Germany's image as a world leader in renewable energy is the product of the Energiewende (loosely translated as "energy transition"), a term used to describe a combination of specific energy policies and a culture-wide attitude shift that has its roots in the Chernobyl nuclear power plant explosion in 1986. That disaster lit the spark of overwhelming anti-nuclear sentiment in Germany that persists today, codified in a 2002 law that calls for the shutdown of all the country's nuclear plants by 2025. But the explosive growth in renewable energy here—from 7 percent of the national mix in 2000 to over 23 percent in 2013—comes as a result of the Renewable Energy Act of 2000. The law sets an ambitious goal to boost renewables and provides a unique financial prod to make that happen.

Support comes in the form of a "feed-in tariff," an incentivizing carrot for clean-energy production that compels utility companies to purchase any available renewable energy at a higher wholesale price than they would pay for power from fossil fuels. That's true regardless of whether it's coming from a large corporate offshore wind farm or from solar panels on your roof. The price varies by the exact source to reflect the varied costs of different technologies and is locked in for years into the future, to give the market stability. But each year, the offered price goes down a little bit, so early birds benefit the most.

Because the rates are guaranteed by law into the future, investors in renewable energy get a kind of long-term security not possible in a system that has to be reapproved by legislators every year, like the United States' Production Tax Credit for wind power, which, sure enough, Congress allowed to die at the end of 2013.

Of course, someone has to pony up for all this: The money comes from a surcharge on German ratepayers' electric bills, roughly 10 percent of an average household's monthly total. In 2013, those fees added up to a $2.5 billion subsidy for renewable energy, according to Deutsche Bank.

Energy analyst Lutz Weischer says Germany will need to use far less coal if it is going to meet its climate goals. Tim McDonnell

Spend an afternoon on a train through the German countryside, and it's easy to see how that investment has paid off: Houses and office buildings are slathered with solar panels, and wind turbines line the horizon most ways you look. That's what makes Garzweiler, and its attendant cadre of smoking power stations, so jarring.

So why hasn't Germany's renewables boom been matched by a drop in coal use?

"To their credit, they've taken a pretty aggressive stance," says Chris Knittel, director of MIT's Center for Energy and Environmental Policy Research. "But there's going to be a lot of growing pains, I think."

The problem actually starts outside Germany, in the continent-wide Emissions Trading Scheme. This is a cap-and-trade market in which EU regulators set an overall limit on how much carbon dioxide can be released by large polluters (the cap), and then companies buy and sell credits for their emissions (the trade). Established in 2005, the ETS is the world's largest carbon marketplace, covering 11,000 plants and power stations across 31 countries that together produce 45 percent of the EU's greenhouse gas emissions. The idea is to push electricity generation companies off fossil fuels by making it expensive to emit carbon dioxide. Over time, the cap shrinks, which drives up carbon prices, which in turn increases the pressure to clean up.

Europe's carbon price is too low to motivate the biggest polluters to stop burning coal.

Of course, that only works if the price of a carbon credit (called an "allowance") is sufficiently high to be a real burden, and for the last few years that has been far from the case. In 2013, prices were the cheapest they've ever been, after declining more or less steadily since the start of the financial crisis. The low point was last May, when a ton of carbon pollution cost only $4.87, down 87 percent from a high of $37.55 in summer 2008. In other words, while normal folks took advantage of the feed-in tariff to build renewable power, the country's large utility companies had little incentive to move off of coal.

For that to happen, the ETS "must be rescued and repaired and reformed," according to Felix Matthes, one of the country's leading experts on the Energiewende at the Berlin-based Öko-Institut, a nonprofit think tank.

The main reason for the carbon market's decline, Matthes says, is that thanks to the recession, Europe's economic development has been about 20 percent slower than was expected when the allowance cap was set in 2008, meaning credits were sloshing around without being used. The market also allows the trading of allowances from foreign carbon markets, primarily China; together, the too-high cap and the market's permeability resulted in an oversupply of allowances, and the price crashed.

carbon prices
Tim McDonnell

As a result, a key tool to motivate a transition away from coal was lost, with little German policymakers could do by themselves to fix it. 

"The key issues on coal power generation have to be solved at the European level," Matthes says, "which is often ignored in this country because this country is so self-sufficient."

