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Germany's Energy Model for India

Jivanta Schöttli, September 8, 2015

At the G7 summit hosted by Germany in June, German Chancellor Angela Merkel was widely credited for having persuaded industrial nations like the United States, Japan and Canada to agree to a joint communiqué on combating climate change. In it, the G7 countries committed to achieving a decarbonized global economy by the end of the 21st century. They also endorsed, for the first time, a global reduction target of 40 to 70 percent in greenhouse gas emissions by 2050, compared to 2010 levels. The G7 meeting was seen as a milestone, paving the way to binding decisions expected at the upcoming United Nations Climate Change Conference (COP-21), to be held in Paris this December.

Climate change has also become an important foreign policy item for Germany, one where it does not shy away from taking a leadership position within Europe and in the international realm. Some have criticized Merkel for riding popular sentiment, especially in the wake of the Fukushima nuclear disaster of 2011, which led her to reverse her party's previous stance on nuclear energy and declare a complete phase-out of the country's nuclear power plants by 2022. However, as a scientist by training and a former environment minister, she has taken a personal interest in the subject.

But Germany's focus on this issue dates further back. The term Energiewende or "energy turnaround" has been a part of the political discourse since the 1980s, advocated then by the Green Party. Governing in a national coalition from 1998 to 2005, the Green Party pushed for the initial nuclear phase-out, a comprehensive ecological tax reform and Germany's pioneering renewable energy act in 2000.

Two principles have been at the center of the government's efforts: enhancing efficiency in production and usage, and decentralizing energy systems. Investments costing billions of euros were made to encourage German households to install solar panels and to sell the energy generated at a fixed and high price, paid through a surcharge on general electricity bills. Over time the investment has paid off, with zero-carbon energy available at rates that are competitive with energy produced from fossil fuels. According to estimates, more than 1.4 million German households and cooperatives generate their own solar or wind electricity.

As a result, Germany's energy policy can be credited with having created the mass demand and mass market in particular for solar energy. In 2012 Germany was the eighth-largest energy consumer in the world and heavily dependent on imports to meet its energy needs. Today, Germany ranks as one of the most energy efficient countries in the world, drawing almost 30 percent of electricity needs from renewable energy.

A further by-product of the Energiewende has been that today, the know-how of German companies is in high demand worldwide. To take advantage of emerging international business opportunities, the Federal Ministry for Economic Affairs and Energy has backed two export initiatives. One is the Renewable Energy Export Initiative, which helps German firms—especially small and medium-sized enterprises—to tap foreign markets and advertise "Made in Germany." The other is the Energy Efficiency Export Initiative, which assists German providers of energy-efficient products, systems and services in taking their business abroad—from testing products to penetrating and cultivating their target markets.

Over time, Germany has emerged as a frontrunner in a campaign that has been pushed by citizens, politicians and industrialists, to combat and mitigate climate change. In December 2014 the cabinet adopted the Action Programme on Climate Protection 2020, to reduce greenhouse gas emissions by at least 40 percent by the end of 2020, compared to 1990 levels.

At the COP-21, where 196 nations are expected, countries will make nationally determined proposals on targets and climate action plans. Amongst the world's major climate change players, India has yet to announce its emission target actions and is expected to do so by September 30. Prakash Javadekar, India's environment minister, has said that India will announce the expected voluntary measures but will also put forward a plan that would draw upon international financial support, technology exchanges and incentives.

Indian Prime Minister Narendra Modi is a vocal proponent of wind and solar energy for India, and his government has announced ambitious targets for enhancing efficiency in meeting the country's growing energy demand through alternative sources. In this quest, German companies and the German government are attractive partners for India.

Existing programs attest to the new convergence in interests. For example, the KfW (a government-owned development bank) has been financing energy-efficient residential buildings in Germany. With the construction boom in India, it extended a credit line of up to $56 million to the National Housing Bank of India as well as providing technical assistance. The GIZ, a government agency operating on behalf of the Ministry for Economic Cooperation and Development, has been cooperating with India's Department of Industrial Policy and Promotion in the Ministry of Commerce and Industry on climate change adaptation in industrial areas.

Climate change can thus become the area of Indian-German collaboration where "Made in Germany" technology, expertise and know-how meets the "Make in India" goal of promoting an efficient and sustainable industrial base.

This article was written for Gateway House: Indian Council on Global Relations. Jivanta Schöttli is a lecturer in the department of political science, South Asia Institute, Heidelberg University, Germany.

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