Panel discusses impact of German shutdown on European, U.S. markets

Has Germany provided a model for the rest of Europe and the United States with the abandonment of its nuclear program? During today's E&ETV Event Coverage of a Johns Hopkins University Paul H. Nitze School of Advanced International Studies (SAIS) discussion, a panel of German energy experts assesses the country's progress on energy since its decision to shut down nuclear power plants. Participants include: Franz Untersteller, environmental minister of the German state of Baden-Württemburg; Friedo Sielemann, counselor for energy and environment at the German Embassy; Kate Gordon, vice president of energy policy at the Center for American Progress; Ken Green, resident scholar on environment, energy and climate at the American Enterprise Institute; Dymphna van der Lans, senior trans-Atlantic fellow at the German Marshall Fund of the United States; and Jack Janes, executive director of the American Institute for Contemporary German Studies at Johns Hopkins University.


Friedo Sielemann: You've heard a lot of speeches already, so I'll cut this very, very short, because I think you're all eager to hear about the issue at hand. And I'll just make two remarks or three remarks, I'll try to make them really short. First of all, I wanted to remind you that today is Germany's national holiday, so the people you see here are all working on a holiday.

It takes people from the hard-working, industrious region of Baden-Wurttenburg to come here on a Sunday and take part in the discussion on a national holiday. Apart from that, you will find anything you want to know about the minister online, so I'm not introducing him much more.

I wanted to introduce two things which are not specifically for Baden-Wurttenburg, but for Germany as a whole when it comes to the discussion on nuclear energy and I wanted to take them just ahead a bit. And there's two points I wanted to make.

When we observed the discussion here it sometimes seemed as if Germany had run away from nuclear energy out of a panic after Fukushima. That is something…that is a very wrong impression, because Germany has been discussing nuclear energy for decades.

Hardly any issue has been so thoroughly discussed in Germany as nuclear energy. And that led to the decision to phase out nuclear energy in the year 2000 already, which became law in 2002.

And that also led to the government we have now, which is a center-right government, Christian Democrats and Free Democrats to confirm the phase out of nuclear energy, just with a different timetable that we had before. And that has been then changed, only the timetable has been changed after Fukushima.

And this leads me just to the second point I wanted to make and I wanted to make this ahead because you'll hear the specifics about Baden-Wurttenburg, but one point that's really important in Germany is that there is a broad consensus in society on this issue.

It has evolved over time and has a broad consensus not only to phase out nuclear, but also to phase in renewable energies at the same time. And I think this is something you really have to keep in mind when you hear about the specific programs in certain German lender, or when you hear about it as a whole, that there is a deep consensus in Germany.

And with that, I just want you to enjoy the discussion. I hope we'll have an interesting discussion, I'm sure we have, because we have an interesting panel. So, again, thank you Mr. Untersteller for coming to Washington and I hope you have enjoyed and will enjoy your further stay here.

Franz Untersteller: Dear Mr. Janes, dear Mr. Sielemann, thanks so much for this warm welcome this morning. Thank you for the invitation to Johns Hopkins University this morning. It's a great pleasure and honor for me to explain to you what the energy transition or energy revolution in German's perspective, nuclear power phase out, all about.

I will also try to illustrate the consequences of this decision for Baden-Wurttenburg. On March 11, a terrible earthquake in Japan triggered a tsunami. Both of these events lead to a series of accidents in the nuclear power plants of Fukushima, thus destroying four reactor blocks and liberating substantial amounts of radioactive material.

At the beginning of June, the German government decided that, as a result of this incident, it would gradually phase out of the usage of nuclear power by 2022. The amendment to the Nuclear Power Act was accompanied by a number of other laws that were enacted. So since the beginning of August the nuclear power phase out has been a done deal.

The energy transition in Germany is now irreversible. This situation was supplied in the German parliament by four parties, by the Christian Democrats, by the Social Democrats, by the Liberals and also by my party, by the Green Party.

And Mr. Sielemann talked about that, let's see, in Germany there is a very situation that the whole people, that it's a good decision that the government has done in this summer. This development shows that even 5,500 miles away from the epicenter, an earthquake can still have a considerable impact.

But what are the effects of this nuclear power phase out going to be and what can the German government do to steer its consequences in the right direction? Energy and climate policies will be among the priorities of the new state government in Baden-Wurttenburg, which is the result of a coalition between the Green Party and the Social Democrats.

We will develop an integrated energy and climate protection concept. The main points of which will be the following. First of all, we want to implement the nuclear power phase out in a systematic and rapid manner.

