The Economist explains: What has gone wrong with Germany's energy policy

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ON DECEMBER 3rd the German government announced plans to redouble its Energiewende, or “energy transition”, and accelerate progress so that the country can meet its goal of a 40% cut in greenhouse gases (from 1990 levels) by 2020. The same week, E.ON, a big German utility, announced its decision to split into two companies. One will focus on traditional nuclear and fossil-fuel electricity generation, and the other on renewable energy, electricity distribution and “energy services” for cost- and climate-conscious customers. Both decisions have been seen as evidence that the Energiewende has failed. But what has gone wrong?The Energiewende has two main policy tools: generous support for renewable sources of energy, and an exit from nuclear power by 2022. The government supports renewables by promising those who install solar panels or finance windmills a fixed, above-market price for each kilowatt-hour of energy they feed into the grid. Those renewable sources have grid priority, meaning they must by law be drawn upon before other energy sources, like electricity from coal, gas or nuclear plants.The above-market prices meant that many Germans rushed into renewables, from installing solar panels on barn roofs to buying shares in wind farms. Renewable capacity expanded quickly, and now accounts for an impressive 27% of electricity production. But …

Source: Utilities