The energy revolution picks up momentum in Germany

September 24, 2014

Disruptive innovation is inevitable, a naturally occurring phenomenon in the free-market system. From the floppy disk to the typewriter, entire industries have collapsed overnight because of a single invention or new process. Rapidly advancing renewable energy technology aims to upset traditional electricity companies, and the shift is occurring faster than utility companies ever expected. Much of this worldwide momentum has been driven by Germany, and the country's energy revolution acts as a lesson for industrialized nations looking to subsidize shrinking supplies of fossil fuels.

Utilities in danger
Germany has stood at the forefront of energy efficiency for years, and the nation's investments in renewable energy have certainly paid off. The New York Times reports that the nation will soon receive up to 30 percent of its power from renewable energy sources, more than double the amount available in the United States.

The nation has been so effective at shifting its electrical burden to renewable energy sources that German utilities are facing classic signs of a disrupted industry. Revenues collected by companies generating electricity have fallen into stark decline, and it is likely that the energy landscape in Germany is past the point of no return. Following a $3.8 billion loss in 2013, German utility RWE's CEO Peter Terium confessed that his company had been "late entering the renewables market - possibly too late."

Long-term strategy
The surprising success of renewable energy in Germany doubles as a grim prediction for utility companies around the world. American power companies have already made moves to deter the success of renewable energy in the United States, and these efforts are likely to ramp up as Germany's energy revolution becomes the new standard for industrialized nations. However, the experience of German power companies should provide some comfort for utility companies.

Representatives from the utility industry have rightly noted that the rate of renewable energy collection can be inconsistent. Wind turbines collect less energy from light breezes, while solar panels are less effective when it's cloudy or at night. This intermittent quality of renewable energy creates an opportunity for traditional power companies to continue meeting spikes in peak demand, though the utilities will need to modify their business model to utilize advances in distributed energy resources.

Experts have noted that an increased investment in energy storage can assist in adding flexibility to the changing grid and that energy storage is necessary for making a smooth transition from fossil fuels to renewable energy sources. The logistics of this transitional period, in tandem with shrinking acceptance of nuclear power, will keep the lights on at electric companies for years to come. In the meantime, investments in renewables and energy storage of all kinds continue to accelerate.