IIPS Japan Policy Commentary

EU Energy Policy and the Energy Situation in Germany
By Mikihiko Shimizu
Senior Research Fellow at IIPS

Introduction
Japan’s energy policy is undergoing fundamental review due to the accident that occurredat the Fukushima No. 1 Nuclear Power Plant administered by the Tokyo Electric Power
Company (TEPCO). This accident occurred as a result of the Great East Japan
Earthquake and Tsunami of March 11, 2011. As it lacks natural resources, Japan should
review its policies with a view to maintaining and increasing its industrial
competitiveness. Focusing on energy policy overseas, this article will present anoverview of the energy policy of the European Union (EU), which leads the world interms of countermeasures to combat global warming, and investigate the energy situationin Germany, which has announced that it is breaking with nuclear power generation.
The economy of the EU—the largest economy in the world
In order to place EU energy policy in context, it is worth considering the status of the EUwithin the international community. If the scale of its economy is expressed in terms ofpopulation and GDP, the 27 nations of the EU have a combined population ofapproximately 500 million and a GDP of approximately 17.55 trillion dollars. 1 As such,the population of the EU is more than four times that of Japan, while the EU’s GDP ismore than three times Japan’s GDP. By both these measures, the EU also far outstrips theUSA, which has a GDP of approximately 15 trillion dollars and a population ofapproximately 300 million. This makes the economy of the EU the largest economy in theworld (see Figure 1).
With the signing of the Treaty of Paris in 1951, the EU was established as theEuropean Coal and Steel Community (ECSC). The six founding nations were Belgium,West Germany, France, Italy, Luxembourg, and the Netherlands. Since then, it has
undergone enlargement on five occasions and is currently comprised of 27 membernations. Over the course of 50 years of deepening and enlargement, the EU’s standing in
the international community has grown, and EU policies, such as its countermeasures tocombat global warming, have come to exert significant influence globally.
For example, through the process of regional integration, the EU has introduced
European standards and regulations to its member nations; at the same time, however, it
has also spurred the spread of European standards and regulations both to neighboring
non-EU countries and to Asian countries such as China. If the EU is able to spread
European standards and regulations to other countries through its countermeasuresagainst global warming, it will be easy for it to seize the initiative as the global rule-makerand spread European rules to the rest of the world that will put European companies at anadvantage in international business.

-1-Population
10,000s 60,000EU (27 states)
17.5 trillion
dollars

50,00040,000
USA
15 trillion dollars

30,00020,000Japan
5.8 trillion dollars

10,0000Figure 1

Size of the economies of Japan, the USA, and the EU in 2011

Source: JETRO’s Data by Country and Region (JFILE)

The EU’s promotion of renewable energy
In order to comprehend EU energy policy, it is necessary to consider it both from theperspective of the EU itself and from the perspective of the member states. This is due tothe nature of policy formulation within the EU—while it is the European Commissionthat devises policy at the EU level for the overall benefit of EU citizens (the citizens of the27 member nations), it is the member nations themselves that formulate their own
specific individual energy policies, such as their own energy mixes.
EU energy policy goals can be summed up as follows: (1) the achievement of energy
security, (2) the enhancement of industrial competitiveness, and (3) the primacy ofmeasures to combat global warming. With a view to putting these policies into practice,
the EU announced a new energy strategy titled “Energy 2020,” touting as its target the“three 20s.” The specific objectives of this strategy are as follows: first, by the year 2020,emissions of greenhouse gases will be reduced to 20% of 1990 levels; second, the shareof renewable energy as a proportion of final energy consumption will be increased to20%; third, energy efficiency will be increased by 20%.
Energy 2020 encourages energy efficiency by offering investment incentives for
improved construction. It also advances a ten-year plan for the development of energy
networks for electricity and gas with a view to building an integrated energy market for
all of Europe, and it seeks the supply of energy to consumers at reasonable prices,
improved energy technology, and stronger cooperation with neighboring countries.

