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Germany Just Gave This One Energy Segment a €17 Billion Boost

by | published June 3rd, 2016

In an attempt to wean Germany from any dependence on nuclear energy, a few years ago the government of Angela Merkel embarked on a massive project to use – solar and wind power – to usher in a new age of environmentally-friendly power production.

The initial results have hardly been what the ministers intended.

Phasing out nuclear power and moving into reliance low-carbon power sources has actually resulted in a situation that’s far worse – for both the environment and for German power consumers.

But now, Berlin is abuzz with the latest attempt to rescue Germany’s massive energy reorientation.

I’m talking about €17 billion being pushed into one specific sector of the energy market… a sector we’ve advanced here in Oil & Energy Investor for some time…

Germany Lacked the Technology for its Original Plan

Now, everybody knew that such a change would require significant improvements in both infrastructure and electricity generation. Some of these require advances in technology that simply aren’t available on the market yet.

On the one hand, that provides a magnificent target for scientists, technician, and entrepreneurs on both sides of the pond.

These opportunities involve tackling the inversion problem (the loss of energy when the direct current generated by solar or wind is converted to the alternating current necessary for use on the power grid), the lack of a revolutionary breakthrough in battery storage (the holy grail in the next generation of power production), and everything in between.

On the other hand, this German energy overhaul signals tough times and sky-high energy prices until these breakthroughs emerge.

Now, nuclear power may have its detractors, especially after the Japanese Fukushima disaster five year ago. That was the event that mobilized the political movement in Germany that brought down nuclear power.

But it remains true that nuclear power is still the cheapest way to generate electricity and, at least from a carbon standpoint, has no environmental impact.

Unfortunately, to date, this has fallen on deaf ears in Germany. The country’s power grid is now a much more expensive and carbon intensive energy space than it was when this zero-nuclear experiment began.

The country is importing record amounts of American coal to make up its energy shortfall, worsening the environmental impact. This has further required an extension of the life of several already outdated coal-fired power plants.

But on the nuclear front, Germany’s situation is even more embarrassing…

Germany Replaced Nuclear… with Nuclear

You see, to cope with the shutdown of its own nuclear power plants, Germany is importing record amounts of electricity generated by neighbor France – where over 70% of the power comes from nuclear reactors.    

So much for the switch to low-carbon, zero-nuclear…

Of course, another consideration brought to the fore by Germany’s attempt to rely on solar and wind as the primary energy source – something never attempted before anywhere – is the need for backup power generation.

The reason is simple: solar power requires sunlight, and wind power requires a breeze. Cloudy or calm days must be accounted for, as does the need to balance peak and off-peak demand, and the inability to gather solar power during nighttime and having to shut off turbines when wind gusts record velocities much above 40-45 miles per hour.

Relying on renewables, therefore, still requires that conventional power stations remain to provide secondary generation capacity. That both dramatically increases expenses while reducing the genuine impact of a renewables-based power grid.

Which makes Germany’s five recently announced policy initiatives intriguing. Not the least of which comes from the new emphasis on something we’ve advocated all along here in Oil & Energy Investor

Germany’s Five Steps – and €17 Billion – to Greater Energy Efficiency

You see, Germany’s Ministry of Economic Affairs has released a new €17 billion strategy to boost energy efficiency in the country. The plan stretches until 2020, and has five parts:

  1. A program to prevent heat loss and use waste heat in businesses, with funding for both upgrades of old facilities and construction of new ones.
  2. Investment grants for more efficient pumps, electric motors, ventilation and compression systems, etc.
  3. A program that has all sectors of the economy, including utility companies, bid against each other on measures to save electricity, with the aim of increasing investment in energy-saving technology.
  4. A pilot project aimed at promoting digital energy meters that can easily tell users how to save energy themselves.
  5. A public information campaign aimed at reducing the use of heat and electricity by consumers, businesses, and government (which will include a movie on the topic of energy efficiency).

Make no mistake – the German energy quandary is not a simple nut to crack.

Nonetheless, if policy initiatives like these pan out, there are going to be some nice investment opportunities – €17 billion in just four years is no laughing matter – in what is a rapidly expanding energy efficiency segment, both in the generation and usage of power.

I’ll be following this, and any opportunities it opens for U.S.-traded companies, closely, right here in Oil & Energy Investor.

P.S. While Germany is trying to move away from nuclear power – by (unintentionally) replacing it with imported nuclear power from France – many other countries are doing the opposite. In fact, 65 nuclear reactors are already under construction, and another 515 are in the planning stages. This is creating a 20 million pound supply gap in one key element – and presents you with three distinct, urgent investment opportunities. To see my full analysis, click here.

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  1. Malcolm Rawlingson
    June 3rd, 2016 at 19:43 | #1

    A very perceptive article Kent. German energy policy is pure smoke and mirrors. Let me say that I am generally in favour of solar and wind energy….where it makes practical sense. Solar power in desert areas where the Sun shines most of the day and for most of the year makes good sense to me. Solar power in cloudy Northern countries like Germany where the amount of sunshine is low for most of the year makes no sense at all.
    France is not the only nation from which Germany imports nuclear generated electricity. The Czech Republic also sends many megawatt hours of nuclear generated electricity into Germany. Angela Merkel is a complete hypocrite when it comes to her nuclear policy – and I believe it will be the undoing of the German economy.
    I have been in the nuclear energy business for 44 years and counting and you cannot replace the energy density of uranium with anything else. Distributed energy sources such as wind and solar have their place but its not Germany.
    Spending 17 billion Euro’s on energy efficiency sounds like a laudible thing to do…and it is except someone has to pay that money back and it will not be from energy savings.
    The real driver is nothing to do with nuclear power but everything to do with the fact that most of the gas for heating homes and buildings comes from Russia. Merkel cannot say boo to a goose as far as Ukraine is concerned because she risks Putin shutting the gas valves.
    THAT and not nuclear phase out is what is driving this policy.
    The folly of German Energy policy will gradually erode the German economy. When driverless electric cars hit the streets in a big way Germany will not have the electricity capacity to supply them neither will it have adapted its car industry quickly enough to take advantage. Its entire economy is built around gasoline and diesel engines and those are now going to be obsolete relics of past times in a few years.
    You should take a look at Ontario Canada Kent. These are the policies that are working. The first step was to make the electricity system carbon free. That is nearly done. Hydroelectric power and nuclear power with wind and some solar produce the lions share of electricity in the Province. Natural gas using combined cycle technology (65% efficient) allow for peaking power. The next step is to electrify the transport systems. Rail electrification is coming soon and electric car incentives will hasten the adoption of electric vehicles in the Province. Ontario stopped burning coal in 2014. Germany is burning more coal than every before. Our way – based on nuclear base load works. Germany’s way based on smoke and mirrors does not.

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