Secondly, we are planning on significantly rising the share of sustainable energy resources in our electricity production. Our goal is to derive 38 percent of our energy from renewable energy resources by 2020. Today we are on a level of 70 percent.

Thirdly, we want to include flexible gas powered plants in the energy production system. Fourth, our infrastructure that is the electricity grids and renewable energy storage devices will have to be adapted to the improved system of power plants.

And fifth, we want to maximize the potential to increase our energy efficiency and energy savings in order to significantly reduce our energy consumption and decouple our energy use from economic growth. How are we planning and organizing the nuclear power phase out?

At the beginning of the year four nuclear power plants were in operation in Baden-Wurttenburg. The two oldest ones were shut down in March, together with six other nuclear power plants in Germany. And these shutdowns are final.

The two remaining nuclear power plants in Baden-Wurttenburg will be shut down by 2019 and 2022 at the latest. Given that Baden-Wurttenburg is a highly industrialized state, it is self-evident that its government will sustain the state's energy supply at all times.

Baden-Wurttenburg will be particularly affected by the shutdown of nuclear power plants, since nuclear power currently provides more than 50 percent of the state's electricity supply. And we must accept that it won't yet be possible to meet our electricity demands entirely and exclusively with a decentralized supply grid of renewable energy sources.

Therefore, we will still need to derive some of our power from more predictable coal-fired power plants. For this purpose we will use a conventional coal-fired power plant, which will secure our electricity supply.

The German Federal Network Agency has confirmed that this will secure our electricity and heating supply for private households and the industrial sector at all times through the winter, even in the case of extreme weather conditions. Moreover, in the medium term we will also need more high efficiency and flexible gas-fired plants.

Such plants are easily controllable and, if needed, they will be able to balance our potential irregularities in the renewable energy supply. Ladies and gentlemen, if you leave something, you have to go into an alternative and, therefore, our state government is planning on significantly rising the share of renewable energy sources in our overall power and heat supply.

Baden-Wurttenburg's biggest expansion potential lies in the area of wind power. The share of wind power in the total electricity supply thus far is a mere 0.8 percent. In this area we are aiming at a future share of 10 percent.

According to our wind atlas, we have enough suitable locations to install wind power facilities, efficient and powerful wind power facilities. Next to the wind power, we think that photovoltaics offer the biggest potential for expansion.

We have been able to reach surprisingly high growth rates in this area over the course of the last two years. In 2009, we installed around 500 additional megawatts and in 2010 we added more than twice that, overall around 2.8 gigawatts were connected to the grid by the end of 2010.

On sunny days photovoltaics already produce up to 25 percent of our electricity supply in our region, Baden-Wurttenburg. We have also attend a high level of supply from water power. In 2010, 8 percent of the cross electricity supply was derived by hydroelectric installations.

In this area we are constantly adding new plants and we are also checking to see where small installations would be efficient. Biomass energy is making important contributions to our energy supply as well. However, the supply share we get from biomass energy cannot be raised due to the growing competition for limited biomass resources.

Unfortunately, renewable energy sources come with a disadvantage, which is that they do not already yield equal amounts of energy all throughout the year. Therefore, we need more energy storage devices, such as pond storage or natural gas reservoirs. Ladies and gentlemen, energy that can be saved has been and will be the best form of energy.

According to a study by a German business initiative entitled "Energy Efficiency," 68 terawatt hours of electricity and 155 terawatt hours of heat energy could be saved each year. By international standards, Baden-Wurttenburg ranks very high on energy efficiency, but we have to get even better.

The technologies that are necessary for an energy transition, such as high-efficiency engines, low-energy lighting and combined heat and power generation devices are, for the most part, available. These technologies are frequently being provided by domestic suppliers.

It has also been shown that it is often in the best interest of enterprise to exploit the energy savings potential that is available. And this is mostly because the energy cost in many different sectors, especially energy expenses for small and medium-sized enterprises, have been business wise competitive factor for a long time.

There is a plethora of funding programs dedicated to improving energy efficiency, both on the federal and on the state level. We have to reduce demand for resources and energy with the help of innovative, environmentally-friendly techniques and efficiency strategies.

This ambitious and innovative approach is being promoted by a recently founded agency in Baden-Wurttenburg called the Innovation and Technology Center for Environmental Technology and Resource Efficiency.

A report by the consulting firm McKinsey illustrates the economic significance of environmental technologies and resource efficiency for the state of Baden-Wurttenburg. By 2020, environmental as well as resource efficiency technologies are expected to add value worth €30-€45 billion, what means between $40 and $60 billion for the state of Baden-Wurttenburg, thus accounting for half of the overall projected growth.

