India has much to learn from Germany’s bold energy transformation

The Germans gave the word kindergarten to the world of education. They gave the term wirtschaftswunder to development economics to describe their country’s remarkable economic transformation immediately following World War II. Now, in the area of sustainable growth, another typically compound German word is inviting global attention: energiewende. This refers to the profound energy transition Germany is going through. For a country dubbed as the “sick man of Europe” at the beginning of this century, the achievement is stupendous.

Today, already something like 30 per cent of Germany’s electricity supply comes from solar and wind energy and the country is actually exporting power. The goal is to increase this contribution to 50 per cent by 2030 and a staggering 80 per cent by 2050. Smaller countries in Scandinavia have similar achievements and ambitions but Germany is completely different because it is the world’s pre-eminent industrial economy and has a population of slightly over 80 million. The scale of what Germany has accomplished over the past decade and a half is what gives it wider relevance, especially to large countries like India.

At present, Germany has around 37,000 megawatts of installed solar energy capacity. In addition, it has another 29,000 megawatts of installed wind energy capacity. What has given renewables new momentum is the decision of Chancellor Angela Merkel to completely phase out Germany’s present nuclear power generating capacity of about 12,000 megawatts by the year 2022. There has always been a strong anti-nuclear movement in Germany and this got a fresh impetus following the Fukushima catastrophe in 2011 which prompted the Chancellor’s dramatic volte-face. It was a bold decision given that when Fukushima happened, Germany was getting between a fifth and a quarter of electricity supply from its nuclear power plants. It is the complete decommissioning of all such plants in eight years coupled with an overriding emphasis on energy efficiency that gives energiewende a unique dimension. However, question marks do remain on how much coal capacity Germany will end up adding to compensate for abandoning nuclear power.

“The scale of what Germany has accomplished over the past decade and a half is what gives it wider relevance”

The primary motivation



Meeting domestic and international environmental objectives has undoubtedly been the primary motivation for this remarkable change. A legislation for promoting renewable energy was first enacted 14 years ago. It has undergone many changes subsequently, but the anchor remains the concept of a “feed-in tariff” that depends on the technology being used. Anybody can invest in solar or wind power, sell surplus power to the grid and get a generous income that covers investment and running costs, guaranteed for 20 years, regardless of demand. The grid operator has a legal obligation to connect the installation and an obligation to accept electricity whenever it is produced. As a result, there are now close to 5 million small producers — individuals and cooperatives — accounting for around half of the installed renewable energy capacity. This means that some 6 per cent of Germans are energy producers. This is the nearest equivalent to the mobile phone revolution. The structure of electricity generation has been thoroughly shaken up and the four big private utilities have been consistently losing market share.

Controversies



However, the transition has not been without controversy. The most contentious issue is whether consumers are paying more now than they were earlier. The cost of renewables is financed out of a surcharge on the bills of consumers. Of course, many consumers have themselves turned producers, but that apart, there appear to be two views. One view is that German household expenditure on electricity has not changed over the past decade and that the latest increase will cost the consumer every month the equivalent of a pint of beer. But the fact remains that energy prices will continue to increase since the large-scale use of renewable sources does require extensive grid, storage and backup infrastructure. The gamble is criticised as being expensive but it cannot be denied that it is expansive.

That is perhaps one reason why according to some surveys, over two-thirds of Germans support energiewende, which actually goes well beyond electricity generation and embraces changes in energy use in transportation and housing as well.

The Indian context



What about the energy transition in India? At present, wind energy capacity is close to 22,000 megawatts and solar amounts to another 2,650 megawatts or so (nuclear is about 4,800 megawatts). Capacity wise, wind and solar account for about 13 per cent of total electricity generating capacity, although contribution to actual energy supply is perhaps no more than six per cent. In April 2014, the Planning Commission’s expert group on low carbon strategies for inclusive growth had released its final report that suggested that by 2030, the share of solar, wind and biomass in electricity supply be tripled to around 18 per cent. Unfortunately, this report has yet to get the full public attention it warrants.

The main difference with Germany, of course, is that in 2030, India’s energy supply basket is projected to have an eight per cent contribution from nuclear energy as well. In terms of capacity, wind energy is recommended to increase to 1,20,000 megawatts and solar to 1,00,000 megawatts by the same year. These may look like daunting goals at the moment but they are eminently feasible, especially given the fact that India is more favourably endowed in solar energy and in some parts, even in wind energy.

The energy transition which will have to be driven by innovations in technology, regulation and financing will bring multiple benefits. It will, of course, increase energy security and also reduce emissions of carbon dioxide. It will also have significant positive impacts on public health and also stimulate development in regions that have remained backward so far. The possibility of India acquiring strategic leadership in the green technology industry globally in about a decade’s time also is very real — provided it is linked with a strong indigenous research and development and engineering capability. New avenues for employment will accelerate. A very recent study by the Council on Energy, Environment and Water and the National Resources Defense Council has estimated that around 24,000 jobs have been created in the last three years alone when solar capacity has increased from around 1,800 to 2,650 megawatts. In Germany, the renewable energy sector employs close to 4,00,000 people and therefore, as capacity and supply contribution expands, green employment in India too will grow substantially.

If a comprehensive valuation of benefits is done, as the expert group boldly pointed out, “even with lower GDP, the low carbon strategy is worth pursuing.” In any case, the reduction in the average annual GDP growth rate by the expert group’s own reckoning by the use of low carbon strategies is 0.1-0.15 percentage points.

That is, instead of say a 8 per cent growth rate, you will end up having a 7.85-7.90 per cent growth rate. Surely, this is by no means any kind of disaster, especially when all the gains of green growth are reckoned and taken into account fully. India is ready for another 4G revolution — great green growth gamble.

(Jairam Ramesh is a Rajya Sabha MP and former Union Minister.)