-2-Renewableenergy
12%

Coal
14%
Nuclearpower
22%

Crude oil
30%

Natural gas
22%

Figure 2

A breakdown of energy consumption by type in the 27 EU states in 2010

Source: Eurostat (August 2012)

In this environment, the adoption of renewable energy in the EU has been progressing
steadily. A comparison of energy consumption in the 27 EU states in 2010 with that of1990 reveals that consumption of renewable energy as a proportion of total consumption
has been increasing rapidly, rising from 4% in 1990 to 12% in 2010 (see Figure 2).
Germany boosts employment by popularizing renewable energy
The EU develops state-level policy for its member nations by force of law (in the shape ofEU regulations and directives), and the member nations attempt to change their nationallaws so as to inject EU policy into their own national energy policies. As part of thecomplementary relationship between the EU and its member nations, the EU seeks tostimulate the economic activity of its 27 member states (that is, to develop anenvironment in which EU companies and industries can maintain and increase theircompetitiveness within the international community) with a view to creating economic
growth and higher levels of employment.
In its energy policy, the EU is proclaiming that it will strengthen European leadershipby means of energy technology and innovation, and it is placing particular emphasis ontechnology relating to wind power, sunlight, biomass, smart grids, nuclear-related
technology, and carbon capture and storage (CCS). It was within this context that—very
quickly after the accident at the Fukushima nuclear power plant—EU member Germany
announced that its federal government was aiming to break from nuclear power
generation and would expand its use of renewable energy.
Even before this, Germany had been moving forward with the adoption of renewableenergy. A comparison of electrical power generation by source for Germany and Japanfor 2010 reveals that, while renewable energy accounted for only 3.1% of energy
production in Japan, the level in Germany (including solar, wind, geothermal, and otherfuel sources) was 14.8% and growing steadily (see Figure 3).
-3-

100%

3.1
7.4

90%

14.8
3.3

80%

26.0
22.6

70%
60%
50%

14.0

27.4

1.3

40%
8.8

30%

44.0

20%
27.4

10%0%

Japan

Germany

Coal and peat

Oil

Natural gas

Nuclear energy

Hydro energy

Solar, wind, geothermal, and other fuel sources

Figure 3

A comparison of electrical power generation by source in Germany andJapan for 2010

Source: Energy Balances of OECD Countries 2012, published by the International Energy Agency(IEA)

As Germany has pushed forward with the adoption of renewable energy, it has also seen
employment increase in this sector. In 2011, Germany’s Federal Ministry for theEnvironment, Nature Conservation and Nuclear Safety put the number of people working
in jobs related to this field at 381,600. This figure represents a 4% increase over 2010 andis well over twice the number that was employed in this field in 2004, representing anincrease over seven years of 138% (see Figure 4). The jobs of 280,000 of the people
employed in this sector were created as a result of the enactment of Germany’sRenewable Energy Law.
A breakdown of these job numbers reveals that, combined together, the solar, biomass,and wind power fields account for more than 90% of the total, with jobs in the solar andbiomass fields being the most numerous (each accounting for 32% of the total) and jobs
in the wind power sector accounting for a further 26.5%. Since there is the expectation inGermany that the renewable energy sector is an effective source of new jobs, it isanticipated that the nation will further increase the adoption of renewable energy.

-4-(People)
450,000
381,600

400,000

339,500

350,000

367,400

300,000

277,300

250,000
200,000
150,000

160,500

100,000
50,00002004
Figure 42007

20092010

2011

Number of people employed in the renewable energy sector in Germany

Source: Brutbeschäftigung durch erneuerbare Energien in Deutschland im Jahr 2011 (March 2012)

Germany’s energy policy in the context of its abundant energy resources
Germany boasts abundant energy resources. Germany’s level of self-sufficiency inprimary energy stands at an impressive 32.6%. It is able to domestically procure 58.9% of
the coal and peat that it uses and to supply itself with 13.2% of the natural gas and 3.4%of the crude oil that it needs. The result is that, even when Germany has problems
importing energy, it is able to make up any shortfall from its own abundant sources ofprimary energy.
By contrast, Japan’s level of energy self-sufficiency is far below that of Germany andstands at a mere 5.1% (if nuclear energy and renewable energy are discounted). Hence,
Japan needs to recognize that its energy situation is vastly different from Germany’s.
Japan is poor in natural resources (it possesses only minimal deposits of crude oil andnatural gas, and it is reliant on substantial imports of energy from overseas), while
Germany maintains a high level of energy self-sufficiency based on its abundantresources of coal—despite being the largest consumer of primary energy in Europe (seeFigure 5).

