Is Germany's Energy Transition a Case of Successful Green Industrial Policy? Contrasting Wind and Solar PV

Abstract

In this paper, we address the challenge of Germany’s energy transition (Energiewende) as the centrepiece of the country’s green industrial policy. In addition to creating a sustainable foundation for Germany’s energy supply and contributing to global climate change objectives, the Energiewende is intended to create a leading position for German industry in renewable energy technologies, boost innovative capabilities and create employment opportunities in future growth markets. The success in reaching these aims, and indeed the future of the entire concept, is fiercely debated.

The paper aims to provide an up-to-date and balanced assessment of costs and benefits of renewable energy support measures. However, since costs and benefits can differ widely between targeted technologies, we compare solar photovoltaic (PV) and wind energy to illustrate critical elements of green industrial policy success. We find mixed evidence that Germany reaches its green industrial policy aims at reasonable costs. Wind energy seems to perform better against all policy objectives, while the solar PV sector has come under intense pressure from international competition. However, this is only a snapshot of current performance, and a dynamic and systemic perspective may nonetheless make the support of various renewable energy sources advisable.

Keywords: Green industrial policy; renewable energies; Germany

JEL Classification: Q42, Q48, L52