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Teaching that illuminates a complex energy policy world

Lion Hirth gets top marks from students and faculty.

The world sees renewable energy as an antidote to its climate problems. But replacing dirty, if dependable, fossil fuels like coal with weather-dependent windmills and solar panels is a huge challenge for power systems. Policymakers who want to meet targets for the Paris Agreement on climate change or implement clean energy policies – like Germany’s Energiewende – need deep knowledge of these complex and interdependent systems.

But guiding markets to keep up with rapid technological change can be a tricky thing for policymakers. Their technical savvy is often no match for the engineers. Students who aspire to careers in energy policy need an excellent grasp of the technological and economic basics so they can take decisions that are sustainable in environmental, economic, and political terms. 

“I try to teach that it’s not good public policy to prescribe detailed solutions in this sector,” says Lion Hirth, Assistant Professor of Governance of Digitalisation and Energy Policy at the Hertie School of Governance. “But, of course, prescribing solutions is what students at a governance school often intuitively favour – and many people in the public debate as well.” In the fast-changing energy world, policymakers have to find a balance between present and future needs. “It’s certainly impossible to design a system that will be perfect 40 years ahead. Problems that are keeping us busy today weren’t on anyone’s horizon just five years ago.”

It is precisely this challenge that Hirth prepares students to face when they graduate from the two-year Master of Public Policy or Master of International Affairs programme.  Students learn about market models and regulatory philosophies worldwide, about retail and wholesale electricity markets in Europe and differences to those elsewhere; they discuss the effects of tools like taxes, quotas, and subsidies, and the roles of different actors in the system; and they study how various instruments can be used to achieve different goals in different markets: liberalised or highly regulated; spot, intraday, or futures trading; scarcity pricing or capacity payments; big utilities or decentralized producers.

Recipient of faculty Excellence Award for teaching

Hirth consistently earns top marks from students for his insightful teaching and hands-on engagement .  After his first year at the Hertie School, Hirth won a faculty Excellence Award from the Academic Senate, and students have praised his “exhaustive knowledge”,  “inspiring and motivating” lectures, and “clear structure and useful slides”,  in their standard practice of evaluating faculty at the end of each course.

“Teaching is something I really enjoy and also something this institution takes seriously.”

Hirth joined the faculty in 2017 after completing his PhD in Energy Economics and a post-doc at the Technical University of Berlin under the renowned energy policy expert Ottmar Edenhofer. With its strong emphasis on teaching, Hirth says the Hertie School was a natural fit. “Teaching is something I really enjoy and also something this institution takes seriously. So I felt Hertie was a good match in terms of what I can do well and what is appreciated here.”

Kimberley Liu, a 2017 graduate of the MPP programme who did her BA at Duke University, took all of Hirth’s classes: Electricity Systems and Markets, Economic Growth and Climate Change, and Renewable Energy Policy. This training helped secure her a job at the cutting-edge energy consultancy Aurora Energy Research in Berlin after an internship upon graduation, she says. “Lion Hirth’s class definitely helped me land the job. It provided me with a solid understanding of the background and fundamentals.”

Clarity is of essence for governance to work in a system combining politics, economics, and physics, Hirth says. His guiding principle is to teach about markets and policy frameworks that can operate freely and allow actors to make long-term investment decisions, he says: “Nothing heavy handed, no detailed micromanagement by policymakers, but rather thinking about how markets can be set up so the incentives are right, so that what people do benefits the power system – and society.”

A grounding in markets and economics – but also physics and engineering

In a packed classroom on a November morning in Berlin, Hirth illustrates how difficult it is to make policies that can deal with the changing landscape of power production – from coal and nuclear to wind and solar – and ensure markets stay in balance.  “Bloomberg, the news agency, recently ran a story claiming Germans are being paid to consume electricity,” he tells the students. In reality, he says, Germans always have to pay for their electricity, but it is true that sometimes, when demand is very low and production is very high, market prices can become temporarily “negative” – meaning in theory that consumers are paid to use power. It’s up to policy makers to help markets adjust to such imbalances – for example, by incentivising flexibility among consumers and producers, an issue they will grapple with in the future as more weather-dependent renewables feed into the system.

“Lion Hirth’s class definitely helped me land the job. It provided me with a solid understanding of the background and fundamentals.”

In Germany, for example, the electricity grid must accommodate wind and solar energy, consumers who are also producers, batteries, and new infrastructure. That is why Hirth devotes part of his electricity markets course to the engineering behind these systems. “The consequences of energy-policy decisions can only be understood if you know how power stations work and how electricity flows through power grids,” he says. Different types of power plant respond to surges in electricity demand in different ways – some can deliver very quickly, others not at all. “All this is highly technical – you need to understand the engineering and physics. This is what sets energy policy apart from other policy areas.”