As a consequence, these technologies offer the biggest potential for growth. This is a great opportunity for the state of Baden-Wurttenburg and, lady and gentlemen, we will seize it. Our state government is fully committed to implementing the energy transition.

We are doing this together with our partners from the energy sectors, municipalities and private enterprise. Collaboration will be necessary to implement the energy transition successfully. I'm looking forward to your input. Thanks a lot for your interest.

Jack Janes: Thank you very much Mr. Minister. We're going to have a discussion with you and I think if there are questions to be raised, that we'll come back to them in the Q&A. But we first I think should get the perspectives of our other panelists here.

And we agreed that all of you got the information about these incredible credentials that they each carry, but we agreed before the we will start with Kate Gordon, who is of course at the Center for American Progress and has been not only involved in this as an expert, but, just to warn you other two panelists, she's a lawyer.

And I think she will make her case accordingly. So, if I can start out this in a way, Kate, I mean you heard the minister lay out the plan for one state, I think indicating of course that you have to look at the federal level, as well as at the state level.

My question, and I'm sure you're going to comment on this in addition to your own thoughts, but would be immediately, what did you hear that we can use in terms of our struggle with the same issue in the states?

Kate Gordon: That's a great question. It's particularly good to hear about a regional effort right now that's working in concert with a national effort, because we here in the U.S. are in a particularly difficult place in terms of national policy. And it's particularly important for our regions and hours states to become leaders again.

I think last time you were here in the United States was a few years ago when the scene looked very different. It was-you know, back in 2008, we had the recovery act, the stimulus bill, which was really the largest single domestic energy bill we've ever had in the United States.

It put an enormous amount of investment money into infrastructure, into financing for research and development and, you know, new renewable energy projects, a lot of new funds into energy efficiency and transportation.

In 2009 we had a very active debate about whether we would have a cap and trade policy on carbon at the national level and/or an energy policy that wasn't cap and trade, but that put a significant amount of investment into renewables and efficiency.

We are now at a moment when the stimulus bill funds are expiring and when none of those other bills passed and when we actually are sort of at a significant place of all-out attack at the national level on clean energy as an idea and on the idea of government investing. Those two things, those two pillars are under attack.

So we're really kind of not only back before we were in 2008, but I would say sort of, you know, sort of lower than that. So the states have been particularly important. And I think that's something that I heard and really responded to, is that the regions where job creators and industry are really trying to build and trying to do economic development the way that states really do it.

In the United States the federal government claims not to do economic development, but our states do economic development. They look at their existing resources, they look at where they're strong, competitive, have competitive advantage. They decide where to try to grow or not to grow.

Where we've seen that happen at the state level here, we've seen investments in clean energy. We've seen policy certainty, we've seen places like Ohio for instance where we had a governor who just came in who ran on a platform of getting rid of the state's renewable energy standard.

Ohio has a pretty conservative renewable energy standard that allows for things like carbon capture and sequestration, but it is a standard in an industrial state.

The governor, Kasich, ran against that and said he would repeal it, got into office and one of his first meetings was with a number of business members in Toledo who said, "You can't get rid of the standard. This is the only thing keeping Toledo's economy together. We have become a solar hub where we used to make windows. We're relying on existing technology. We're relying on existing infrastructure, you can't do this."

And the governor said, listening to the business members, "You're right," and changed his mind. Similar situation in Michigan where we had a Republican governor run on a clean energy platform because of the advance battery work there, which is really fueling the state's economy, and in California of course, which has been a leader.

So, I think we're at an interesting moment here and really looking back to the states again to become leaders in the clean energy transition. But really, I'm concerned and I think many of us are concerned that that just isn't enough. You quoted a McKinsey study -- a European study, I've seen that study on sort of how to flexibly -- how to do the transition flexibly and according to regional differences.

Another McKinsey study that just came out here was with Google. I don't know if people saw this. It was a really interesting study about how innovation and breakthroughs can sort of have an economic impact in the energy space.

And what that study says is that if there is innovation, sort of if you look at a model where there is a lot of breakthrough innovation in things like energy storage and kind of scaling up renewable energy, you see an enormous economic benefit.

You see, I think, $155 billion per year in GDP growth. You see, you know, over a million net jobs, reduced household electricity costs by almost $1000 a year, and obviously reductions in oil and greenhouse gas emissions.

