The American Interest
Analysis by Walter Russell Mead & Staff
Germany's Green Nightmare Germany’s Energiewende: A Path to Economic Self-Destruction

More bad news for Germany’s green dreamers: Two reports published this week highlight some fundamental flaws underlying the Energiewende, Germany’s radical set of energy policies.

The first, by the Commission for Research and Innovation (EFI), states that the subsidies by which green power producers in Germany are paid guaranteed, above-market prices to put electricity on the grid aren’t a cost-effective instrument for climate protection. Nor are they producing a measurable effect on innovation. “For both these reasons, there is no justification for a continuation of the EEG [the Renewable Energy Law],” the report concludes.

Those are devastating blows against the Energiewende’s legislative cornerstone, which has been in force since 2000. The special path on energy cost taxpayers €22 billion last year alone—and that figure doesn’t include residual costs to the economy.

German industry, as Reuters writes, seized on the report to support its opposition to incentives for renewable energy:

Export-oriented companies have warned that a sharp rise in the price they pay for power, buoyed by the cost of green incentives, are making them uncompetitive and some have threatened to shift investments and production abroad.

With industry accounting for around a quarter of Germany’s economy, its voice matters in Berlin. The BDI has said the government’s plans put about 900,000 jobs in Germany at risk.

The second report, by Information Handling Services (IHS), calculates that Germany lost €15 billion in exports last year from having to pay a premium for electricity compared with international competitors, and a total of €52 billion in the six-year period from 2008–13. As the Financial Times points out, smaller companies were disproportionately affected, because, “unlike heavy energy users such as BASF and ThyssenKrupp, small companies are not eligible for exemptions from the energy bill surcharges that cover the costs of the move to clean energy.”

Germany’s Minister of Energy and Vice Chancellor Sigmar Gabriel has already acknowledged that the system of subsidies for green energy needs to be reformed. Minister of Finance Wolfgang Schäuble also admitted that Germany may have gone too far in its attempt to legislate climate protection. But the reports published this week go even further than these confessions. The problem isn’t that there is a trade-off that needs to be rebalanced. Germany’s Energiewende isn’t a trade-off at all—just pure economic self-destruction: “The EEG doesn’t provide more climate protection,” the EFI writes. “It just makes [energy] more expensive.”

What impact these reports will have on policy remains to be seen, though it is nearly unthinkable that the German parliament will follow the EFI’s recommendation and scrap the EEG entirely. Much like Obamacare in the United States, the governing coalition has staked too much on the Energiewende to admit its failure so openly. Unlike Obamacare, however, the Energiewende has been embraced by both of Germany’s main political parties and remains wildly popular with the electorate. A new poll published by Spiegel Online, for instance, shows that 83 percent of Germans want Merkel to advocate even more ambitious, binding EU emissions reductions targets.

That way, at least, everyone can suffer.

Published on February 27, 2014 12:12 pm
  • Government Drone

    “A new poll published by Spiegel Online, for instance, shows that 83 percent of Germans want Merkel to advocate even more ambitious, binding EU emissions reductions targets.

    That way, at least, everyone can suffer.”

    That really sums up the whole project, doesn’t it?

  • Jacksonian_Libertarian

    “83 percent of Germans want Merkel to advocate even more ambitious, binding EU emissions reductions targets.”

    All in support of the Greatest Hoax in history, one of the founders of Green Peace just testified to congress that there isn’t any scientific evidence for “Global Warming”.

    • William Casey

      I don’t believe this number. I have relatives in Germany who I talk to on a weekly basis. They are PO’d about the rising cost of electricity, over 50% in past year.

  • free_agent

    You quote, “Nor are they producing a measurable effect on innovation.”

    Which is really rather surprising. Historically, governments have been fairly good at creating new technologies by ensuring that there was a profitable market for them.

    • Robert

      Please some examples.

      • free_agent

        The big one was the creation (by the US government) of airmail. Though the service was higher price than surface mail, its price was considerably less than its costs. But the volume of airmail was low enough that the subsidy could be buried in the Post Office budget. The consequence government contracts for air mail service were a major driver in the early technological development of aircraft.

        The critical point is that the government wasn’t paying specific companies to carry out specific technical work, companies got money only if they succeeded. So it was considerably more efficient than the typical government grant system.

        • docscience

          If that’s the big one, it’s pretty sad.

          • AldivosTarril

            Have you heard of the internet?

  • free_agent

    The burden on German export industries could be alleviated by paying for the subsidies out of the state budget rather than by a surcharge on electricity bills. My guess is that the added taxes needed to do that would cause a revolt at the polls.

  • WalterHorsting

    Green energy depends on rare earth elements. REEs are found with high concentrations of Thorium a super fuel that is cast into tailings ponds. There is enough thorium and unspent nuclear fuel waste in cooling ponds to power the world for over hundreds of years. Molten Salt Reactors can be built cheaply, are walk away safe, emission free, 24×7 power at $.03kwh. Energyfromthorium.com

  • AldivosTarril

    Let’s see what this “Economic Self-Destruction” looks like in Germany:

    1. hundreds of thousands of good jobs

    2. billions of dollars in exports – technology and generated energy

    3. billions of dollars in avoided fuel costs every year, estimated to reach $1 trillion by 2050

    4. avoided pollution resulting in healthier, happier people

    5. the end result being an energy system that will last forever and that runs on free fuel

    Looking at the relentless propaganda fired at Germany’s clean energy revolution by this rabid rightwing blog I don’t expect these facts will make much difference here!

