© REUTERS/Ilya Naymushin

On April 21, the US filmmaker Michael Moore released his latest documentary, Planet of the Humans, on YouTube. The film accuses environmental activists of corruption and contends that renewable energy technologies are often worse for the planet than fossil fuels: producing solar panels, it points out, requires consuming energy and mining metals.

A month later, in Moore’s home state of Michigan, two hydroelectric dams burst after heavy rains, forcing thousands of residents to flee their homes and destroying properties across the nearby city of Midland. It was lucky that no one was killed.

The Michigan dam disaster offers a chance to test Moore’s hypothesis about the dark side of renewable energy. Whereas solar power is a relatively new part of the electricity mix, humans have been using water, a renewable resource, to generate electricity at scale for over a century. Looking at the history of hydropower reveals that renewable technologies have always had flaws—and that’s just fine.

Not so Modern

The first commercial hydroelectric power plant began operating in Wisconsin in 1882, the same year that Thomas Edison opened the world’s first central coal-fired power plant. Small-scale hydropower spread quickly around the world, and by the 1930s engineers were building massive hydroelectric projects like the Hoover Dam on the Colorado River. The “white coal” cascading down the Alps provided almost all of Italy’s electricity at the outbreak of World War II.

In the post-war decades, people added hydropower almost everywhere financial and natural resources allowed it. The Soviet Union began construction of the giant Sayano-Shushenskaya Dam in 1963; it remains the biggest power plant in Russia today. In the 1970s Brazil and Paraguay built the even larger Itaipu Dam, now the second-largest power plant in the world, behind China’s gargantuan Three Gorges Dam. European countries kept expanding hydropower too, and today Norway, Switzerland, and Austria generate more than half of their electricity in this way. By 1975 humans were generating over 20 percent of their electricity from this renewable resource.

Hitting a Water Wall

However, hydropower faced mounting problems in subsequent years, even as people woke up to the dangers of oil spills and coal-related air pollution. One issue was that the dam-building spree of the long boom years meant “most of the good sites in rich countries had been taken” by 1980, as environmental historian J.R. McNeill has written.

Just as relevant was the realization that building hydroelectric dams could have some nasty social and environmental side effects.

Living near dams can be deadly. In 1975 a typhoon in China’s Henan province caused the Banqiao Dam to collapse, inundating a highly populated area. Tens of thousands drowned, and over 100,000 people died during ensuing epidemics and famines. Chernobyl may be more infamous, but Banqiao was vastly more lethal. (Like the Michigan dams, Banqiao provided not only hydropower but also vital flood control and irrigation; of the 57,000 large dams in the world, around 6,000 exist solely to produce electricity and another 4,000 both produce electricity and perform other services.)

Dams can do major environmental damage even when they don’t break, preventing fish migration and altering the ecology of the surrounding area. Take the well-known Aswan High Dam in Egypt, whose ecological impacts will endure longer than the memory of Gamal Abdel Nasser playing the US and USSR off each other in his quest for funding. Its turbines produced around a third of Egypt’s electricity in the 1980s, and it protected Egyptians and their cotton crops from heavy Nile floods. Unfortunately, the dam also prevented fertile silt from flowing from Ethiopia to Egypt, and Egypt had to use much of that new electricity to produce chemical fertilizers. Without the Nile floods, the Egyptian soil accumulated more salt, and without the Nile water that had once reached the Mediterranean, shrimp and sardines in that sea were deprived of nutrients and died.

Dam-building can have other direct impacts on humans. When serving as his country’s prime minister, Jawaharlal Nehru dubbed hydroelectric dams the “temples of modern India,” though they also displaced tens of millions of his compatriots in the 20^th century. In tropical areas, creating reservoirs can lead to increases in waterborne diseases such as malaria.

The backlash against such impacts began to slow the growth of hydropower in the 1980s. People had seen too many of the negative impacts, seen too many post-colonial governments empty state coffers and risk angering their affected neighbors for the chance to cut the ribbon on a massive infrastructure project. In the early 1990s local critics, backed by Western NGOs, forced the World Bank to withdraw its support for a dam-building project on the Narmada River in India, and World Bank financing for hydroelectricity dried up around the turn of the century.

Between a River and a Hard Place

Today hydropower exists in a sort of purgatory between the polluting energy sources of the past and the safer renewable sources of the future. Its uncertain position is reflected in the language used by energy experts to describe it. For the International Energy Agency, it is one of the “modern renewables” along with wind and solar. The World Bank offers data from “renewable sources excluding hydropower,” while BP actually lumps hydropower in with nuclear energy, another low-carbon energy source that was providing almost a fifth of global electricity when the Chernobyl nuclear reactor exploded in 1986 and has become slightly less important in relevant terms since.

In any case, hydropower is still the most important source of low-carbon electricity: hydropower generated 16 percent of global electricity in 2018, more than nuclear (10 percent) and other renewables (9 percent). With demand for low-carbon electricity increasing, the World Bank has stepped up its financing of hydropower since 2008, and private companies and regional development banks facing less scrutiny have backed new dam construction in developing countries. China has stepped in as a funder in recent years in the framework of its Belt and Road Initiative, providing loans for big hydroelectric projects with few strings attached.

Yet concerns about new construction remain, which is why the European hydropower industry is focused on renovating old hydropower plants, adding turbines to existing dams, or backing smaller “run-of-river” projects that do not involve the construction of large dams. It also sees promise in “pumped storage” hydropower, which uses excess wind or solar power to pump water upwards and store energy for later.

Only a few countries are ploughing ahead with landscape-altering mega projects, costs be damned. China is building two huge dams on the Jinsha River, raising tensions with downstream neighbors who fear for their farmland. Meanwhile, Ethiopia’s construction of the Grand Ethiopian Renaissance Dam (GERD) on its part of the Blue Nile has brought it and Egypt to the brink of a “water war.” Rather than finance this contentious dam, the World Bank is now mediating between Egypt and Ethiopia.

Those three controversial projects will be a responsible for a quarter of hydropower’s modest projected growth over the next five years—IEA analysts expect hydropower generation to increase by 2.5 percent per year in the 2020s, compared with 16 percent per year for solar.