But the problem with this study was that what it showed was long as coal and natural gas continue to be as cheap as they are now, as long as those technologies continue to not factor in the cost to health, to the environment, as long as there's no cost to carbon, as long as there's no policies moving us toward a renewable energy future, renewable energy will be crowded out and innovation will not happen at the level it needs to in the United States.

So that's a bunch of stories there. We're not going to be leaders in innovation. We're not going to have those economic benefits. We're not going to see those sort of -- moving forward the way we need to.

And, honestly, places like Germany, China, Spain, other places around the world that are really embracing this future and are passing the policies and do have a cost of carbon that sort of evens the playing field, will be far ahead of us by the time we get our act together.

So that's really where we are I think here, is in a moment where we're very used to being an innovation leader. We're very used to being a world leader on many of these technologies. But we are facing challenges both from policymakers and just from the market itself to that leadership.

So I think that's kind of where we are, we're in sort of a difficult place, but, again, hearing from places where regions have a strong role and where an industrialized region in particular can really step forward and say, look, we are responding to this imperative, the policy imperative and the public imperative.

We are responding by thinking hard about how we need to adjust our energy use and how we can do that and still maintain economic competitiveness. That's very heartening to hear and I think we can learn a lot from it.

Jack Janes: Thanks Kate. Ken, you heard Kate say the notion of federal investment is under attack. Both of the countries that we are talking about today are very federal countries, very federalist countries.

And one wonders whether or not, in the context of the paralysis shall we say or at least at the moment the indecision in Washington about how to proceed on this issue, that it falls back to the states to take initiatives. You spent a lot of time in California. You know where that state has been in terms of leadership.

Again, asking the same question, what did you hear from the minister that you could perhaps see in a similar dynamic working here? And maybe you want to take issue with Kate as to whether or not a federal investment is a necessary thing to get this innovation going.

Ken Green: Thanks and good morning everyone and thank you for having me in. I almost went to Johns Hopkins for my doctoral degree. I interviewed, but I decided to stay at Los Angeles and go to UCLA.

Jack Janes: The weather is better.

Ken Green: The weather is better, tuition is lower, it was lower at the time, now of course you can't say. But I appreciate you having me here today. I think Kate and I actually, strangely enough, largely agree on the really big picture of what's happening in the United States and it really does relate to this question of regional versus federal.

Right now, for most of its history, the United States has had a largely unplanned energy economy. I mean there has been great weeping and wailing of why don't we have a federal energy policy? And the reason we don't have one is because in the past, the policy, as it were, of the United States, was that we have 50 states. The states are laboratories of democracy.

They come up with interesting ideas. They also succeed or perish-succeed or retract based on the validity and usefulness of those ideas and that the federal government is not the source of knowledge. The federal government is not the central planning facility to tell people in Maine how to shape their roof and to tell people in California how to get their next couple of watts of electricity.

And we are now at a crossroads in the United States where people are saying that we need, in fact, to move to a planned energy economy. That we need a federal energy plan. That the planning for these decisions should be centralized, should be run by the federal government in coordination with the environmental and other agencies of the federal government.

And I think that is-in fact, Kate's exactly right, that is the source of tension that we face right now. I think it's a minor-it's a little oversimplification to say that people are attacking the idea of federal investments. I have said fairly often that, in fact, the federal government does have a role in energy policies, particularly in energy investment in fundamental research and development.

We have evidence, there's data that suggests that markets, private actors in markets under invest in basic R&D at the university level. And there is an area where the government has, in the past, contributed and created products that were picked up by the private sector and turned into massive profit areas.

The Internet being a case in point. At the same time, we also have an equal wealth of evidence that says federal investment in applied research and development, in scale up from bench to application and from application to distribution and development, either, one, crowd out existing private investment or, two, underperform private investment, because there's a lack of responsibility.

The private venture capitalist puts his money where his mouth is and if he loses his money, he loses his investors and he loses his shirt as we say. When the government invests a planner at the government says I think Solyndra looks like a great opportunity. Let's buy! How much? Well, how much have you got in your bank account?

Well, I happen to be the federal government, so I have half a billion dollars. All right, and who's responsible? Is anyone fired? Did anybody's bank account take a hit other than yours and mine, the taxpayers? No. And so there is no constraint on the wishful thinking when a distant government planner chooses a technology.

So, a little more on the regional question. We talk about California and I grew up in California. I went to school there. Many great things to be said about California. One of them is not its economy.

It is true, actions-and I was going to talk about this in my prepared notes, but the bottom line is you can do almost anything you want to, or you can do a lot of things with energy, but we live in a world where actions have consequences and trade-offs are unavoidable and inescapable. This is where the Buddhists have things right.

