German industrial competitiveness is set take a big hit at the expense of the country’s green energy ambitions, according to a new draft law. Reuters reports:
In an amended draft law seen by Reuters, the government proposed that German industrial companies producing their own electricity in new renewable energy or combined heat-power plants would pay a higher surcharge than previously planned.
Here’s how this came about: As part of its energiewende, Berlin promised solar and wind energy producers long-term, above-market rates (called feed-in tariffs) for their electricity as a way to help boost the country’s fledgling renewables industry. The plan worked, and some will tell you that the solar and wind energy industries are thriving in today’s Germany. But these energy sources, green though they might be, are terribly expensive, and feed-in tariffs are the only reason they’re finding a foothold in the German market. The costs of these feed-in tariffs have been passed on to consumers, both households and industry alike, in the form of green energy surcharges—making German electricity prices some of the highest in Europe.
Berlin attempted to shield energy-intensive German industry from these surcharges by exempting some of its biggest electricity consumers, but in doing so fell afoul of the EU’s competition laws, as Reuters explains:
Germany had until Tuesday to bring its green energy reforms into line with the bloc’s competition laws, including requirements to make heavy industry pay a surcharge for power they produce at their own plants.
If the revised law passes, and the EU is satisfied that Germany isn’t acting in a protectionist manner, then many of these industries can apply to the bloc for further exemptions from the surcharges. But if you’re a German business that relies on cheap electricity for your bottom line, this whole fiasco has to be deeply unsettling. We’ve already seen some German firms start boosting investments abroad—including in the United States, which is flush with cheap shale gas—and if Berlin continues to follow this ill-conceived green energy strategy, you can expect many more to follow suit.