On Our Radar: Renewables' High-Stakes Proving Ground

10 Jun 2011 – Mohammed Al-Shawaf

For more than two decades companies have valued our ability to serve as their early warning system, to interpret what is happening in the world today and how it may impact their business tomorrow.

Our “Radar” services range from the general – monthly cross-industry trending digests – to the bespoke – tailored analysis of the most critical emerging issues to your business, and recommendations on how to tackle them.

This is the second in a series of blogs giving a glimpse of what’s on our radar. If your company could benefit from an early warning system, to identify key threats and opportunities as you navigate the rapidly evolving sustainability landscape, please contact us.

Renewables’ High-Stakes Proving Ground: Germany

Prominent short-seller Jim Chanos has been on a campaign against some high-profile renewable energy companies of late, exemplified by his aptly-titled presentation: “Alternative Energy: Does Solar + Wind = Hot Air?” But while Chanos attests that wind and solar power will “never be cost-effective sources of energy,” he likely didn’t foresee the high-stakes German experiment that will go a long way towards proving or disproving that theory. On May 30, Angela Merkel announced that Germany would close all of its 17 nuclear reactors by 2022. One day later, renewable stocks that included solar and offshore wind firms rose sharply.

The market’s knee-jerk reaction notwithstanding, the country’s announcement will make things worse before they get better. Germany’s nuclear ban is estimated to add 25 million metric tons of CO2 emissions a year. This, after the International Energy Agency reported on May 30 that global CO2 emissions in 2010 were the highest in history.

Besides the increase in emissions, Germany’s move to make renewables a more significant power source will test electricity pricing, reliability, availability and by extension, the country’s economic growth. But discounting the decision because of uncertainty in the near-term, or the politics that invariably went into the decision would be shortsighted. In our most recent survey conducted with GlobeScan, 54% of sustainability experts and practitioners said that a low-carbon economy is possible without nuclear power. Can Germany be the proof of that sentiment? Regardless of how you feel about nuclear power, this is a transition worth watching.

See also the first in our Radar series: Green Marketing is… Contested