If we didn't have trade-offs, we'd all be very happy. Everything would be great. But we do and California has made some interesting trade-offs. So let's look at California. We have regions. Let's look at California. I also lived for five years in the great state of Texas, which is a great example or contrast to California.

Because in the state of Texas you have-they have pursued a largely unplanned energy economy. And in the state of California, they have increasingly planned their energy economy based on environmental principles, since I was a kid, for at least 34 years. And let's talk about that.

The California economy is one of the worst in the country. It has gone down precipitously. It is numerically insolvent when you look at it pensions and its obligations. The Texas economy has grown tremendously over the years. California's unemployment rate is ragingly high.

It's amongst the highest in the country, especially in the teen and minority populations. The Texas unemployment rate has gone down. It's one of the lower ones in the country. Again, with jobs for the lower income brackets, the poorest people are finding jobs. California has seen massive industry flight.

In fact, they have virtually no industry left except for Hollywood and Silicon Valley corporate offices. And the corporate offices in Silicon Valley have their manufacturing done elsewhere.

Texas has seen an influx of corporate offices and high-tech manufacturing that few other states can rival in biotechnology, in chemistry, in physics, in a vast array of electronics, a vast array of research areas. California population is actually losing population. The Mexican immigration problem is turning the other way.

It's going to be a problem because they won't have enough people coming from Mexico to work in California, because there's no economic opportunity left there. And, of course, as I said, they're bankrupt. And Texas is gaining in population. Also, therefore, gaining in votes in the United States, right? Gaining in demographic power. Texas is thriving in California is bankrupt. They're a very clean bankrupt.

It's a clean and beautiful bright state if you happen to be a very well-heeled celebrity or executive. If you're trying to live, it's not so good and so actions have consequences. And energy actions have huge consequences, because-I have to plug this book I have coming out called "Abundant Energy; The Fuel of Human Flourishing." AEI is putting it out.

It's a short textbook aimed at college students. And in the research for that, being a biologist and environmental scientist by training, I was looking at sort of where we started using energy and what the role is of energy in human civilization. And my conclusion was you hear a lot about we're addicted to energy, we're dependent on energy.

And as a biologist, I looked back and found that since we harnessed the ability to use fire, between two and 6 million years ago, we look, in fact, nothing like our ancestors and we actually evolved to use energy. We are obligate energy users. That's what distinguishes us. All human tribes, no matter how remote, have been found to be able to harness energy and use it.

No animal population has been ever found to use energy in the form of fire or anything else. And so because everything we do, and I mean sitting in this room, we are all, every one of us are sucking down energy at a positively stupendous rate. Everything we do, everything we're using, everything we used to get here was made with an infusion of energy.

It was preserved and maintained and shipped with infusions of energy. Every day someone comes in here and cleans this place. They clean the rugs. What do they use to do it? Energy. Finally, when we sit here and use it, we're pouring energy into electronic devices in order to make use of it.

And so when you start tinkering with that and you make tiny changes in price, you have big changes in outcome, because the price ripples through your entire economy. So you have to be very careful if you choose more expensive options over less expensive options and there are trade-offs. You can be very, very clean and very, very broke. You can be less clean and less broke. There are choices to be made.

Jack Janes: Okay, that's an interesting zero-sum game you set up there. You said you can be clean, but broke or you can be less clean and not so broke. I wonder in the middle of that, the Dutch are very good at finding middle ways, Dymphna. But I also want to find out from your perspective, we talked about two federal states being compared here, but most of this is being done at the European level, in other words.

That's a dimension that I think we should now bring into this discussion as well. But how do you see both Kate and Ken talking about the ways to go forward and how that's being done in Europe and, to some extent, the role of government here?

Dymphna Van Der Lans: Thank you very much, so it's a pleasure to be here. I'm very conscious of the fact that I'm the eighth person to speak and you've been sitting here very patiently for 52 minutes. So I will try to be short and concise. Also, before I say something, I should probably point out that I am not a policy expert like my two esteemed colleagues here. Neither am I a politician.

I come from the business world. I know how to make money out of new technologies, which I did for the last 12 years, mostly. Also I should probably point out that I have actually never worked in the United States or Europe. I have only worked in Asia, where I run businesses in China and India for last 15 years.

So saying all that, apparently because I am Dutch, I will have an opinion and I will try to articulate it as well as I can. So, the one thing that I, sort of listening to these conversations, that I just wanted to point out is this notion of political courage. So, obviously, what's happening right now in Germany is based on the very, very long tradition, as you pointed out, of discussion and debate.

