Germany’s Energy Policy Needs a Long-term Strategy, Not More Ad-hoc Decision-making

When the nuclear disaster in Fukushima, Japan, happened, the German government decided within two days that the country’s nuclear power plants would be shut down. The five oldest plants will not go back online. These decisions were made despite the German government and utilities having previously reached an agreement to extend longer run-times for the nuclear power plants. Instead of upholding such signed contracts, the government called on renewable energies companies, commercial investors and consumers to invest in these energy forms and produce more clean energy.

The solar industry as well as commercial and private investors heeded this call and installed plants with a capacity of 7.5 GW in2011 – an immense expansion compared to 2010. As a reaction to this unexpected boom, the German government has announced the most severe cuts in the feed-in tariff for solar installations since they began their support in 2004. Instead of cutting the feed-in tariff by 15 percent, the government has proposed cuts of 20 to 29 percent. This measure should contain the new capacity to between 2.5 and 3.5 GW, according to government expectations.

Criticism from the opposition parties, trade unions as well as the PV industry in general has been swift and vocal: demonstrations erupted in Germany’s capital Berlin against the cuts. The Bundesnetzagentur (BSW), Germany’s utility and infrastructure regulatory agency, organized a protest attended by approximately 50 domestic solar companies. Their criticism is two-fold: on the one hand, the businesses are fighting lower-cost Chinese competition, which is being heavily subsidized by their government. On the other hand, they are afraid of losing their competitive edge and having to lay off employees.

This back-and-forth on the country’s energy policy is not helping to assure either the solar companies or Germans in general about the future of the solar industry. Consumers and commercial investors now hesitate to invest in a solar plant, while businesses’ warehouses are full – all results of the German governments ad-hoc decisions on energy policy as well as of opaque communications. Instead of explaining the why and what-for of such decisions, the public sees only the results of the decision-making, which do not seem to be guided by a long-term strategy. A bit more strategy and less ad-hoc policymaking would stand the government in good stead – and ensure that the public would be much less confused about the direction taken.