Renewable If Not Necessarily Sustainable

Hydropower, then, is an old source of renewable energy that can do major environmental damage. It is also a crucial component of the current low-carbon energy mix at a time when carbon dioxide emissions are a serious threat: China would have had to build about 20 coal-fired power stations to generate as much electricity as the Three Gorges Dam. Dams can be a useful climate change adaptation tool as well, irrigating fields to help farmers keep farming in the face of climate change-related rainfall variability and drought. Responsible policymakers know that they have to balance climate and environmental concerns, reducing the impact of hydroelectric dams and generating low-carbon electricity in other ways where possible.

And yet renewable skeptics like filmmaker Moore present the drawbacks of wind, solar, and hydropower as if they are some new issue whose discovery undermines the rationale behind the energy transition. This is uninformed nihilism. As climate policy expert Leah Stokes put it in her review of Planet of the Humans, “Renewables have downsides. As do biomass, nuclear, hydropower, batteries, and transmission. There is no perfect solution to our energy challenges.”

In short, Moore’s film misunderstands both the past and present of renewables. Renewable energy was creating problems for humans well before anyone worried about greenhouse gases: muscle power is renewable, though the horses that powered 19^th-century urban transport also coated city streets in a layer of manure and forced farmers to dedicate vast tracts of farmland to growing oats. What’s more, every energy transition is necessarily powered by existing sources: early coal miners used horses; the bulldozers that built the first nuclear power plants ran on oil.

On the flip side, utilizing fossil fuels instead of renewable resources has had incidental benefits for the environment in some cases. The advent of kerosene lighting, for example, reduced the incentive to kill whales for their oil, while the switch from wood to coal spared countless acres of forests. And if the billions of people in poor countries who burn renewable wood, charcoal, or dung in open fires had gas- or electric-powered cookstoves instead, they would live longer, healthier lives.

No, renewables are not perfect. Solar panels rely on energy-intensive mining, and wind turbines can kill birds. Yet they are the best option we have. Renewable critics lean too hard on the adage that “there’s no such thing as a free lunch,” when the proverb they need to reach for is “take the lesser of two evils.”

The post Carbon Critical: Hydropower, the Old Renewable appeared first on Berlin Policy Journal - Blog.

© REUTERS/Amr Abdallah Dalsh

With so many cars trapped at home with their owners, oil prices have fallen to the lowest level in decades, triggering crisis meetings of OPEC plus. The price of oil has even dipped below zero at times—producers will rather pay someone to take the oil off their hands than pay someone to shut down their wells.

The problem of oil oversupply is about as old as the industry itself. Long before Saudi princes and Russian presidents were arguing over supply cuts, the free market-loving US state of Texas was limiting local production to support higher prices. Even today, the industry’s solutions are sometimes, well, crude. When shale drillers produce superfluous natural gas along with their oil, they simply burn it in the sky in a practice known as “flaring”.

In order to mitigate climate change, low-carbon sources of energy like solar power will have to supplant oil products as our most important source of energy. But new energy sources are no less vulnerable to the oversupply problem. In fact, the more renewable energy in an electricity system, the trickier things can get.

Brimming over with Sunlight

The coronavirus lockdowns are turning excess electricity into a real problem. Chinese coal miners are calling for production cuts, while the United Kingdom is preparing to pay windfarms to shut down on short notice to avoid congestion on the grid and blackouts. Electricity prices are down across the EU, too. The basic problem for electricity is the same as that for oil: lower demand means higher supply and falling prices.

But electricity, unlike oil, cannot sit in a tanker or pipeline until prices recover. In the words of Gretchen Bakke in her book The Grid, “the grid must be balanced; consumption must always match production… [Electricity] cannot be boxed or stored or shipped. It is always used the same instant it is made.”

Although it is possible to store electricity as energy that can generate electricity later, for example by pumping water from a low area to a high area and allowing it to rush through a turbine when needed, energy storage is very limited today: at any given moment the EU can generate 20 times more electricity than it has the capacity to store. The vast majority of that storage is in the aforementioned hydropower, not batteries.

Humans have traditionally worked around these limitations by storing fuel (coal, gas) and burning it to create electricity as needed. The problem is that producers have no control over the “fuel” for solar power, the sun’s rays. While the danger of solar undersupply is well known—how to store solar power to use it at night or in dark winters?—the reverse problem of oversupply can arise when solar is at its most effective, soaking up the noon sun while consumers are in the park.

Sometimes solar power is worth less than nothing. Germany occasionally exports small amounts of power at negative prices to neighboring countries; this is happening more and more frequently as renewable generation expands. In fact, due to the successful expansion of wind power in the North Sea, Germany has had to install devices called “phase shifters” at its borders to prevent electricity from spilling over into the Dutch or Polish grids, overwhelming them with cheap, clean power.

Too Much of a Good Thing?

Yet just as little oil is actually delivered for -$1, negative electricity prices don’t necessarily mean consumers get paid for turning on the toaster; rather, they are a signal to grid operators that they should shut down some electricity generation because there is nowhere to send the power. Coal or gas power plants are typically the first to go because they generally have higher operating costs than solar, where the fuel costs nothing. Having to turn these plants down or off and then on again (“cycling” in the jargon) is a huge pain for their owners, who lose out on revenue and sometimes damage their boilers and turbines in the process.

Sensible government policy to support the expansion of renewable power can further complicate things for grid operators and owners of other types of power plants. The foundational law of Germany’s Energiewende, the Erneuerbare-Energien-Gesetz (EEG), gives renewable power priority access to the grid and requires grid operators to pay a certain price for it regardless of demand. Many US states let owners of residential solar panels reduce their bills by the amount of energy they send to the grid, no matter how little it is worth at the time. US solar power producers whose income is protected by government regulation can sell their power for next to nothing and drive competitors out of business, whether their emissions are low (nuclear) or high (coal).