So the phase out of nuclear is not completely unexpected. It's been debated for many, many years in a very, very honest and open and balanced way, which is, as a new resident of Washington DC, I've only been here four weeks, is not happening in this country. And I'm still struggling to define how it got so bad.

It's really unacceptable as far as I'm concerned, because the urgency of the decisions that need to be made are there. We really have not enough time left to just sort of pretend that this isn't an issue. Transitioning to a low carbon economy is going to be a significant issue.

Which brings me to the point of investment decisions. I've worked in the private sector, as I mentioned. I worked for a large, integrated oil company, which is BP, and I also -- I worked in a private equity for the last two years, where I was a chief operating officer for a private equity fund.

I know all about making investment decisions and the one thing I needed and was lacking more and more was a predictable policy environment. Which leads me to the other point observation about the decision that was made in Germany.

Although it was long coming, it was still unexpected for the people who had just recently made investment decisions, mostly on the gas-fired I would say and some of it on coal as well. And significantly the people who made nuclear investment decisions.

So, as much as I'm in favor of the phasing out of nuclear as a source of energy, I think it has a role to play in the transition and I would have liked to see that phase out a bit more deliberate and a bit more carefully done and not as-although it's not unexpected, it still was a little bit unexpected or too early for some of the investment decisions that were made.

The final point, or the last point that I wanted to make is around innovation. So, although I do not agree necessarily with the timing of the decision, there's something that I immediately felt once the decision was announced, that sort of made me step back and say, well, this is great for innovation and it really, really is a good step for forcing innovation on renewable and sustainable energy sources.

Mostly because it forces people and the companies who deploy them to start thinking about business models. So as was pointed out as well by the other two people here, is that a lot of this technology is available. None of this is rocket science. It's very, very easy stuff.

I'm not an engineer, but I can run a biomass gasifier. Really, it's not difficult. You chuck it in, out comes electricity. It's not very complicated. There's solar. There's wind. None of this is difficult to do.

The real, real, real trick in making this work is doing it at scale, not at scale as in bigger turbines, but at scale as in a business model that actually gives you the opportunity to deploy it at scale. And when I say scale I have to be very careful because my pronunciation is very difficult on this scale.

But basically what I mean is it's-so, for example, if you take biomass gasification or energy storage for example, one of the things that I think you're very carefully thinking about, you need to find ways to run these as a business model, so that they're clustered together.

So you can reduce your cost of operations and, thereby, increase profitability of the business that you're running. And that's the real innovation. There's a role there for government. I'm still not quite sure what the role for government is there, so I'm hoping nobody is going to ask me that question.

But there is another role there and that's on the corporate side. A lot of these corporations, the large energy corporations have the ability to foster innovation within those organizations. It's not waiting and hoping that the entrepreneurs out there will find an angel investor who will make this work, which is very, very difficult and very stressful for these entrepreneurs.

It's finding people within these large corporations who you could call an intra-preneur, so, in other words is an entrepreneur but within an organization, within a corporation who has the ability to reach out and deploy these technologies at scale, because he can-he or she can tap into existing expertise and knowledge of those corporations.

So, I mean there's obviously-I'm also conscious of the fact I probably didn't really respond to your question, but I can come back to that later. But there is a lot of-I think there's really a lot of more courage needed than we can see right now.

So there's the political courage that we need, but there's also the courage of these large energy corporations to say, yes, we will find the people within our corporation who can help us deploy this at scale.

Jack Janes: Okay, let's come back to that European question later, but let me ask the minister a question that has to do with what you just said, because you said political courage is important. But Ken, I think, said, you know, government can't pick winners and there ought to be more corporate initiatives taken.

Mr. Minister, you are in a state which is run by a green/red government that has one of the most successful automobile companies in the world. At the beginning of your term in government, there was some statements made by your government saying, well, maybe you should make less cars. Not going to work.

But the point is, is that how do you see the cooperation with your corporate presence, which is one of the most important in Germany? I mean Baden-Wurttenburg is a leader, but you have-you have EnBW, you have Daimler, you have a whole lot of companies. Are they responding to what Dymphna just suggested is also political courage within the corporate world?

Franz Untersteller: Thanks. Also, in the future we will build cars and also in the future we are first in the world with Daimler and other companies. I would like to give you the answer in German, because for me it's very easier to give all my issues in German and Miss Holland will translate.

Jack Janes: OK.

