Why the Energiewende

Strengthening local economies and providing social justice

Local ownership of renewables provides great economic payback to investing communities. Energy efficiency and renewables together give the poor a way to hedge against fluctuating prices for fossil fuels.

When communities invest in projects themselves, the economic payback is much greater than when large, out-of-town firms invest. But while community ownership has been widespread in Germany, it faces tremendous obstacles. Since 2014, the German government has focused on offshore wind, which is largely owned by incumbent utilities, not communities. The policy switch to auctions across Germany and the EU is expected to discourage community projects further.

For instance, you can import heating oil to heat your home, and that money leaves the country, but if you install solar hot water collectors to cover part of your demand for heat, you get the energy for free and a much greater share of your energy expenses will stay within your country – and possibly even within your community. Some of your investment will come back to benefit you indirectly as tax investments in infrastructure (schools, roads, research, etc.). There have been a number of estimates for specific programs in Germany. For instance, a lot of government funding for renewables is funneled through Germany's development bank KfW. Its building renovation program has been estimated to produce three to five euros in tax revenue for each euro of tax money invested. And these building renovations not only help decrease imports of heating oil and natural gas, but also protect and create a lot of jobs in the construction sector.

Local added value also has a welcome side effect – it increases acceptance of change. When the wind farm is funded partly by the community, there is far less NIMBY-ism than when an anonymous out-of-town investor is behind the project. In Germany, hundreds of energy cooperatives have come about; here, citizens come together to collectively invest in renewables – and, increasingly, in energy efficiency. In addition to numerous power plant projects, local power grids are also being purchased from large grid operators so that communities can have more control of their own grids.

German regions and municipalities are discovering the economic opportunities in renewables and energy efficiency, especially for communities that produce more energy than they consume over the year. For more on how investments in renewables can stimulate the local economy, see the section 2 – I “Energy by the people”.

Protecting the poor

Another important aspect of the energy transition is social justice. Energy efficiency in particular not only helps promote domestic added value, but also reduces energy poverty. As prices rise in Germany, energy poverty moves into the foreground as an issue. Over the long run, the price of renewable energy will remain stable (there are no fuel costs for wind or solar, and equipment costs continue to drop), whereas the cost of fossil fuel and nuclear will only continue to fluctuate, so the energy transition itself is a way of keeping energy poverty in check.

Rising energy prices impact low-income households the most; after all, on average they spend a higher portion of their income on energy needs and are the least likely to be able to afford investments in energy efficiency such as energy renovations, efficient appliances, and fuel-efficient vehicles. The most efficient way to combat energy poverty is to implement energy efficiency measures on a large scale – including renovating low-income households to reduce energy demand.

The German government is currently sponsoring "energy audits" in a nationwide project as part of the Energiewende. The goal is to help people, including those on welfare, to conserve power, heating energy, and water. In addition, fixtures that reduce power and water consumption (such as compact fluorescent light bulbs, power strips with on-off switches, and water-saving showerheads) are provided. These energy audits are one example of how the Energiewende can produce innovative cooperation concepts.