-5-58.856050(%)

40

32.6

30
20

13.2

100

0.4

3.7

3.4

5.1

0
Coal & peat

Crude oilJapan

Figure 5

Natural gas

Total

Germany

Energy self-sufficiency levels for Japan and Germany in 2010

Source: Energy Balances of OECD Countries 2012, published by the IEA

As can be seen from Figure 3 (which compares the proportions of different energy
sources used for electrical power generation), Germany generates 44% of its electricity
using coal and peat, a resource in which it enjoys a high level of self-sufficiency, and22.6% of its electricity using nuclear power. (This figure is 3.4% below Japan, wherenuclear power is used to generate 26.0% of the nation’s electricity.) As mentioned above,
however, Germany also generates a considerable proportion of its electricity (14.8%)
using renewable energy sources such as solar, wind, and geothermal power. In addition,
Germany is an exporter of electricity, and, according to the German Association ofEnergy and Water Industries (BDEW), the nation has enjoyed a continuous export
surplus in electricity since around 2003 (that is, its exports have exceeded its imports).
The German federal government has sought to break with nuclear power generationand increase the adoption of renewable energy, with the cabinet agreeing in June 2011 ona package of ten new energy bills, including revisions to the basic law on nuclear powerthat prescribe breaking with nuclear power generation, and a revised renewable-energy
law that prescribes the promotion of renewable energy. Although this course correction(to break with nuclear power) appeared to represent an abrupt switch in policy, it was, infact, a resolute decision by Chancellor Merkel, made after thorough preparation.
After the accident at the Fukushima nuclear power plant, Chancellor Merkel set up anethics committee—under her personal leadership—on the safe supply of energy. In May
2011, this committee published a report titled “Germany’s energy transition—Acollective project for the future,” which estimated that Germany would be able tomaintain its capacity for stable power generation even if it were to renounce nuclear
power generation permanently. (Germany’s nuclear power facilities had been taken
offline from the national power network following the accident at Fukushima.) Out of astable supply of 90 gigawatts (GW) of electrical power that was available in Germany in-6-

2010, 8.5 GW had been produced using now-suspended nuclear power generation.
Subtracting this would still guarantee sufficient capacity to generate a stable power
supply of 81.5 GW—more than the 80 GW that represent peak demand in Germany. Inaddition, although 3 GW of fossil-fuel power generation was to be phased out and taken
off the network by 2013 due to obsolescence, a further 11 GW in new fossil-fuel powergeneration was scheduled to be added. Hence, it was forecast that a stable power
generation capacity of 89.5 GW would be ensured.
An energy policy based on stronger international competitivenessOn the basis of a common EU energy policy, Germany has endeavored to diversify its
sources of energy in order to ensure a stable energy supply, and to adopt renewableenergy as a countermeasure to combat global warming. As a result of Germany’s realistic
approach and the steady manner in which it has addressed this issue over many years, thenation has been able to generate increasing volumes of electrical power using solar, wind,and biomass power as well as natural gas. By virtue of this process, it has reduced its
reliance on nuclear power generation.
Despite the fact that the nation enjoys a high level of primary-energy self-sufficiency,
Germany is addressing the issue of ensuring a stable energy supply in a practical fashion
and remains aware of the risks that exist. Japan will probably need to squarely
acknowledge its lack of natural resources and tackle maintaining and strengthening its
industrial competitiveness in an international business climate that is becoming evermore rigorous. To this end, Japan requires a strategic medium- and long-term energy
policy based on the construction of realistic mechanisms that are geared towards ensuringsafer nuclear power generation, procuring energy at lower cost, and diversifying thenation’s energy sources (to include renewable energy).

1

The 27 member states of the EU are: Belgium, Germany, France, Italy, Luxembourg, Netherlands, Denmark, Ireland,
United Kingdom, Greece, Portugal, Spain, Austria, Finland, Sweden, Cyprus, Czech Republic, Estonia, Hungary,Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, Bulgaria, and Romania.

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