Germany and Europe: Towards a New Growth Path? – Energy Sector Transition

December 11, 2012
Neue Promenade 6, Berlin, Germany

Energy Sector Transition – German Madness or an Opportunity for Growth?

Germany has decided to phase out nuclear energy and to transform its energy sector into one based on renewable energy. On the one hand, this decision can be viewed as a purely political one. On the other hand, it can be regarded as a potential source of economic growth with innovation and technological advances, which may increase energy efficiency and general productivity. The goal to raise the share of renewables in the energy market to 20% turned out to be successful. This largely happened due to the feed­-in-­tariff and without significant changes to the structure of the energy market. But striving towards a 100% share of renewables will require massive changes in technology and infrastructure related to production, storage, grid and consumption, as well as associated transformations of governance structures and the market mechanisms themselves.

Currently, the increasing price for electricity associated with the energy transition is subject to much criticism within Germany. Other countries are watching with a skeptical eye. How can the energy transition become an economic opportunity not only for Germany but also for other countries?

For this, it is important to understand which actors are involved, their interactions, the set of choices they have and the governance arrangements hindering or promoting this transition. Furthermore, it is crucial to distinguish different stages of technological development and to investigate the governance structures and incentive mechanisms fitting the respective development phase. The size and composition of transaction costs and opportunity costs involved play an important role and differ depending on the circumstances.


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