In fact, because the sun is so fickle, solar power imposes considerable costs on the whole system. The 2019 OECD report “The Costs of Decarbonization” compared a system with 50 percent renewable power to a base case system that runs entirely on fossil fuels and found that the renewable-heavy system increased total system-level costs by 42 percent. That’s because the renewable-heavy system needs to invest more to avoid both undersupply, e.g. by keeping some coal or gas plants on standby, and oversupply. (None of this is a reason to stick with fossil fuels, which impose much higher costs on society as a whole than do renewables.)

A Victim of Its Own Success

The public might have little sympathy for operators of coal-burning plants who are losing profits, but the oversupply problem is increasingly coming back to bite solar itself. The problem is “value deflation.” As Varun Sivaram explains in his book Taming the Sun, “even if the cost of solar falls as a result of increasing deployment, its value might fall even faster. That’s because the more solar is installed, the less the electricity it generates in the middle of the day is needed.” In other words, the first installed solar panel is very useful and easy to integrate into the system, but the latest one might only add electricity when the system needs it the least, when all of its predecessors are also generating.

The COVID-19 crisis has accelerated value deflation in markets with a high penetration of solar power. For example, in California, stay-at-home orders have depressed electricity demand from commercial and industrial users. As a result, the grid operator has been forced to curtail—or throw away—record quantities of solar and wind power that are worthless when generated in excess of sagging demand.

Welcome to OSEC

What to do about oversupply? There might not be an Organization of Solar-Exporting States to regulate production, but there are two approaches to keeping electricity supply and demand in balance.

The first is to improve energy storage so there is somewhere to put excess supply. The price of batteries is falling fast, and electric cars are essentially batteries on wheels. The more electric cars there are on the roads, the more storage there is for solar power. Another option is to use solar power to split water molecules and produce hydrogen, which, like oil, can be stored as a dense liquid fuel: in supertankers, in national strategic reverses, in pipelines, and in the hydrogen car in the garage. Finally, there are innovative possibilities for storing solar power as heat, like the concentrated solar plants that use mirrors to concentrate the sun’s rays on a giant tank of molten salt.

The second is to increase potential demand. Sivaram, until recently the Chief Technology Officer of ReNew Power, India’s largest renewable energy company, highlights in his book a number of clever ways to do so, like using excess solar power at desalination plants to turn ocean water into drinking water, or heating hot water tanks during the sunny afternoon so they are ready for evening showers. Major institutions are already trying to shift demand to match supply. The EU Clean Energy Package requires power companies to offer “dynamic pricing” tariffs, so that customers will be aware of the best time to charge their car or turn on the dryer. Google announced in late April that its data centers will work harder when the sun is shining.

It is also essential to increase the size of electricity grids by building interconnectors to allow the transfer of electricity from place to place. If the grid is large enough, there should always be a customer somewhere: solar farms in Spain could power dining room lights in Hungary, where the sun would already be going down.

The post Carbon Critical: The Sun Always Rises appeared first on Berlin Policy Journal - Blog.

© REUTERS/Hannibal Hanschke

The German federal government has decided in favor of building liquid natural gas (LNG) import terminals and infrastructure. In March, Chancellor Angela Merkel’s CDU/CSU-SPD government, in its “coalition contract,” pledged to “Make Germany the site for LNG infrastructure.” This is a notable policy change, because in Germany the opposition to LNG imports and use has been so much stronger than anywhere else in Europe.

The aim of this new endorsement is to reduce maritime and roadway heavy-transport emissions. However, many in Germany argue that using “small-scale” LNG in this way, as a “bridging” fossil fuel, is “wasted investment”. They contend that Energiewende-mandated electric vehicles can and will rapidly de-carbonize heavy transport. Still others oppose LNG imports on the grounds that they would unnecessarily diversify Germany’s gas suppliers with the aim of offsetting increasing reliance on Russian pipeline gas. They insist that Russian pipeline gas has been “historically reliable” and is cheaper for Germany than building large-scale import terminals for LNG.

Though the federal bureaucracy had been advancing this policy change for over a year, top government officials did not make any particular effort to bring the issue to public attention or to drum up support. Accordingly, media and public understanding of the federal government’s motivations has been less than ideal.

Small-Scale Imports for Cleaner Transport

There are two main points to understand. First, the aim of the new policy is clearly to address long-standing environmental and competitiveness problems in German marine and heavy road transport: compared to diesel, LNG as a transport fuel is much cleaner, emits less CO₂ and is generally cheaper. Second, the approved small-scale LNG import facilities will not reduce German dependence on Russian pipeline gas, which is used for conventional purposes. The new policy is not intended to reduce dependence on Russian gas and the controversial Nord Stream 2 pipeline, contrary to various press reports.

The first facility to win approval from Berlin (and previously from Brussels) is planned for the North Sea port of Brunsbüttel, near Hamburg. The initial focus on the Hamburg region is logical. From there, LNG can be shipped up the Elbe River as an inland-shipping and road-transport fuel. In addition, there is access to the Kiel Canal, the world’s busiest artificial waterway, where LNG can be used or delivered into Scandinavia and the Baltic region. Hamburg is also Germany’s major container port, and the shipping industry has begun converting engines to LNG fuel globally.

However, as well as facilities for fueling ships and trucks in the immediate port area with liquid natural gas, and shipping some gas onwards, the plan also includes an onshore regasification unit and connections to the existing gas-distribution network for conventional gas applications—heating, electrical generation, etc. Experts feel this will provide the project’s developers with flexibility, as it will take time for LNG road-transport infrastructure to develop in Germany. Currently, it is almost nonexistent.

The €500 million terminal will have facilities to transfer, store, and redistribute the liquid for use as maritime-bunker fuel, road-transport fuel, and various industrial applications. Such direct use of LNG as a liquid fuel, without regasification, is known as “small-scale” LNG. This is distinct from “large-scale LNG,” which involves much-higher volumes that are re-gasified in huge facilities and injected into the gas grid for conventional uses.

A sense of scale is important. The Brunsbüttel facility will receive LNG equivalent to 5 billion cubic meters (bcm) of gas per year. In 2016 Germany consumed 80.5 bcm of gas. So the Brunsbüttel facility’s capacity to re-gasify a portion of the LNG could help replace a part of the gas Germany now receives from the Netherlands, whose Groningen field is mandated to close soon. But the small scale of the new facility’s means it cannot significantly diminish Germany’s great dependence on Russian and Norwegian pipeline imports.

