovativeness in the energy sector. This encouraged the government to formulate, adopt and implement a comprehensive energy policy known as Energiewende which was applauded by the IEA for its energy efficiency and environmental-friendliness. The main re-usable green and clean energy sources in Germany are wind power which contributes a total of about 10 % of the total electricity output, solar power which contributes about 3% of the total industrial electrical energy output, geothermal power, hydropower, biomass and biofuels.

Private energy-producing firms have invested in clean energy in order to maximize their revenues, create employment opportunities, optimize their capacity for energy generation and test their novel inventions and innovations.

In summary, the significant effects of re-usable green and clean energy on Germany and its economy have been the growth of the renewable energy sector, adoption of Energiewende and the commercialization of renewable energy.

Works Cited.

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