Hirth has a good deal of hands- on experience in the field. While working on his PhD, he also spent five years at the Berlin headquarters of the big Swedish power company Vattenfall, honing his expertise in the system integration of renewable energy. His main research interests lie in the economics of wind and solar power, energy policy instruments, and electricity market design, as well as open data and open-source modelling.

“I always wanted to do research that was policy-relevant – helping clients solve very concrete problems in the policy domain,” says Hirth. “How should a law be written? Should we allow this or that exemption? What sort of threshold should we apply? These are very concrete questions that have to be finalized by the time parliament debates the law.” But he is at the same time interested in longer-term, evolutionary questions, he says. “How should power systems be set up? Who should decide what? What are the fundamental economic mechanisms? What kind of incentives make sense?”

Geared for future policymakers from around the globe

As he sees it, the challenge is to understand how policymaking tools can be applied in vastly different contexts. “People come from different backgrounds and they will end up working in different systems,” he explains. But the most aspects of all of these systems are universal and do not depend on whether they are in the US, Germany or Columbia. “The fundamental economic actions and principles – how incentives work and how they don’t, how market prices are formed, and how people behave strategically in certain situations – are 95% the same everywhere.”

“...the challenge is to understand how policymaking tools can be applied in vastly different contexts. People come from different backgrounds and they will end up working in different systems.”

He also offers something students don’t usually find at a public policy school – a course on energy system modelling, essentially programming computer simulations of electricity markets. The course lets students try their hand at a practice that policymakers rely on – but often outsource - to see how markets develop under different conditions. The students aren’t likely to become computer geeks (even though some might), but the idea is to “let them develop an intuition about how difficult the technique is as a guiding tool for policymaking, and how easily you can fudge” Hirth says. “They see modelling can help answer certain questions, but that it’s totally useless for others.”

Hirth throws them straight in at the deep end: “After a short intro, I ask the students to open their computers and solve the first problem. Most of them are pretty shocked – but it helps demystify the technique. Later, when they are involved in policymaking, they’ll be able to assess such studies when confronted with them,” he says.

Kimberley Liu says modelling is actually very important in her job. “At Aurora, we work primarily on German electricity market and this involves a lot of modelling. So, if you have a shock to the market, what would the effect be to the market based on which plants are running,” she explains. The firm’s clients often request tough technical and specific information, depending on what their companies are interested in. “But Lion’s course provided me with enough foundation to be comfortable with the topic.”

Insights from practioners and policymakers

A real asset for his students is that Hirth routinely sits down with policymakers to discuss their problems and conducts research that helps inform their work. He also straddles the business and research worlds through his consulting firm, Neon Neue Energieökonomik GmbH. As a result, Hirth has a steady stream of real-life insights to bring into his lectures. “This gives the discussion in class a lot of credibility,” he says.

“Hertie students are really engaged, they like to learn, and they are willing to invest. That’s why I really enjoy teaching them.”

Liu seconds that. “Since Lion is a practitioner as well as a prof, he has a lot of contacts in the field. He founded Neon, and it is quite well known in the sector, so he often brought people in who told us about their experiences.” In Hirth’s renewables course, she recalls, a new practitioner visited almost every other week. “For students who aren’t aware of all the opportunities in the field, it is really useful to see the many different kinds of areas people work in using the same foundational background.”

Among the things Hirth values the most at the Hertie School are its students. “Initially, I thought I wanted to teach students who already knew something about the topic – teaching economists about energy systems, or engineers about energy markets,” he says. But many of the students he now teaches are sociologists, political scientists, or lawyers. “I think my classes are challenging in terms of methods and they don't always relate closely to what the students already know,” he admits. “But Hertie students are really engaged, they like to learn, and they are willing to invest. That’s why I really enjoy teaching them.”

 

Lion Hirth is Assistant Professor of Governance of Digitalisation and Energy Policy at the Hertie School of Governance. His research interests lie in the economics of wind and solar power, energy policy instruments and electricity market design, as well as open data and open-source modelling. Lion is also Research Fellow at the Mercator Research Institute on Global Commons and Climate Change (MCC), Director of the consulting firm Neon, and Secretary of Strommarkttreffen, a network of energy professionals. His academic publications on the market value of wind energy and on the integration of renewable energy into power systems have won several awards. He holds a PhD in Energy Economics, and Diploma in Economics, and a Magister in Political Science.