[Franz Untersteller responds in German]

Translator: Well, I would like to respond to the question you mentioned about, well, the suggestion that we should just build fewer cars. And I would like to mention something the Prime Minister of the state of Baden-Wurttenburg said, which is that in a world where the resources are getting fewer and fewer, oil, gas, and coal, we have to make sure that we build more efficient cars and smaller cars and cars that need less fuel. So that would be our strategy.

[Franz Untersteller continues in German]

Translator: Well, at the beginning of my term, I talked to many representatives from the industrial sector, to engineers, to the car industry, and I got the impression that the opportunities that come out of this sector definitely outweigh the risks.

As you know, in Germany we've had this debate about the nuclear power phase-out for over 30 years and studies have shown that we definitely have the possibility to secure power supply, even despite the nuclear power phase-out. At the beginning of the year we still had 17 nuclear power plants in operation. We have reduced that number to nine.

And when you look at electricity prices, they have not gone up. So, we have an incredible -- this sector is very dynamic and, at the end of the day, I think if we stick with it, we will be among the winners and not among the losers. Thank you.

Jack Janes: Mr. Minister, let me ask the other panelists here. I want to come back to Dymphna about the European response to that. But, Kate, go back to the point that was just made here. I mean the argument is that they're going to reduce the 17 nuclear plants. They're going to be out of commission by 2022 and that transition, of course, is going to take a while.

That's another 10 years. How do you see it? If you were queen for the day, would you be able to-look at her eyes, would you be able to project out like the minister just did and said we can phase out over the next 10 years and we'll be all right? How much is nuclear energy producing on electricity across the nation at this point, 20 percent?

Kate Gordon: About 20 percent.

Jack Janes: OK, so what's the projectory, if there was one?

Kate Gordon: It's -- oh, that's a tough question. You know, as someone who does policy for a living, it's very hard for me to separate out any answer from policy. Given the existing environment and existing political situation in the United States, it would be very hard for us to phase out that 20 percent.

There isn't -- there just simply is not scale up, as you were talking about, in other technologies. We have a very small -- you know, we've seen small amounts and, you know, honestly, in the last two years we've seen, within the sector, huge gains in renewable energy, but the sector is tiny in the United States. And those gains are under threat I would say, because of various financing policies that might go away.

So given that we've seen -- given where we're starting and also given, you know, just to take slight issue with Ken on the lack of a national energy policy, given that we have an energy policy right now that gives subsidies to oil and gas, that doesn't account for the cost of carbon, that exempts natural gas from the Clean Water Act and the Clean Air Act, so we have an energy policy that unnaturally depresses the cost of a bunch of things and that gives it enormous amount of loan guarantees to nuclear actually, or has, it would be very, very hard for us to get there.

The one thing I'll say, and I think this is not to be taken lightly either here or in Germany, is that natural gas is a real game changer. The new reserves of natural gas being found here, being found in Germany, across a number of countries do offer an alternative, particularly to coal for base load power in this country.

Looking again at the McKinsey projections, up to 2030 in the United States, you do see a big shift towards natural gas and away from coal. That's really where we see gains in the United States in the next 20 years, even without sort of policy intervention.

On the other hand, I would argue, again, that the cost of natural gas in this country is artificially low, because the natural gas is exempt from most environmental regulations right now. So, if we actually start to regulate it where it should be regulated, it will be a little bit higher cost.

But I guess that would be the -- the only way I can answer is to say that on our current business-as-usual trajectory, there's no way. On the other hand, you know, looking at the places like Texas that have passed policies to require the significant use of renewable energy in their economies, looking at those examples from regions and cities across the country, I think we have the capability to scale up if we have the policy behind it and if we sort of evened out the playing field a bit away from the existing fossil technologies.

So I think we could do it with the right political courage let's say, to your point. I think right this second, given the politics, it's just not going to happen. And given the politics and the cost of natural gas, it's just not going to happen.

Jack Janes: Ken, I'll come right back to you, but I want to ask Dymphna, Germany is seen by many in Europe as the leader in many ways, not just in this field by the way, but certainly in this area. Sketch out for us where you see other Europeans responding to the benchmark that Germany is now setting for the rest of Europe.

Dymphna Van Der Lans: And, obviously, it's very difficult to sort of make a general statement about Europe overall, but it really depends on different countries and it also really depends on sort of where they are from a geopolitical perspective.

So, let's just say that the response of Poland to its realization that the shale deposits that are there, which have been there for a very long time, so again, this is not an unexpected, new discovery. It's a realization that they may have the ability to actually extract it for commercial value, which is a very different conversation.

Anyway, their response to that is obviously one of happiness and they're excited about the opportunity that they may actually be able to create some source of income for themselves mostly based on tax income.