Indeed, despite a spate of articles claiming the contrary in major media outlets, including Der Spiegel and Bloomberg, the goal of the federal government’s new LNG policy is not to cut dependence on Russian gas. The entire regulatory and ministerial review process clearly focused on fueling maritime and heavy-road transport. Clearly, this small-scale facility provides no serious counterweight to Germany’s Gazprom imports, which are projected to rise from current levels of 55 bcm via Nord Stream 1, to 110 bcm of gas per year when Nord Stream 2 is complete, or about 60 percent of total German gas imports. At present, Germany receives 31 percent of its gas from Russia and 24 percent from Norway. Reversing this reliance on Russia would require multiple large-scale LNG regasification terminals capable of fueling a major portion of the country’s conventional gas demand for electricity generation, heating, etc.

Stalled Transport Cleanup

So what is the motivation for the new LNG policy? 46.1 percent of German GDP is dependent on exports (2016 data), compared to 26.9 percent for OECD states overall. Therefore, it is especially important that Germany be competitive in its maritime and heavy road transport to move all those goods. Yet despite having pinned the nation’s commercial future on the success of the Energiewende, actors from government, industry, political parties, and climate/environmental institutions have, embarrassingly, accomplished virtually nothing when it comes to cleaning up air-pollution and carbon emissions from transport. The so-called Verkehrwende (transport transition) is going nowhere. The ongoing diesel scandal is but one aspect of this, involving passenger vehicles. However, in maritime and heavy trucking, Germany has fallen disconcertingly behind many other European states and the United States.

For example, in California, after some 15 years of efforts, in 2015 fully 60 percent of all buses were running on compressed natural gas (CNG), as were 17 percent of all U.S. buses. This means their engines were emitting about 99% less particulates and sulfur dioxide, 70% less nitrogen oxides, reducing noise pollution about 50% and emitting from 12 to 20 percent less CO₂ than diesel fueled engines, which remain ubiquitous in most German cities. Using LNG in buses would bring similar environmental benefits to Germany.

Moreover, over the past few years, the use of LNG for maritime and heavy-transport fuel has begun to take off in the US, China, and parts of Europe. The US Energy Information Agency expects American railways to undergo a transformation from diesel-to-LNG similar to that of steam-to-diesel for locomotives in the 1950’s; this shift would be both environmentally beneficial and reduce cost, as LNG has a similar energy density to diesel, but it is broadly cheaper and much cleaner.

Alternative Fuel

While Germany has made little progress on cleaning up heavy transport, international organizations have recently mandated new emissions standards. In maritime shipping, clean-fuel regulations requiring that carbon emissions be cut by half by 2050 were adopted for the first time this April by the UN’s International Maritime Organization. Most analysts expect that meeting these targets will “require the shipping industry to completely redesign their fleets around new fuels.” Accordingly, the German maritime sector has pressed the federal government to facilitate LNG infrastructure, lest it fall behind in global competitiveness.

So too, for the trucking industry, as Brussels moved in May to adopt its first carbon emissions targets. German business has pushed Berlin to foster the infrastructure and policies needed to facilitate the shift to new fuels such as LNG. Given the country’s very-high export-dependent economy, it is of utmost importance that it does not become an LNG ‘desert’ among other EU neighbors, who have already begun to meet Brussels’ mandates for LNG fueling stations. If Germany had no LNG capacity, the uninterrupted movement of road or waterway freight via the country would be threatened. Accordingly, the federal government and Brussels have both recently begun providing subsidies for LNG adaptation in Germany.

To be clear, LNG brings serious benefits. But LNG is not carbon free, and is likely to be only a ‘bridging fuel’ to other technology. However, power-to-gas technology, which would use renewable energy to produce natural gas or hydrogen for such purposes, is today far from feasible at scale. This is also true of electrification of heavy road and sea transport.

So, given that LNG is useful in the present, why has there been so much opposition to the import and use of LNG in Germany? This opposition has come, broadly speaking, from two camps.

Two Streams of Opposition

The first camp asserts that, regardless of other countries’ experiences, Russia has been a historically reliable gas provider, and so building large-scale LNG import terminals would be an expensive and unnecessary energy security policy. This dovetails with a widespread conviction among German business and political elites that only via mutual German-Russian interdependence, especially in the energy business, can Germany ameliorate geostrategic tensions. Repeated bad behavior by Moscow does not shake this conviction; on the contrary its makes interdependence even more necessary.

A second camp argues that LNG use—large- or small-scale—is antithetical to the renewable-energy goals of the Energiewende. Here, natural gas and LNG are often dismissed out-of-hand as simply another fossil fuel, “largely produced in the USA” by “environmentally dangerous” fracking that is banned in Germany. Therefore, according to this reasoning, it would be “hypocritical” to import it.

However, scientific assessments by the International Energy Agency present serious challenges to many of the popular, environmentally motivated concerns about LNG use. When the agency reviewed studies of “methane leakage” conducted in recent years, it concluded that natural gas is indeed superior to coal, and can and is being improved by better regulation of leakages in its production and supply chain. And while many challenge official assessments of leak-rates from U.S. production sites, most agree such leaks can be minimized with improved maintenance and regulations. Moreover, aside from this concern there is no challenge to LNG’s very significant pollution-and-noise reduction advantages over diesel. Nevertheless, in a number of discussions earlier this year in Germany, I found strong opposition, on principle, to the idea of distributing LNG in liquid form as a transport fuel (i.e., “small-scale” LNG).

Basically, the line of argument here is that, in light of the goals of the Energiewende, Germany can and will be “zero carbon in transport” in a couple decades–and so expenditures on LNG infrastructure will be “wasted investments.” Given Germany’s presently dismal record in greening transport, including the stubborn diesel scandal, the hubris of this technological optimism appears rather large. It also neglects the fact heavy roadway and sea transportation are technically much more difficult to electrify than passenger vehicles.