    • Robert

      Concerning the above article; “Germany’s Minister of Energy and Vice Chancellor Sigmar Gabriel has already acknowledged
      that the system of subsidies for green energy needs to be reformed.
      Minister of Finance Wolfgang Schäuble also admitted that Germany may
      have gone too far in its attempt to legislate climate protection.” These guys seem to be saying that this can’t continue. What do you say to them?

      • AldivosTarril

        Of course “the system of subsidies for green energy needs to be reformed” because it’s a dynamic system with constantly changing parameters – e.g. the cost of renewables keeps falling as more are deployed.

        • William Casey

          Solar and wind are not renewable, they are reoccurring and thus are unreliable. Germany announced in January plans to build at least eight new coal fired plants.

    • Fred

      It’s extremely hard to take seriously anyone who thinks this is a “rabid rightwing blog.”

      • AldivosTarril

        Well, rabid rightwingers won’t see it that way.

        Regardless, the constant barrage of anti-clean energy propaganda from this blog makes it look like one of the Koch brothers PR tools.

    • Venkat Rao Dasari

      Avoided pollution, how? Didn’t they increase coal consumption? What fuel costs were saved? As far as I am concerned, Germany should go full steam ahead and leave manufacturing to US.

      • AldivosTarril

        Wrong again. Coal consumption down – unless you look at short term blips like a climate science denier does.

        • teapartydoc

          And all this reference-free. Amazing.

        • John Wondra

          No. December’s “doldrums” revealed how poorly the German grid responds to inevitable declines in intermittent power from wind and solar. In addition to burning coal far more than predicted, they are using “biomass,” i.e.,wood chips, to provide the requisite backup when “renewables” predictably fail to deliver. There is no net reduction in fossil-fuel generation; it is necessary, given that they have abandoned nuclear alternatives.

          • AldivosTarril

            “the AGW dogma”

            I see. You’re a science denier. No further questions.

        • Venkat Rao Dasari

          Here are some inconvenient facts: Germany generated 308 TWh of electricity from coal in 1991, steadily decreased to 255 TWh in 2009 and it increased to 286 TWh in 2013. (http://www.ag-energiebilanzen.de/). It is projected to go up next few years — especially with Russian/Turkish gas issues. A German citizen on an average pays about 29 eurocents per kWh, out of which 5.5 eurocents is EEG tax (actually 6.1 eurocents if you include VAT on EEG). Germany rates are slightly lower than Denmark’s at 31 eurocents per kWhr. Germany makes France look like an economic genius paying a mere 16 eurocents per kWhr. In many US states residential power is about 50% of German costs. Now if they actually build “modern grid” EEG costs would nearly double. For those of you that are interested Dr. Willem Post wrote a very good article with facts on the Energy Collective blog.
          Here is one of my worries. These Gov’t subsidies will jeopardize free market economy just as French cheese subsidies screwed up WTO negotiations. This is not good for Germany nor for US.

          • AldivosTarril

            So you admit that the long-term trend is down as I stated then claim short-term fluctuation means… what?

            Germans choose to pay high electricity prices via taxes to encourage efficiency and allow for investment in clean energy. It’s grown-up thinking. However:

            Germany’s Renewables Revolution – “German industry enjoys the lower spot prices that renewables create, so it pays about the same for electricity as it did in 1978, and less than French industry pays today.” http://blog.rmi.org/blog_2013_04_17_germanys_renewables_revolution

            Renewables continue to drive down the base cost of electricity for Germany: “Increasing supply of renewable energy is one of the main reasons electricity prices in Germany have declined, Teresniak said. Average day-ahead electricity prices in Germany fell 18 percent to 43.49 euros ($54.36) a megawatt-hour in the first five months of this year compared to last year…” http://www.bloomberg.com/news/2012-06-26/renewables-make-german-power-market-design-defunct-utility-says.html

          • AldivosTarril

            P.S. This: “Willem Post wrote a very good article”. Post is a notorious liar who just makes things up in his battle against reality.

      • John Wondra

        They have lost net jobs due to increased energy costs. Their leading solar producer cannot compete in the world market and is going under. They are having to rely on other’s production, at higher costs, to cover the gaps when domestic “green” power isn’t available or is otherwise too expensive. Not one of Aldivos’ “points” are based in fact.

        • AldivosTarril

          About 400,000 Germans are employed in their clean energy sector. It brings in billions of dollars in exports and is making their industry even more competitive:

          Germany’s Renewables Revolution – “German industry enjoys the lower spot prices that renewables create, so it pays about the same for electricity as it did in 1978, and less than French industry pays today.” http://blog.rmi.org/blog_2013_04_17_germanys_renewables_revolution

          But in the rightwing alternative reality these facts do not exist because rightwingers are just tools for the fossil-nuke cartel.

  • http://whenfallsthecoliseum.com/author/kwatson/ megapotamus

    When people shake off the stupids and energy prices collapse we are going to finally be getting somewhere. Yes younglings…. perhaps there is useful power in the sun’s rays but not in frikkin’ Germania. Forward.

  • teapartydoc

    Throughout history there has been a positive correlation between energy consumption and economic growth. All of Western Civilization is now in a demographic and economic stagnation that is burdened by decades of government debt and unsaved-for pension obligations. A combination of government austerity and economic growth is in order, and the best way to get this is to unleash private sector energy production. Don’t hold your breath waiting for anyone to start doing this as a matter of policy. They’re too busy primping themselves in front of a mirror of old, failed ideas.