There's a lesson here for US policymakers, according to MIT's Knittel. The German experience, he says, is proof that pumping cash into green tech is only effective if, at the same time, the biggest carbon polluters are forced to pay for their emissions. That could take the form of a carbon tax, widely viewed as a nonstarter in Congress, or carbon-cutting regulations like those currently being pushed by Obama and his Environmental Protection Agency, which would force coal companies to invest heavily in carbon capturing systems if they want to keep their plants open.

"Economists are pretty unanimous in that the way you should incentivize more solar panels, for example, is by making the dirty electricity more expensive but not subsidizing the clean electricity," he says.

And good luck convincing the American public that renewable energy subsidies should come out of their monthly electric bills, like they do in Germany. "So I actually think what we want to learn from Germany is to not adopt these sorts of policies," Knittel says.

Since I visited Germany last falL, there's been some progress in the cap-and-trade market. In February, EU carbon prices rebounded to just over $9 per metric ton following a January vote by the market's framers to withhold 900 million allowances until 2019 and are expected to rise a little more by the end of the year (although by mid-April they were back down around $7).

There's another sign of change on the horizon: Germany's solar explosion drove the supply of electricity on the grid so high that nonrenewable wholesale prices—the amount utility operators pay to purchase electricity from a power plant—have dropped to the floor. That makes it much more difficult for power companies to recoup the billions of euros they've invested in building the plants, which in turn makes any investments in new coal plants seem unattractive. That's bad news for the companies that have long been the backbone of the energy system; if the plants become economically unviable, these companies' entire business model could collapse, taking the coal industry with them.

One person working on this problem is Thomas Birr at RWE, the second largest of Germany's four major utility companies and the owner of the Garzweiler lignite mine and its adjacent power plants. I met Birr in the company's glass-encased corporate boardroom at the top of a gleaming tower in downtown Essen, an enclave north of Cologne that is a historical center of the steel and mining industries. In the past decade, Birr says, the price at which the company sells electricity has dropped by half, from 80 euros ($109) per megawatt-hour in 2000 to less than 40 euros ($54) today.

"That exposes us to a very big challenge: How to run a fossil park with these prices," Birr says. "The answer is that it's basically impossible."

The village of Immerath, on the edge of Garzweiler, is already eroding away. Tim McDonnell

But with no effective price on carbon, there's no reason not run the existing plants for all they're worth. In other words, today, the cost of carbon pollution is low enough to justify operating the old plants. But because the wholesale electricity price is still low, companies like RWE are squeamish about future investments in new plants they insist are still necessary. Birr argues that because of the inherent variability of renewables (Germans still need electricity when the sun isn't shining and the wind isn't blowing), coal will still be "desperately needed" in the energy mix for decades to come.

Many energy watchdogs here think Birr and his peers are missing the point. For one thing, it can take nearly a day to fire up a switched-off coal plant, making it an imperfect candidate to pick up the slack for a sudden, temporary drop in wind or solar. (Natural gas plants can come online much quicker.) But more to the point, there is money being left on the table.

The Öko-Institut estimates that Germany's four major utility companies, the old guard of fossil fuel energy, account for only 10 percent of the country's total investment in renewables. RWE, for one, says it has put about $11 billion into renewables since 2008, out of $75 billion in revenue from 2013 alone. RWE's investment, like that of the other big players, comes primarily in the form of big offshore wind turbines in the North Sea that are too expensive for individuals or small companies to build. Meanwhile, households and small-to-midsize renewable power companies make up the rest of the investment pie. In other words, companies like RWE could be missing a golden chance to get in on the ground floor: Recall that the renewable energy subsidy declines over time, meaning the longer one waits, the less one benefits.

"Utilities are not going to be the central players they used to be in the power system," WRI's Weischer says. "Now, they're playing catch-up."

At the edge of Garzweiler, that vision of the future still seems far off. Gisela put Butch on a leash and walked through the empty streets of Immerath, the neighboring village that has already been abandoned in the face of the encroaching mine. It was silent, and bits of trash drifted past on the breeze like tumbleweeds.

We walked up the steps of a towering, ancient cathedral where Gisela used to come for concerts and a farmer's market. Now the doors were locked.

The Energiewende never arrived here, she said. "It's absolutely shocking what has been taken away already from our piece of the world here."

This story was produced with the support of the Heinrich Böll Foundation.