The European context of the energy transition

In 2018 a European Union directive sets the target of 32% renewable energies in 2030. This figure corresponds with that of the law of 17 August 2015 (1) on the energy transition for green growth, by which France has also commits to reduce the share of nuclear power in electricity production to 50% by 2025. According to this law, the share of renewables in electricity production will have to reach 40% in 2030. In Germany, first legislative measures to encourage renewable energies date from 1990. The objectives are currently formulated as follows: in 2050, at least 60% of renewable energy, 80% of electricity produced with renewable energy and full output nuclear power by 2022 (2).

These environmental imperatives are set in the context of an energy market profoundly transformed by more than two decades of reforms aimed at establishing a competitive European energy market.

 

France and Germany: two separate paths to reach the same destination?

France and Germany originally have very contrasting energy systems:

  • France has long operated with a quasi-monopolistic organization and a high share of nuclear power generation (currently over 70%).
  • Energy production in Germany is initially based on a system of agreements to coordinate a highly fragmented set of producers. The share of coal and lignite is very high because of abundant reserves and their historical role in the industrial development of the country.

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European energy market reforms have reduced differences in the organization of the market. On the other hand, energy choices still bear a clear national footprint. Germany continues to operate coal and lignite plants, and France continues to operate nuclear power plants. This situation generates a lot of perplexity, even opposition, especially on the French side.

 

Is the German energy policy absurd or, on the contrary, coherent?

A recent paper by Laurent Alexandre presents the French energy transition as the transposition in France of a device, not to say a religion, having already failed in Germany. In short: renewable energies are not enough to ensure production, emit CO2, increase dependence on solar panel producing countries, lead to the maintenance of coal, and dependence on natural gas producing countries. The transition would be a transition to more harmful emissions and more energy dependence.

Other aspects can contribute to a sense of absurdity:

  • The fluctuating nature of renewable electricity leads to negative price situations (3).
  • Popular opposition to wind turbines is getting organized.
  • The rise in electricity prices due to renewable energy subsidies.

The energy transition also gives rise to opposition in Germany. On the one hand, German opinion varies according to the region, in particular according to access to coal. Bavaria is thus historically relatively more open to nuclear, with no coal reserves. On the other hand, opinion also varies by sector. Renowned industry captain Wolfgang Reitzle has taken a stand against the energy transition (4).

However, this opposition, although not devoid of political relays, is weak in comparison with the political weight of the environmental movement, which has relied on the opposition to nuclear (military and civilian) and has thus provided many Germans with a sense of identity and cohesion. The question is whether, beyond the political exploitation of the religious force of ecology, there is an economic coherence in the energy transition policy.

To evaluate this coherence, it is necessary to look at the path traveled and the projected path. The German government’s communication highlights the rise in the share of renewables in electricity generation (38% in 2018) while noting that the goal of reducing CO2 emissions by 40% in 2020 compared to to 1990 will not be reached (the reduction will be rather towards 30%). However, it announces new measures and is optimistic about the longer term goals:

  • From now on, the exit of coal is announced for 2038. And, now that the nuclear seems defeated, one observes the appearance of a movement anti-coal (5).
  • The electricity transmission network will be developed, especially to connect the North and the South.
  • There are projects to encourage the storage of energy from renewable sources.
  • The growing competitiveness of renewable energies will allow the generalization and interconnection of the energy transition throughout Europe.

Proposals currently under discussion at the German and European levels envisage setting up a European industrial policy to develop the battery sector in particular, or introduce a carbon tax at the borders. In short, the energy transition is a project of total decentralization of energy production. The question of coherence is in fact that of the credibility of the project: will Germany be able to mobilize the massive energies required to put in place the new energy system that it has set itself as an objective? Or will this project fail because of its excess?

 

Opportunities: innovate in storage, electrical mobility, and digital transformation

The prospect of a generalization throughout Europe of the energy transition may seem distant. However, the legislative framework of this transition is binding in the present.

The situation presents opportunities for industrial innovation under at least three points of view:

  • Storage of renewable energies: storage is one of the main weaknesses of renewable energies. We published on our blog open-organization.com a year ago a technology sheet on the existing options. More recently, we have been interested in the potential of hydrogen (here and here).
  • Electric mobility (6) : the German government considers that the future of mobility is electric and puts incentives in place to encourage consumers to buy electric cars. The French manufacturers are ahead in this area: will they be able to do something of this advantage, beyond the windfall effect?
  • Digital transformation: Digital transformation promotes more active and more responsible consumer behavior. Big data, blockchain, Internet of Things … all these technologies are combined with the imperative of the energy transition, within the framework of a competitive European energy market. A subject that deserves to be addressed with the key of reading of the open organization, developed by Presans.

 

Conclusion

The energy transition appears at the end of this review as a political compromise first German, then a program of European transformation. However, the consistency of this compromise, which is presented as a systemic project, will not be visible for at least ten years. Many things can happen by then.

 

(1) Coming from a context where the question of the renewal of nuclear power stations at the end of their life arose.

(2) Germany remains a player in research in the field of nuclear fusion.

(3) A supplier pays a user to absorb excess electricity.

(4) Industries that consume a lot of electricity benefit from the exemption of the renewable energy package. But for many companies, high prices reduce competitiveness.

(5) The victory against nuclear is historically based on an alliance between environmentalists and coal advocates (who did not want nuclear competition).

(6) See our reading guide on mobility.