In response to my inquiries, representatives of major international energy companies in the past year described frustration in finding any interest in Germany for LNG. Unlike in other EU countries, they said they could see no prospects in the German market. They expressed amazement at the German insistence that LNG is not needed to help displace coal or diesel.

 The real Meaning of Brunsbüttel 

Much of the popular and elite opposition to using LNG in Germany is based on a sort of technological optimism that sees the good as the enemy of the perfect.

Nevertheless, what is clear is that political decisions were taken to address long-standing environmental and competitiveness issues in heavy transport. But there was no appetite for a larger, forthright confrontation with the pervasive hubris about what are in reality very difficult and still-unsolved technical and economic problems preventing fully green heavy transport. It is also clear that these decisions had nothing to do with hedging Germany’s heavy and increasing reliance on Russia gas via the Nord Stream 2 project.

The government’s embrace of small-scale LNG is indeed a positive environmental and competitiveness policy change for heavy transport. But Germany still faces far larger energy security problems.

The post Germany’s Real LNG Strategy appeared first on Berlin Policy Journal - Blog.

© REUTERS/Stringer

America’s significant engagement around the globe has always been justified by a variety of reasons: making the world “safe for democracy” (Woodrow Wilson); humanitarian interventions to prevent genocide; concerns over the proliferation of weapons of mass destruction, etc. However, Washington’s willingness to intervene was also founded on its own national interest—securing the United States’ energy lifelines. Over recent years, however, the development of huge shale oil and gas deposits has drastically reduced US dependency on energy imports and allowed the country to abdicate its global leadership role.

It has also reduced the willingness of American society to bear the financial burden for stability in other parts of the world. The United States’ foreseeable energy independence is the economic basis for a policy of withdrawal. With his “America First” rhetoric, Donald Trump has become a symbol of this policy. But its origins lie with the Barack Obama presidency. The rebirth of isolationist traditions in the US goes hand-in-hand with the development of its energy resources.

The precise opposite is true for China. The “Middle Kingdom” requires gigantic energy sources to sustain its growth. And this demand has determined Beijing’s foreign policy of late. China is now attempting to identify global import options and secure these with tremendous financial and diplomatic efforts. Liquefied natural gas (LNG) from Qatar, oil from Venezuela, uranium from Central Asia, coal from Australia—the burgeoning world power thirsts for ever new sources in order to sate the growing needs of 1.3 billion Chinese.

The expansion of Chinese military capabilities, not least its power politics in the South China Sea, indicate that the People’s Republic (as the US in the past) is preparing to defend its supply routes if necessary by way of its navy and air force. Beijing’s international energy policy is rapidly filling the void left by the American retreat. While China had been only gradually and hesitantly advancing towards the role of a world power,  Trump’s withdrawal has accelerated its pace and bolstered China’s assertiveness on this path. Recent developments reveal how energy policy is shifting the global balance in favor of China.

Petro-Yuan vs. Dollar

Since the conclusion of the Bretton Woods Agreement in July 1944, the US dollar’s status as global reserve currency has imbued it and thereby the US with unparalleled power. Oil, by far the world’s most traded commodity, is priced according to the benchmarks Brent or West Texas Intermediate, both traded in dollars. The US has therefore always been able to rely on an elevated global demand for its currency, which could then could be turned into tangible goods and services. Or it could be weaponized, as was the case with sanctions against Russia and Iran.

Perhaps to preempt such action, China has now introduced its own oil futures benchmark denominated in yuan. It marks the culmination of a ten-year push by the Shanghai Futures Exchange Commission to give the country more pricing power in Asian oil markets. Moreover, the “petro-yuan” will be a first step toward de-dollarization and, considering that China is the largest oil importer, may quickly become the most important Asian oil benchmark. Given that its dependency on oil imports will rise over the next decade from currently 69 to 80 percent, the petro-yuan is China’s attempt to attain sovereignty over its own oil trade.

In recognition of this development, the yuan has been included in the International Monetary Fund’s currency basket. The European Central Bank now also holds yuan in its foreign currency reserves, having bought an equivalent of €500 million in 2017. Other countries have already signaled the desire to follow suit, putting the Chinese government in an increasingly influential position in international monetary matters.

However, these developments have a much wider scope. The emergence of the petro-yuan could fuel further currency wars, accelerate the diversification away from the US currency, and repatriate billions of dollars to the US on account of dwindling global demand. Washington’s ability to keep the expansion of its money supply decoupled from domestic inflation would become severely impaired in the long run and require a great deal more fiscal discipline on the part of the Federal Reserve. Whether the yuan will be a more successful challenger than the euro, which was introduced 16 years ago among similar hopes and fears, but ultimately left the dominance of the dollar untouched, remains to be seen.

Taking the Lead in Climate Policy

The Chinese claim to leadership is also displayed in the area of climate policy. While Donald Trump dubbed climate change a “Chinese hoax” and pulled the US out of the Paris Climate Agreement, President Xi Jinping has positioned himself as a global climate leader. At the 2017 World Economic Forum in Davos, he announced, with an eye to Washington, that his country would respect the Paris Agreement. In October 2017, during his opening remarks at the 19th congress of the Chinese Communist Party, Xi even called for China to take the helm in the fight against climate change. The EU, Canada, California, and numerous American metropolises have agreed to take on the challenge together with Beijing. As a direct result of US withdrawal, China managed within just a few months to perform a fundamental transformation of its image: from coal-intensive scapegoat to visionary champion of global climate policy.

This about-face is not solely the expression of a skillful PR campaign. China is seriously in the process of substantiating its claim to leadership with concrete measures. Take the country’s first street paved with solar panels in the city of Jinan in central China. It covers 6000 square meters of the city’s expressway and produces 820 kilowatt-hours of electricity that are fed into the Shandong Province grid. And 500 kilometers to the south, near Huainan, the Chinese have built the largest floating photovoltaic power station with 165,000 solar panels generating enough electricity to supply 15,000 homes. Another floating solar power plant is scheduled to come online this year, and it is four times as large.

