Merkel’s Other Crisis Spurs German Quest for Energy Holy Grail

August 26, 2012 by  
Filed under Green Energy News

For Michael Specht, the solution to
Germany’s future energy needs lies in a rectangular framework of
steel pipes and valves the size of a VW campervan parked on the
outskirts of Stuttgart.

“We’ll need this technology if we want to make Germany’s
energy switch a success,” Specht, a head of department at the
ZSW Center for Solar Energy and Hydrogen Research, said last
month on a tour of the facility where the energy-storing device
is based. “The question isn’t if it’ll be deployed, but when.”

Specht is one of an army of researchers working to overcome
the technological challenges posed by Chancellor Angela Merkel’s
decision to abandon nuclear power and shift to renewables in the
biggest energy-infrastructure overhaul since World War II. Their
task is to fill the energy gap when atomic plants that accounted
for about 20 percent of Germany’s power early last year go
offline within a decade.

As executives from EON AG (EOAN) to Siemens AG (SIE) join government
officials to discuss the implications of the energy switch at a
conference in Berlin today, the challenge for Merkel is to keep
the lights burning and energy affordable. The risk is her energy
policy fuels a second crisis as she grapples with financial
turmoil from Greece that’s raging across the euro region.

“The energy overhaul is an epic project that will span
many decades,” said Claudia Kemfert, chief energy expert at the
Berlin-based DIW economic institute. She estimates at least 200
billion euros ($250 billion) of public and private investment
will be needed over 10 years to compensate for nuclear. If
Merkel manages it smartly, it’ll bring “economic advantages,
raise competiveness and create jobs,” Kemfert said.

Election Year

The alternative is disruption to Europe’s biggest economy
and higher power prices. With plans to fast-track construction
of unpopular power lines and consumers being warned to expect
steeper bills to pay for renewables in 2013, an election year,
energy policy looks set to join the euro crisis as a campaign
theme standing between Merkel and a third term.

The opposition Social Democrats and Green Party, which drew
up the nuclear phase-out in 2002 when in coalition together,
accuse her government of a lack of commitment to the project
after its sudden conversion to renewables following the tsunami
and nuclear disaster at Fukushima in Japan. They say Merkel
isn’t going far or fast enough, and that by giving her blessing
to some new coal-fired plants, she favors utilities’ interests
over those of consumers and the renewables industry.

‘Major Consequences’

Peter Altmaier, the minister in charge of the overhaul, is
candid about the high stakes of getting it right. Failure to
deliver “would have major consequences for prosperity, economic
growth and employment,” he said in an Aug. 16 statement.

Almost 18 months after Merkel announced she was shuttering
Germany’s atomic plants by 2022, turning her energy policy on
its head, the government is funding a research boom to ensure
that Indian-style blackouts don’t happen in Germany. EON and RWE
AG (RWE), Germany’s two biggest utilities, are among the companies on
board after a combined 26.8 billion euros was wiped off their
combined share value last year as they were forced to overhaul
their operations to curb losses from closing reactors early.

Research is focusing on a major downside of renewables:
unlike nuclear energy, solar panels and wind turbines leave
consumers without power when the wind doesn’t blow or the sun
doesn’t shine. That makes storing energy key to their use.

Sixty energy-storage projects have been singled out for a
total of 200 million euros in research grants through 2014. The
government is also mobilizing the state-owned bank, KfW Group,
to provide low-interest loans to storage projects.

‘No Way Round’

“Electricity storage really is the holy grail for the
German energy transformation,” Dieter Manz, the chief executive
officer of Manz AG (M5Z), a German engineering company interested in
battery equipment technology, said in an interview. “There’s no
way around it if we want to make things work.”

That’s where Specht’s box in Stuttgart comes in. It uses
electricity and carbon dioxide, a greenhouse gas blamed for
global warming, to turn water into methane that can be stored in
underground caverns for days or weeks, then burned in gas plants
when needed.

Volkswagen AG’s luxury-car division Audi is building a 6
megawatt industrial-sized plant based on the technology that’s
due to start operating next year. EON has invested at least 5
million euros in the power-to-gas concept and started
construction of a pilot plant on Aug. 21.

Other government-funded research projects include a trial
system using computer technology to connect renewable generators
with storage facilities and consumers on the North Sea island of
Pellworm, and research into chemical batteries that are larger
and have a longer lifespan than lithium-ion batteries.

Bendable Panels

Scientists at the Fraunhofer Institute in Freiburg are
working on longer-term projects, from bendable solar panels to
high-speed charging stations for electric cars that might one
day act as a battery for the national grid.

The overhaul is growing markets for domestic manufacturers
including Solarworld AG (SWV), as well as for their foreign peers such
as Vestas Wind Systems A/S., the world’s biggest maker of wind
turbines.

It all amounts to “a major innovation wave within the
German economy that can strengthen our position on the global
markets for the next 20, 30 years,” Altmaier said last month.

Altmaier, 54, a chancellery confidante and former
parliamentary whip for Merkel’s party, was appointed environment
minister in May after Merkel sacked his predecessor, Norbert Roettgen, amid reports that he wasn’t listening to industry
concerns and opposition claims that targets were slipping.

Green Objections

The Greens and Social Democrats, whose original plan forged
under Chancellor Gerhard Schroeder to abandon nuclear power was
overturned by Merkel in 2010, then reinstated six months later
after Fukushima, accuse her of mismanaging the task. Juergen Trittin, co-leader of the Greens, has called on the chancellor
to push more ambitious renewables targets instead of cutting
subsidies, saying the whole project is “in danger.”

The average German household may have to pay 175 euros a
year next year to subsidize renewables, a rise of 40 percent,
according to Stephan Kohler, head of the Dena energy agency, a
researcher part-owned by the government. That will prompt “a
heck of a power-price debate,” Kohler told reporters Aug. 22.

Germany aims to raise its share of power production from
renewables to at least 35 percent by the end of this decade from
25 percent now. The U.K. is targeting about 30 percent by 2020,
while Sweden, Austria and Spain, each of which have richer
hydro-electric resources, have pledged to better Germany’s
share. The U.S. has no federal mandate for renewables.

Merkel, whose electoral district on the Baltic Sea coast
looks out to a EnBW Energie Baden-Wuerttemberg AG offshore wind
farm comprising 21 Siemens turbines, says the energy transition
is “a Herculean task.”

Yet it “can be an example to other nations by showing them
that you can succeed,” she said June 25 in a speech. “It’s
possible to take the path to a sustainable energy supply.”

To contact the reporter on this story:
Stefan Nicola in Berlin at
snicola2@bloomberg.net

To contact the editor responsible for this story:
Reed Landberg at landberg@bloomberg.net

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