But that response from Warsaw is met with-but the response to that sort of realization from other major countries in Europe, specifically Germany or France or the European Union, is on the side of Warsaw one of surprise. They're like, why don't they like the fact that we have all these shale discoveries and actually can extract it?

Well, at least that's very much a geopolitical conversation. So, I think it really sort of depends on where the countries are, either from a geopolitical perspective or, in the case of my country where innovation and new technologies are very much accepted and people feel a very strong responsibility on a personal level to making sure that this transition actually works.

There we look at what happens in Germany with happiness and very eager to see if we can make that work. But, again, I mean in the case of the Netherlands, we have a lot of natural gas as well. So, it always is going to depend on the individual countries which, just to make sure that we're not stepping away from the fact that we are talking about a conglomerate of -- you know, if the United States of Europe and the United States of America almost.

And one of the things that really strikes me in all of these conversations is the notion of the need for an integrated grid. And in Europe it's the biggest issue right now. If the European Union isn't going to step up to the plate and actually create an integrated grid that's well managed, can balance all the different feed-ins from different sources of energy, it's going to be a significant problem.

Jack Janes: I think that's exactly what I wanted to ask the minister, because-but before I do that, I'll come back to you in a minute Mr. Minister, but, Ken, you wanted to weigh in after Kate said something and then we'll go back to the Minister.

Ken Green: Sure. If I get to be king for a day my first rule was going to be to overrule the queen.

Jack Janes: You could be king and queen for the day.

Ken Green: I'm going to rescind all of the queen's edicts as soon as I take office. So the question, could the U.S. phase out its nuclear power? I think the answer is we could. The only question is whether or not politically we'll be able to decide how.

Jack Janes: Right.

Ken Green: I mean there really is a big fork in the road, which is there's coal and natural gas and there's renewables. And one of them could be scaled up immediately and deployed. The other one would take much longer to scale up and deploy and has its own problems of grid stabilization, as we just discussed.

Some studies show at a more than 5 percent input for solar or wind you have major grid destabilization and problems maintaining your grid stability, which is critically important for production. So the question is not could we, but how. I should throw in a disclaimer here by the way.

I actually am not a fan of nuclear power. I'm not convinced it has been economic ever. I think it's mostly a legacy of military technologies looking for a new use. I mean I have no-and I own no energy stock of any sort, so I have no dog in any of these fights.

But I think we certainly could and I think natural gas is-the key point here is, will we let natural gas be the game changer or will we not let natural gas be the game changer? One last point from my perspective, you know, people say, well, we're running out of natural gas.

Even with the new kind of shale, big gas finds, we have probably several hundred years. If we manage to get the methane hydrates that line the ocean bottoms, we have many, many hundreds of years, possibly thousands of years of energy. And so the question is will we change the game and in which direction will we change it?

Jack Janes: Mr. Minister, you heard this notion of gas and, to some extent, one of the questions that I wanted to throw to you is, given that, and that reality I think is also true in Baden-Wurttenburg, can you solve your problem really without having what Dymphna said is not there, which is a common European grid?

How far is that away and what does a state in a federal government of Germany, what can you do to expedite that? Because it seems to me that one of the issues that came up when you decided to exit nuclear was, well, where are you going to make up the difference?

Are you going to import it from elsewhere? Is it not true that you cannot solve this problem, over the long run, without having a European solution? [Franz Untersteller responds in German]

Jack Janes: Can you get that please?

Translator: Thank you. I believe that we need a European solution for other reasons as well, not just the reasons that were mentioned at this conference. And I do not entirely agree, while I would say that gas is not going to be the game changer for us, our main strategy will consist in promoting renewable energies, photovoltaics, wind energy and hydro energy as well.

And we will certainly need to use gas-fired power plants for the period of transition and also with the help of combined heat and power plants. But this is only going to be in transition, a period of transition and, in the long run, we will also try to reduce the use of gas by promoting the use of energy efficiency and, thus, making up for the energy we need.

[Franz Untersteller continues in German]

Translator: We also need a European strategy, because we have this goal to promote wind energy and to add another 15 to 20,000 -

Franz Untersteller: Offshore.

Translator: On offshore--did you mean megawatts?

Franz Untersteller: Yes.

Translator: Yes? In the Baltic Sea, the North Sea. And secondly, one problem that we do have is the storage problem in Germany. Unfortunately, in Germany we do not have enough storage facilities, so that we do need a European strategy to implement our goals in the long run.

Jack Janes: OK, thank you very much, very interesting and I thought very thoughtful comments about where our options lie.

[End of Audio]



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