Lessons from Germany: The Danger of Energy Mandates

As the United States faces the specter of rolling blackouts due to the retirement of fossil fuel-fired generation facilities, German officials are acknowledging that their premature closing of coal power plants was a mistake and are bringing the generators back online.

America’s current crop of elected leaders looked to Germany, which is considered the gold standard for clean energy, for policy inspiration over the past decade. Following decades of anti-nuclear sentiment, former German Chancellor Angela Merkel began phasing-out nuclear energy in 2011, beginning the shutdown of the country’s 19 nuclear reactors. Today there are only three still online. Not long after, the German government began shutting down coal power plants – with the goal of transitioning completely away from coal by 2038 at the latest – increasingly relying on new wind and solar power projects, as well as leaning into natural gas for the country’s dispatchable energy needs.

It was a gamble that did not pay off the way German officials expected.  Even before the war in Ukraine, Germans paid nearly three times the average rate for electricity in America.  By using top-down mandates rather than relying on market forces, Germany is now in an energy crisis of its own making, and America’s elected officials should take note.

Relying too heavily on certain generation technologies rather than a robust all-of-the-above mix leaves countries – and states – vulnerable to unexpected factors that impact favored technologies. In Germany’s case, Russia’s war in Ukraine led to a ban on imports of Russian natural gas and coal at a time when Germany’s ability to generate nuclear energy and rely on domestic coal production is at a 50-year low. The country is scrambling to find new sources of natural gas and is re-opening coal power plants to provide dispatchable power, which wind and solar technologies are unable to currently provide.

The United States is staring down the barrel of a similar problem, albeit for different reasons. In the rush to transition to wind and solar, states began shutting down coal power plants and continued hampering nuclear power operations. Unfortunately, industry regulators such as the North American Electric Reliability Corporation (NERC) warned this spring that up to two-thirds of the U.S. could experience blackouts this summer, due in large part to these top-down mandates and market-distorting subsidies of certain favored technologies.

Fortunately, state leaders are taking notice of this issue. Wyoming passed a bill that establishes a standard by which legacy power generation facilities should not be mandated to close unless a proper replacement is already online. This bill is the basis for a draft model policy, which you can find at this link, under consideration by the Energy, Environment, and Agriculture Task Force at the upcoming ALEC Annual Meeting in late July.