The German Oversupply of Renewable Energy
As the renewable energy race ramps up with each region and country vying to achieve ever more ambititous goals, sometimes the price end-users pay for energy ends up as the beneficiary of the situation. Over the Christmas break, energy consumers in Germany were actually paid to use energy. Part of that of course is due to supply and demand. Supply greatly outstripped demand at that time across the country. Basic economics helps us predict what happens to price for a particular commodity with that particular imbalance. Unseasonably warm weather throughout a lot of Germany and plenty of wind power on the grid contributed to this. But a greater force underlying this phenomena is Germany’s relentless pursuit of renewables from a policy perspective. The country’s investment in the 2014 Renewable Energy Act has helped tilt Germany’s renewable energy mix even further towards renewables like wind, offshore wind, solar and biomass and other areas. Renewable investment has ben so effective in a sense that German end users have been paid to use energy on several occasions. Specifically, on Christmas Eve of 2017, factory owners and other high energy consumption customers were paid, according to the New York Times, in excess of €50, or around £44, per megawatt-hour.
With the sun shining for sustainably long periods and the winds blowing actively, on some days in Germany the country gets up to 85 percent of its electricity from renewable sources. This portends well for lower use of fossil fuels and for the environment. Germany has now set a goal of achieving 80% of gross energy consumption by renewable sources by the end of the year. With the renewable tends only accelerating further in Germany in the years to comem will power producers find a more optimal mix or a better way to monitor renewable sources, store them when necessary and find a more appropriate way to balance out supply and demand? Time will tell but clearly the march towards plentiful renewables is a good problem to have.