- Money Morning Australia

The $260 Billion Renewable Energy Revolution Germany Is Set to Invest In


Written on 26 March 2012 by MoneyMorning

The moment Germany announced its highly publicised decision to phase out nuclear energy in the wake of the Japanese triple disaster; observers began to ask one very important question.

Just what energy source would replace such a huge swath of power in Europe’s dominant economy?

The short-term solution had to be natural gas.

But this would make Germany more dependent upon imported energy, especially from Russia.

In that sense, the nuclear phase-out made the Nord Stream pipeline – from Russia, under the Baltic Sea, to northern Germany – absolutely essential.

Today, the first line of the twin pipeline is already in operation. The second should be on line at the end of next year (if not sooner).

Then there is the other Russian project – South Stream. This one intends to move Russian and Central Asian gas into Southern and Central Europe.

Much of that will also reach Germany.

In addition, several pipeline projects are vying for the excess production from the second phase of the Azerbaijani Shah Deniz offshore development in the Caspian Sea.

Included among these is Nabucco, a venture to bypass Russia and transport gas into the Baumgarten hub in Austria for ongoing distribution.

Nabucco has long been the European Union favorite, but it has been unable to attract sufficient supplies. Three other pipeline proposals also are attempting to secure the Caspian gas for transit to Europe.

But there is a problem for Germany in all of this.

It does not want to form an increasing dependence upon imported gas to power its economy.

And this sentiment is driving one of the biggest alternative energy revolutions in recent memory.

Germany’s Renewable Energy Push Towards…

The 17 currently operating nuclear reactors in the country provide about 20% of the national electricity needs. Any replacement of those plants (where capital expenses are already sunk) will add significantly to the end costs of energy.

That means a political decision following the Fukushima Daiichi disaster one year ago ends up costing the average German citizen even more to secure what is already among the most expensive electricity in the world.

Germany does have shale gas.

But the furor over nuclear power is paralleled with a similar environmental concern regarding the dangers of fracking, a process of pumping water and chemicals under high-pressure to break open the rock and free the gas.

There are now four U.S. examples of seismic anomalies resulting from the combination of fracking and deep horizontal drilling.

And they have not instilled much confidence for the markets.

Instead, what the Germans are deciding to do is already being called the biggest restructuring of the national energy landscape since the end of World War II.

The government will initiate a campaign valued at more than $260 billion to harness wind and solar power.

The price tag is staggering. It is already pegged at more than 8% of the nation’s entire gross domestic product (GDP). And it could move even higher.

This will involve huge wind farm areas in the Baltic and massive new high-power transit lines nationwide. The goal is to have at least 35% of the nation’s power needs generated from renewable energy sources by 2020.

However, the developments of this massive policy shift are even more exciting.

All Eyes on Germany’s Renewable Energy Solution

Germany has become the first nation to really tackle the rising energy crisis. To succeed, the country will need new technologies and fresh approaches, some not even yet on the drawing board.

The most important European market will transform into a massive energy laboratory. But success is hardly certain.

Either way, all eyes will focus on this huge German experiment.

It will cost German consumers even more than they pay now – some analysts say as much as 60% more. It holds captive the survival of a government, political careers, industrial prospects, and continental-wide financial policy.

As the Eurozone wrestles with debt contagion and questions the strength of cross-border banking, the main lynchpin of that zone – Germany – is embarking on a very ambitious and risky path.

For those accustomed to seeing renewable energy sources such as solar, wind, geothermal, and even biofuels dependent upon heavy government subsidies, the German experiment will be a significant change.

The large public sector injections of tax revenues and credits will still be there.

Germany will have to increase taxes to pull off this grand departure. That could make it the most expensive government debacle in recent memory.

What changes is this.

A Solid Market for Renewable Energy

For the first time, a huge, guaranteed market will be opening up for alternative energy.

It will require new developments, infrastructure, improvements, and breakthroughs to make it work.

In short, there will be a new playing field for well-focused, forward-looking, entrepreneurially driven energy firms.

Unlike any other alternative energy push in memory, this one will have both government support and an assured, expanding need.

In the months ahead, wind power pioneered in Denmark and major advances in solar from China, along with a number of other ingredients introduced geographically in between, will converge on Germany.

That will translate into some huge profits over the next decade, both from new applications in Germany and the export potential to other countries.

A brave new world is underway for retail investment’s next big return sector.

Dr. Kent Moors
Global Energy Strategist, Money Morning (USA)

Publisher’s Note: This article originally appeared in Money Morning (USA).

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2 Comments For This Post

  1. Philosopher Says:

    In the time I spent in Germany, I realized why the average German has such a fair skin – very limited sunshine…

    It appears the German government did not spend too much time talking to their world-renowned engineers…

    Yes, a Brave New World is under construction, and this will submit Germany to the Master, and enslave its citizens using that most potent of weapons – DEBT!

  2. Davitong Says:

    Germany is doing the right thing to go solar and wind. We all see what is bringing from Climate Change (I would rather say CC rather than global warming to avoid the argument with those selfish fossil fuel agents). Nuclear is no doubt a quick fix but it is a matter of time someone have to pay a high price for the risk and uncertainty associate with it.

    Mother nature can basically provide us all the missing link with renewable energy, or at least part of it for the moment. It is a lazy government not to put more incentive to make it up in running for the benefit of our offspring, or probably some of us may have already facing the consequence of not listening to the call from mother nature.

    Sadly the money power behind Fossil Fuel producers, distributors and their agents (including politicians) are so attractive that they are trying all they can to play down whatever green ideas coming up that can jeopardize their income stream.

    There were never lack of genius ideas from innovators as well as green products offering to the market but very few of them being able to go through all those man-made resistance before they can reach the consumers. Electric car was a good example, a small new start-up company was suppressed by a big petrol car manufacturer to join a trade show to ensure the electric car can never go to the market smoothly.

    A government minister announced that a new solar farm project should compete in equal term for the grant with other traditional power generating company in the market will basically left very thin room for the renewable energy to survive even some green money from private sector really want to invest into the project with expectation of below average return.

    The vision of Germany today will definitely bring them reward in future, but when we talk about climate change, we need to work together. It is the world village today, everyone is affecting each other. German doing the right thing will benefit all others and vise versa the CO2 from those countries keep burning can still harm our atmosphere and hurting Germany as well. Not fair, isn’t it ?

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