It is true that coal still dominates China’s energy mix and will continue to do so for the foreseeable future. China’s power plants burn as much coal as the rest of the world combined. Yet emissions from coal have been declining over the last three years, and the current five-year plan stipulates a two-year moratorium for issuing permits for new coal power plants. The rapid development of smart networks, a revamped electricity market design, and the advancement of renewables are clear signs for a real energy transition, perhaps even an energy revolution, taking place in China.

China Spends, the US Cuts

The country is planning on investing €317 billion in renewables over the next three years, furthering their unprecedented expansion. And China already has close to 200 gigawatts of installed wind capacity, more than twice as much as the US. Two-thirds of photovoltaic cells sold worldwide and half of newly installed wind turbines come from the People’s Republic.

For the Chinese leadership, it’s less about reducing greenhouse gas emissions and more about three key points: fighting unbearable smog in China’s largest cities, garnering international recognition, and gaining an edge over the competition in global markets in terms of technological innovation and political power.

Here, too, the US is on the verge of surrendering first place to the Chinese. The Trump administration is planning to ask Congress to cut the funding for energy efficiency and renewable programs by 72 percent in the fiscal year 2019. Many institutions will suffer, but the hardest hit will be the National Renewable Energy Laboratory (NREL), with research and development funding dropping 78 per cent for solar alone.

China’s leadership is especially pronounced in the automotive sector. Chinese regulators have just halted the production of 500 car models that do not fulfill the country’s environmental standards. Beijing is confident that, as the world’s largest vehicle market, they can rely on producers adjusting to efficiency standards set by China. It is betting on e-mobility, and everyone is following suit.

The Electric Silk Road

While the US believes it will be able to isolate and sanction major countries like Russia and Iran, China is looking for means and ways to forge economic and technological ties with as many states as possible. China’s Belt and Road Initiative (BRI), a modern version of the Silk Road, intends to connect the world’s second largest economy with Southeast Asia, Eurasia, the Middle East, Europe, and Africa via a network of oil and gas pipelines, electricity and fiberglass networks, highways, rail connections, as well as air and seaports.

The Chinese plan to establish an electricity super-network is barely being noticed in Europe and the US. In May 2016, the Chairman of the State Grid Corporation of China (SGCC), Liu Zhenya, submitted a proposal for a $50 billion electricity network spanning the globe to combat pollution and climate change. He enjoys the support of President Xi. The plan envisages more solar parks and wind farms, geothermic energy, and hydropower stations across a globe increasingly interconnected by a super-grid.

In the mid-term, the plan foresees the expansion of trade and investment along the new Silk Road. SGCC has already honed in on ten transnational transmission networks meant to connect China with, for example, Russia or Mongolia. The SGCC is also trying to purchase 20 percent of the German transmission system operator 50Hertz. That would be the first time a Chinese company holds a stake in critical telecommunication and electricity infrastructure.

The Belt and Road Initiative is a significant Chinese projection of power. Not least because it is presented as a soft power project focused on renewable energy, communication, transportation, and fight against climate change. In reality, China is exhibiting strength and gaining political and economic influence on the global stage.

Europe’s Response

How should Germany and Europe as a whole respond to this new Silk Road? First, the Belt and Road Initiative is not a short-term plan, but will presumably remain at the core of Chinese foreign, economic, and energy policy for years to come—and Germany and Europe need to develop a long-term strategic response. Given the vast resources backing the project, it would make little sense to attempt to fight or contain it. Rather, engagement, support, and cooperation are key. Just as the old Silk Road was not a one-way street, the current project holds new and unexpected opportunities for European researchers, engineers, managers, bankers, and traders.

The State Grid Corporation of China, one of the world’s largest companies, organized a conference in Frankfurt last year where it presented a vision of extending its reach all the way to Europe. It made an offer for comprehensive political, economic, and technological cooperation. So far, academia has heeded the call to a greater extent than politics.

Germany’s government could also appoint a Silk Road representative, who together with German industry, the country’s financial and trade institutions, its research bodies, and politics, could organize conferences and workshops along the Silk Road, identify areas of cooperation and coordinate the implementation of projects. The Foreign Office already has a working group on connectivity that is examining the Silk Road concept and could serve as a base for such a representative. But a German reaction will not suffice. It is essential to bring in the EU. A similar coordination office could be established with the Commission.

Bring in Russia, India, and even the US

Russia should also be an integral part of the concept. The gas pipeline “Power of Siberia” between Russia and China is set to transport 38 billion cubic meters of natural gas to China as agreements on a “Power of Siberia 2” pipeline are finalized. This all further illustrates the close collaboration between the two countries in energy matters.

What’s more, we should make the (not easy) attempt to recruit India for this project to avoid the impression that the BRI initiative is directed against Delhi. India has reached an agreement for an Indo-Pacific security cooperation with Australia, Japan, and the US as a way to contain the perceived aggression of Chinese expansion in the region. Because of these real fears and manifest tensions, it is crucial that India is welcomed and becomes part of the technological and economic cooperation framework.

Lastly, it would also be desirable for the US to participate in such initiatives. It could recognize the Silk Road concept as an opportunity for America and its industry. However, the project is only conceivable as a cooperation on equal footing, relying on a sensitive understanding of the traditions and mindsets of all involved partners. An “America First” approach based on elbowing, friend-or-foe thinking, marginalization, sanctions, and meddling in the internal affairs of other states will not be compatible. That is why we cannot wait for the US, but rather have to formulate our own response in Germany and Europe, and act accordingly.

The post Pax Sinica appeared first on Berlin Policy Journal - Blog.

© REUTERS/Wolfgang Rattay

It was hailed as a breakthrough: nearly four months after the election Chancellor Angela Merkel’s conservatives and the Social Democrats agreed to launch formal negotiations on forming a government together, again. In a 28-page draft policy agreement, the negotiating parties listed the compromises they had spent weeks wrangling over – and skirted around the issues where no agreement could be reached.

During negotiations, the two sides appeared ready to drop German-authored plans to lower carbon dioxide emissions by 40 percent from 1990 levels by the year 2020 because it simply wouldn’t be feasible – the country has only managed to slash 27 percent until now. In the end, however, they kicked the can further down the road, appointing a commission to create a blueprint for reducing emissions as quickly as possible and gradually phasing out coal power.

