Lessons From Germany
What's happening in Germany's electricity business these days is giving us all a preview of big changes that could affect utilities and consumers in the rest of the world.
When it comes to energy policy, Germany's political, business and public opinion climate is considerably different than the prevailing attitudes in most nations, including the U.S. Even so, the evolution of the industry there in the past 30 years can be instructive to Americans.
In 1980, nuclear energy was the fastest-growing source of electricity generation in Germany, producing about 11 percent of the nation's requirement. But after the 1986 explosion at the Chernobyl nuclear plant in Ukraine, the German government in response to public pressure ordered a phase-out of nuclear power by 2022. The 2011 Fukushima nuclear disaster in Japan stepped up that phase-out when the German government ordered eight plants closed immediately and the remaining nine closed by 2022.
Meanwhile, Germany accelerated activity in the renewable energy business by offering guaranteed contracts and premium prices to suppliers, including retail consumers, and subsidizing local applications of renewable energy technology, all recovered by a surcharge on consumer electric bills. The move succeeded to the point where about 25 percent of the electricity generated in Germany today comes from renewable sources, primarily solar and wind energy, with a goal of 50 percent by 2030. German consumers by and large favor these advances and see the nation as a pioneer in both renewable energy deployment and in reducing carbon emissions (even though the emissions results are not yet certain). Pride in their progress helps consumers and businesses accept the high cost of electricity. A kilowatt-hour of electricity in Germany costs about three times what it costs in the U.S.
What does the scene in Germany illustrate? It shows that electric utilities everywhere must balance the demand for power with the capacity and resources to generate power. The abundance of solar- and wind-generated electricity in Germany on sunny or windy days — coupled with the increasing efficiency of appliances — has produced situations when traditional power plants fueled by natural gas, coal and nuclear energy have had to reduce production or shut down all together. Shutting down those big plants is not a simple matter.
"It's very difficult to power down a coal or nuclear unit," says Mike Burnette, chief operating officer for North Carolina Electric Membership Corp., a power supply cooperative owned by the state's electric co-ops. "You still have to have power available when the sun doesn't shine and the wind doesn't blow. Cycling these plants up and down can cause instability in the system, which could mean black-outs and brown- outs in some cases." He also points out that operating these plants at low capacity results in inefficient burning of fuel and can result in increased carbon emissions.
There have been times in Germany when the traditional electricity suppliers have had to pay other nations to take their excess power. When solar and wind generation feeds into the system, it takes priority, not only because that power can't easily be stored for later use, but also because it's less expensive than power produced at traditional plants. The excess needs to go somewhere.
"Batteries hold promise for storing power produced by renewables, but they aren't there yet," Burnette says. "Storage may be the next boom in Germany."
Solar-generated electricity is also growing in the U.S., including in North Carolina. Electric co-ops and other utilities across the country are incorporating solar and wind power as parts of their power supply mix. And increasingly, the suppliers are third party producers, ranging from rooftop installations to large solar and wind "farms."
"Solar and wind energy producers operate generating facilities just like utilities do," Burnette says. "If we purchase power from them, we purchase it on the wholesale level, just as we do from traditional suppliers."
And the bottom line is that the traditional "grid" as we know it — the "always-on" system of power plants, transmission facilities and distribution lines — must still be there and remain stable so that consumers have electricity when they flip on the switch, day and night, on windy days and calm days. Maintaining that grid — operating it, upgrading it, expanding it to new generation facilities — is a cost that everyone must bear.