Germany’s much-ballyhooed green energy transition—its energiewende—has run up quite a tab, and policymakers are having trouble figuring out who is actually going to pay for the policies. In an attempt to kick-start fledgling renewable energy sources like wind and solar power, Berlin guaranteed producers locked-in, long-term, above-market rates called feed-in tariffs. To their credit, this plan of pushing technologies of dubious merit at any cost worked, perhaps too well: the costs of these subsidies have been passed right along to German consumers in the form of a green surcharge on their power bills, resulting in some of Europe’s most expensive electricity.
But out of concern for its economic competitiveness on the continent, Germany has offered generous exemptions to its most energy-intensive industries, and plans to continue doing so for the foreseeable future. Bloomberg reports:
…Germany has sought to preserve its companies’ competitiveness in a European context, [said the deputy head of the Christian Democrats Michael Fuchs]…The move would retain the privileges of some 2,154 companies with heavy power bills. […]
Last year, [green surcharges] added about 23 billion euros ($25.5 billion) to power bills, making electricity in Germany the second-most expensive in the 28 EU nations after Denmark. The fee translates to 6.54 euro cents a kilowatt-hour. The surcharge may rise to 7.3 to 7.5 euro cents by the end of the decade, said Fuchs. Some forecasters predict a leap to 10 euro cents per kilowatt-hour, he said.
The privileges benefit companies from glass makers, to pig slaughterers, cement makers and steel makers. The main criterion for joining the group — and paying a fifth of the standard fee — is a power bill that adds up to a minimum 14 percent of company costs.
Germany is right to be worried about the negative effect expensive power is having on its heavy industry. It’s not a hard sell for companies to move to outsource production (and all the jobs that go with it) outside of Germany if the price of business-as-usual is too high. But exempting these big companies doesn’t do anything to address the deeper problem, namely that this eco-mania carries with it some tremendous costs that must be borne somewhere. And if industry isn’t going to shell out, that leaves smaller companies and—you guessed it—German households that are left footing that bill.
Expensive power can be thought of as a pernicious sort of regressive tax, felt most keenly by society’s poorest. Wealthier Germans might not have noticed the 6.54 euro cents a kilowatt-hour surcharge on their recent bills, but for families whose power bills make up a larger portion of their monthly budgets, these price hikes cut deep.
Berlin is slowly waking up to the fact that its energiewende has produced something of a mess. Last month German policymakers agreed on a framework deal to slow down the deployment of renewables, and according to Reuters a new revision of an energy law plans to limit offshore wind development to try and cut costs and improve grid stability. But these are half measures, and while lawmakers tinker with the energiewende on its fringes, Germany’s poorest are suffering from some of Europe’s most expensive power bills while the country’s biggest energy consumers secure exemptions. That’s some policy you’ve got there, Merkel.