It is a glaring departure from the green image Germany has built. Just a handful of years ago, the country’s Energiewende, or energy transition, was seen as a shimmering example of how the world could beat climate change that the German term itself—rather than “energy transition” or “clean energy revolution”—was being used in American media.  This was its raison d’etre – and the physicist-chancellor Angela Merkel appeared fully convinced of its promise, which she showcased in international climate conferences, winning her the moniker die Klimakanzlerin, or the climate chancellor.

And even though renewable energy generation in Germany broke more records in 2017, growing to cover an astounding 36.1 percent of the country’s electricity needs, that won’t offset the country’s rising carbon emissions enough to meet its own goal of reducing greenhouse gas emissions by 40 percent in 2020.

Breaking Up Monopolies

Germany commenced its Energiewende less than two decades ago by breaking up the monopoly of a few giant utilities and setting market conditions for wind and solar power, as well as bioenergy, to become one of the economy’s primary sources of power. In addition, it created over 300,000 jobs, local revenue for rural areas, and cutting-edge exportable technology.

Inspired by Germany’s ingenuity and gumption, I undertook to learn everything I could about Germany’s visionary experiment by visiting the citizen-prosumers on the ground from the Baltic Sea to the Black Forest, and interviewing the Energiewende’s thinkers. I authored a blog about Germany’s clean energy revolution and wrote dozens of articles for English-language media. For five years, I lived and breathed the Energiewende, convinced that Germany was a determined pioneer in an effort that would keep our planet livable for future generations of human beings and other species.

Yet, despite Merkel’s vigorous push after the meltdown at the Fukushima power plant in Japan in spring 2011, Germany’s commitment to the mission has since fallen off dramatically. It is now a middling contender in the field of climate protection, ranked a lowly 29 out of 61 countries worldwide by the NGO Germanwatch. About two years ago, I noticed that there was ever less new hailing from Germany to write about. I cancelled my blog.

There’s a good measure of hypocrisy in the way Germany continues lecturing other countries like the US about climate protection while it falls ever further behind on its own 2020 emissions reduction goals. As much as Washington deserves a lecturing on the topic, Germany no longer has the cachet to do it.

Playing the Spoiler

These days Berlin even plays the spoiler, throwing its weight around in the EU to the detriment of progressive environmental legislation, as it is currently doing on the EU’s long-awaited climate and energy package—seminal legislation, currently in draft form, that will underpin the transformation of the European energy system until 2030. Germany has pushed to weaken provisions that would open up energy markets to citizens’ initiatives and other new business entrants – the very actors who ignited the grassroots Energiewende in the first place.

One reason for Germany’s demise as climate leader is not public opinion, which overwhelmingly backs the Energiewende and is fearful of climate change. On the contrary, it’s Germany’s grand coalition of Christian Democrats (CDU/CSU) and Social Democrats (SPD), which will most probably be renewed this year for another four-year term. Indeed, Germany’s two biggest parties came to power four years ago talking not about hitting Germany’s emissions targets or prompting the Energiewende’s next exciting breakthrough, but rather about how to slow it down. And this they did.

Chancellor Merkel still pays lip service to climate issues, but her party’s commitment to Germany’s automobile industry is obviously greater. She’s illustrated this by pushing to lower emissions standards for cars made in the EU, allowing the EU carbon trading scheme to collapse, and turning a blind eye to the testing standards of Germany’s diesel gas-guzzlers.

The Social Democrats, her partner in office, haven’t been any better, putting the interests of a small number of coal miners and recalcitrant fossil fuel companies above those of the planet. Germany burns more coal than any other country in Europe; state-subsidized, coal-fired plants provide 37 percent of its power, most of it from lignite, the dirtiest kind of coal. At the recent UN climate summit (in Bonn, Germany, of all places), the Germans refused to join a coalition of 19 countries led by Canada and the UK to set a date for ending coal use. In fact, new coal pits are still being excavated in the west of the country.

The grand coalition’s tepid endorsements of renewables and its changes to support systems have caused investment in renewables to drop to its lowest since 2007; permits to build onshore wind parks have been capped at just 2.8 GW a year through 2019—a gross underachievement compared to the 4.6 GW of installments in 2016.  New investment in and deployment of solar power is lagging in a similar way. Moreover, half-hearted energy savings measures failed to stem the still-rising volumes of oil and gas used in transportation, heating, and industry.

Wrong Moment

This is absolutely the wrong moment for Germany to be curbing renewables. Despite the fact that Germany’s renewables have replaced many gig watts of fossil-fuel generated energy, Germany’s emissions have not declined significantly over the last decade. Although this is in part explained by the economy’s growth, the country’s total emissions increased every year over the last three years.

Merkel long ago forfeited her title as climate chancellor, failing time and again to stand up for the climate. She barely mentioned the environment in her election campaign this year (the Social Democrat candidate Martin Schulz wasn’t any better on the topic).

While it’s hard to fall lower than US federal climate protection polices under the Trump administration, I’m not surprised by Trump’s negligence. But I hadn’t expected Germany to balk so suddenly.

After Trump’s election victory and the looming prospect of America’s retreat from the global stage, there was immediate speculation that Germany would assume the mantle of leader of the free world. This, of course, was never a serious option considering Germany’s humble military and skittish geopolitics. But it could have stepped in and led the world on climate protection.

Not so long ago, German energy specialists immodestly called the Energiewende “Germany’s gift to the world.” It was. Now, the least Germany can do is not to play the spoiler.

The post Political Climate Change appeared first on Berlin Policy Journal - Blog.

© REUTERS/Jason Ree

1. It Can Happen Fast

Germany has managed to move more quickly than any other major industrial country in transforming its electricity sector into one based on renewables. In just 15 years time, Germany has raced from having a power sector with about 5 percent of its power coming from renewable sources (mostly small hydro-electric plants) to generating a full third of its electricity from them, including on- and off-shore wind, bio-energy, hydro, thermal, and photovoltaic solar. On July 25, on a sunny and relatively windy day, Germany’s renewables accounted for 74 percent of its electricity.

