A Thank You Card To Germany

“Indeed, the German people are paying significant money but in Germany, we can afford this — we are a rich country. It’s our gift to the world.” – Markus Steigenberger, Agora

“The Germans were not really buying power — they were buying price decline.” – Hal Harvey, Energy Innovation

ThankYou

I tend to troll some pretty random waters in my pursuit of the global energy complex zeitgeist. Arcane sites like ProCon.org keep me drinking tea into the dark hours of the night. And narrow-focus conferences such as Montreux Energy’s “Future Drive” capture my interest faster than an authentic taco truck in Boston. (I was not only the sole impact investor in the Future Drive crowd earlier this summer, I was the only investor. Period. Which was weird. And awesome.)

After all, if we are approaching the end of the golden era of hydrocarbon consumption (which, if the recent IPCC reports are worth anything more than the paper they are printed on, we all better hope is the case), and if we want to identify investable opportunities embedded in the transition to a post-hydrocarbon era, I need to develop a sense of what is happening on the fringes. Why? Because that’s where innovation happens; the feedstock for the future. Besides, impact investing conferences tend to be echo chambers, crammed with self-appointed thought leaders (like me) talking their book and working their angles. Useful, understandable and in some ways important, I suppose. But not particularly compelling.

Which is a long way of saying that I stumbled on Steigenberger’s quote late one recent night and it stopped me in my tracks. Apologies, but I can’t remember where. Try Google. I had become so accustomed to the balkanized perspective on Germany’s astonishing transformation (in good Germanic fashion, they even have a jaw-breaker of a word for it: energiewende. “Energy transition”. Energy revolution is more like it, if you ask me.) that I had pretty much ceased to think about it at all.

Advocates point to the fact that Germany is approaching 30% of total electricity generated from alternatives and renewables as an inspiring vision of the future for meeting energy needs in the developed world.

Critics point to the insane costs associated with achieving this goal, and condemn it as a massive misallocation of scarce financial resources… not to mention that Germany isn’t exactly the most solar-friendly spot on the planet.

And there doesn’t seem to be much middle ground. Which is a genuine shame, for the truth is that it is both a massive mis-allocation of scarce financial resources and an inspiring vision of the future of energy. But how much did the DoD flow to Shockley and his team at Bell Labs to subsidize the commercialization of the transistor? Or the semiconductor? Or the internet (with a wry nod to Al Gore). In other words, in many cases, someone has to cough up the dough to create a market… and in the case of renewable energy, it has been the Germans. For which they have been, largely, pilloried.

As my favorite socio-economic philosopher Rosanne Rosannadanna would have said: “If it ain’t one thing, it’s another”.

This blog could be way too long, so I’ll not indulge myself. But I do want to make one statement: Germany’s policy on subsidies for alternative and renewable energy may be the most breathtaking examples of collectivist, selfless action the world has ever seen. Why? A few highlights:

  • A recent article in the NY Times noted that “By creating huge demand for wind turbines and especially for solar panels, [Germany] has helped lure big Chinese manufacturers into the market, and that combination is driving down costs faster than almost anyone thought possible just a few years ago.”
  • Germany’s far offshore wind power project (you must watch this video) is driving technology and innovation and, yes, controversy, that will have far-reaching applications around the world.
  • Many poor countries who not that long ago presumed that coal would drive electric generation patterns are now openly debating whether or not they might leapfrog the fossil age and build clean grids from the outset (as they have done so successfully with communications) based almost entirely on German’s pioneering cash.

But….

Revolutions don’t happen without cannons and blood. As with every technology since the industrial revolution, disruption is inevitable. Entire industries in the past have been erased, even as new ones have risen. The energiewend has gutted German utility profits, with market values following in a sickening downward spiral. The Economist recently predicted that energy-related technology will fundamentally remake the electricity business, and have advocated for such things as “smart grids”, distributed power and a complete overhaul of the regulatory environment… basically starting over.

Great fortunes will be destroyed in the transition from hydrocarbons just as surely as great fortunes will be created in the transition to alternatives.

Yet even if this transition/transformation/revolution sweeps the world, it is still far from clear whether it can be implemented fast enough to avoid dangerous levels of global warming. Thus, despite the wrenching dislocations that are evident from Germany’s experiment, I, for one, applaud their commitment.

And as a consumer of electricity as well as a father of a 4-year old girl, I am grateful beyond words that the German people decided to tax themselves – to the order of about $280 per year for the average family, about the cost of one Starbuck’s Venti double mocha every week – in order to develop affordable alternative power for the world. A Promethean gesture for the 21st century.

And so, to you, Germany, a stein of the finest lager raised in the warm glow of lights powered by a bank of PV panels. Danke und trinksprüche!