An empirical exploration into the role of phase-out policies for low-carbon energy transitions: the case of the German Energiewende

Dr Karoline  Rogge, University of Sussex

The energy sector plays a significant role in reaching the ambitious climate policy target of limiting the global temperature increase to well below 2°C, as agreed at COP21 in Paris. To this end, technological change has to be redirected and accelerated in the direction of zero-carbon solutions which calls for a policy mix including demand pull, technology push and systemic instruments. In addition, policies aimed at the destabilization of the existing energy system have been argued to play a key role for such a transi-tion. Yet, the effect of such phase-out policies on the development and diffusion of low-carbon technol-ogies has received little attention in empirical research so far.

This paper addresses this gap by taking the case of the transition of the German electricity generation system towards renewable energies – the so-called Energiewende – with its target of reaching at least a level of 80% electricity generation by renewable energies by 2050. This long-term target is supported through a rich instrument mix, which also includes destabilization policies – most prominently the nuclear phase out strategy until 2022. Based on a survey of innovation activities of all German manufacturers and suppliers in renewable power generation technologies conducted within the GRETCHEN project this paper explores the impact such destabilization policies may have on the development and diffusion of renewable energies. The innovation survey was conducted by telephone in the summer of 2014 and achieved a response rate of approximately 36% (n=390). The sample includes both new entrants but also incumbent players having redirected their activities towards emerging green niche markets in solar PV, onshore wind, offshore wind, biomass and biogas, geothermal, wave and tidal and hydro power.

According to the GRETCHEN survey, German-based manufacturers believe the nuclear phase-out offers the strongest support for the diffusion of renewable energies. In contrast, the EU Emissions Trading System – another destabilization policy – hardly seems to have had any effect. The same holds for the framework conditions for fossil power generation technologies, where no specific phase-out policy was in place at the time of the survey. In addition, the manufacturers were most keenly aware of the political will to promote power generation from renewable energies at the time of the nuclear phase-out after Fukushima, but companies think this credibility of the policy mix has ebbed away since then. This is important as it is this credibility which was regarded by companies as almost as important a factor for determining their innovation activities as the German Renewable Energy Sources Act (EEG), the political expansion targets and foreign demand pull instruments, whereas the EU Emissions Trading System played hardly any role. Furthermore, regression analysis indicates that those companies which view the policy mix as more credible invest more in R&D in renewable energies. Additional analysis finds that, among others, not only the German feed-in tariffs for renewables determine the perceived credibility of the policy mix, but also other instruments, including the nuclear phase-out and the EU Emission Trading System. That is, destabilization policies are shown to positively contribute to companies’ perceptions of the credibility of the policy mix, which in turn leads to higher investments in corporate R&D in zero-carbon technologies.

Based on these findings of a positive effect of destabilization policies on the development and diffusion of renewable energies the paper derives policy implications on how to tailor policy mixes in times of innovation and disruption currently occurring in the energy sector in transition.