This is a faster shift than anyone, even the environmentally minded Green party, anticipated in 2000 when the Renewable Energy Resources Act was passed. The key to the transition’s success: a surcharge on electricity (the feed-in tariff) that helped investors pay for the initial investments into renewable energy generation technology as prices for the generation technology plummeted. Optimists like Greenpeace Germany, who are pushing for the Energiewende to be accelerated, say that Germany could have two-thirds of its power generated from renewable sources by 2030, and 100 percent by 2050. The German government is more conservative: it expects to be 80 percent renewable by 2050.

2. Renewables Don’t Hurt the Economy  

Germany provides stellar evidence that renewable energy expansion, if done correctly, won’t stunt economic growth. While Germany has made incredible strides in expanding renewables, its highly industrialized economy was one of the first to crawl out of the recession in 2009-2010, and grew steadily in all of the non-crisis years between 2004 and 2015. The transition obviously hasn’t lessened Germany’s competitiveness on the global market, as the country exported more in 2014 than ever before (and increased its already lopsided trade surplus to $234 billion) despite international crises, sanctions against Russia, and sluggish global growth. One export record after another has been shattered – even now, when the rest of Europe’s economies are still mired in a nasty funk.

Moreover, the renewables sector has created about 372,000 jobs in Germany, while other aspects of climate protection policy, like energy efficiency, alternative mobility, educational and training programs, research and development, the decommissioning of nuclear reactors, and grid expansion, may have added at least another 1.5 million posts. The most obvious winners of the Energiewende are those farmers, small- and medium-sized businessmen, and citizen’s groups that have invested in renewable energy and sell it to the power grid. Ask nearly any Bavarian farmer if he or she is for expanding renewables – the farmer will likely say “yes”, even if he or she balks at cutting grid corridors through the Alps.

3. The Workhorses Are Solar and Wind

Each country, region, and municipality will, in the future, have a mostly local energy mix that will reflect its natural resources, needs, and weather patterns. Some countries, like Iceland, can rely on thermal power from volcanic sources in the earth. Others, like the southern Balkans and Norway, will have large hydro-electric works to draw on. But most of the renewable power production in the near future will come from solar photovoltaic and onshore wind power. These two technologies are the backbone of Europe’s transition so far, and have the best prospects for becoming yet cheaper and more effective at the same time.

A recent report by the Berlin-based think tank Agora Energiewende argues that solar photovoltaic is already cheaper than fossil fuels in the sunniest parts of the world, and will be cheaper just about everywhere by 2025. “Solar energy has become cheaper much more quickly than most experts had predicted and will continue to do so,” says Agora Director Patrick Graichen. “Plans for future power supply systems should therefore be revised worldwide. Until now, most of them only anticipate a small share of solar power in the mix. In view of the extremely favorable costs, solar power will, on the contrary, play a prominent role, together with wind energy – also, and most importantly, as a cheap way of contributing to international climate protection.”

4. Involve the Grassroots

Germany’s Energiewende has not been driven by the big gas and power utilities – on the contrary. The existing utilities, deeply invested in nuclear and fossil fuels as they are, have tried to put the brakes on the Energiewende. Rather than invest in the renewables revolution like so many smaller investors, they bet against it – and lost. This is why their profits have plummeted in Germany, while a whole cottage industry of smaller producers and renewable offshoots have capitalized on the transition. The four largest utilities in Germany have only six percent of the share of renewable production – although they are now, finally, scrambling to jump on board. In fact, about two-thirds of the clean power generation facilities are in the hands of farmers, individuals, energy co-ops, citizen’s groups, small- and medium-sized businesses, green investment funds, and municipalities. It is this hands-on engagement that has made the Energiewende in Germany popular, and thus possible. It has promoted a vast democratization of the energy sector, empowering citizens in a business once dominated exclusively by multinationals

5. Nuclear Power is Not Necessary

Germany has been expanding renewables at the same time that it has pursued an exit from nuclear power and hit tough EU greenhouse gas reduction targets. Americans, even American leftists, tend to be much friendlier to nuclear energy than Europeans, particularly the anti-nuclear Germans. But no matter which side you fall on, Germany offers proof that nuclear energy is not necessary to transition to green energy. Contrary to alarmist reports that Germany would have blackouts or power outages in the aftermath of the 2011 Fukushima nuclear disaster, when Chancellor Angela Merkel shut down a third of Germany’s nuclear plants and accelerated a phase-out of the rest, Germany has experienced very few outages, fewer than neighboring countries such as pro-nuclear Czech Republic and France.

6. Disincentivize Coal-Fired Generation

Germany deserves kudos for greening the power sector, but not for pro-actively driving down the share of its energy generated by coal, the dirtiest of all energy sources. In fact, coal’s share in the German mix even increased slightly from 2012 to 2014, although it was still lower in 2014 than at its height in 2010. (It is currently on the way down again.) This is not because renewables couldn’t fill the gap left by the shut-down nuclear plants, but because the German government and the EU refused to put a price on the burning of fossil fuels that would make its use prohibitive. The 2005-launched EU emissions trading scheme was born with a flaw that rendered it ineffective, and the EU, led by its German energy commission, refused to fix it. The lesson: it is not enough to support renewables; coal has to be taxed and disincentivized in other ways. The fossil fuels industry will put up a fierce fight, as it has in Europe, but limiting it is imperative for bringing emissions down.

7. Expand and Smarten the Grid Now

Germany was too slow to expand and upgrade its grid networks, which has slowed expansion and irked some of its neighbors. The fact is that much of the time, there’s too much renewable energy in the German network. Meeting supply with demand when using weather-dependent green energy means either having significant natural storage capacity, like Norway does, or requiring a decentralized smart grid to distribute electricity effectively. Germany is now playing catch-up with grid expansion.

In terms of energy policy and use, the US is very different from Germany in many ways. But the German experience is still relevant: it is an economic heavyweight, with sophisticated, energy-intensive production sectors like those in North America. The Germans are out in front on renewable electricity, but notably behind in other areas, like alternative mobility, for example – where Berlin could learn something from California. US policymakers would do well to take the Energiewende into consideration when plotting their own approach to climate protection.

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