Costly program undermines efforts to build common European market
Germany must press ahead with energy reforms if it is to avoid the spiraling costs of subsidizing “green” energy forms like solar and wind from derailing its entire agenda, the renewables chief of one of the country’s largest energy companies, RWE, said Jan. 10.
“In its present form, the renewable energy law isn’t sustainable,” Hans Bünting, the managing director of RWE Innogy GmbH, told reporters in Essen last week.
Late last year, an independent study similarly warned that unless the energy program was accelerated, Germany would fall short of its self-imposed goals. “The speed and intensity” of the energy program “must be increased significantly,” it read, “to achieve the improvements in energy efficiency that are aimed for.”
At present, renewables provide some 20 percent of German energy. By 2050, as much as 80 percent of electricity should be generated by clean sources such as solar and wind.
Germany’s green-energy agenda is no doubt ambitious, but it threatens to isolate the country in Central Europe. The Czech Republic’s and Poland’s announcement that they will build switches on their borders to keep German electricity off their grids undermine the aim of creating a pan-European energy market.
Green energy makes up only a small portion of these two countries’ energy mixes, as both continue to rely mostly on fossil fuels.
With the phasing out of nuclear energy in the wake of the Fukushima power plant disaster in Japan in 2011, Germany’s renewable energy target looks all the more difficult to meet, and it is doubtful whether it is politically feasible.
Berlin already doles out significant subsidies to local green-energy producers – in excess of 20 billion euros in 2012, reports the Frankfurter Allgemeine Zeitung – while electricity costs are rising. Chancellor Angela Merkel hopes to convince voters of the success of her energy agenda ahead of elections later this year, but her liberal party coalition partners as well as some members of her own Christian Democrat Party, especially in the south, the economic heartland of Germany, are skeptical. Besides the mounting costs, manufacturers there have to cope with the threat of power outages as a result of intermittent green energy production.
Although solar’s share in German electricity production is rising, most green energy is still produced by wind farms in the north. Wind being an inconsistent source of energy, Germany’s heavy reliance on it causes fluctuations in the power grid that, in turn, can force companies to shut down production for fear of a blackout.
Such companies are financially compensated at the taxpayers’ expense – up to 20,000 euros per megawatt per year when analysts say 2,000 euros would be a perfectly reasonable figure. The total cost of Germany’s green-energy project thus rises by the millions.
Additionally, businesses can apply to be exempt from paying a surcharge that finances green-energy subsidies when it would inhibit their ability to compete globally. But it’s not just multinationals that are granted such exempt status. Weekly Der Spiegel reports that among the more than 1,500 companies that are able to escape paying the tax this year are chocolate factories, poultry farms and slaughterhouses. It quotes energy expert Andreas Löschel as warning that if the policy isn’t reversed, “only the stupid ones will not be freed from the surcharge.” Even many midsize companies can prove some sort of international competition, so the tax burden falls disproportionately on small businesses.
Germany’s green-energy push nevertheless remains fairly popular at home, but not abroad. Neighboring countries like the Czech Republic and Poland, which are tied to the same electricity grid as Germany, have been compelled to absorb the fluctuations that stem from its wind-energy production. These countries now intend to build security switches on their borders to prevent overloads and blackouts.
The conservative German newspaper Die Welt has little sympathy for its own government, arguing the Czechs and the Poles cannot be blamed for acting in what it calls “self-defense.” Rather, Merkel’s administration was “blinded” by its lofty ambitions, the paper editorialized last month, and used the grids of neighboring countries without even asking their permission, let alone paying for it.
Die Welt recognizes that the Czech Republic’s and Poland’s decision fragments the European energy market and “makes Germany the electric island in the European energy network.”
Germany may meet its goal of boosting renewable energy production significantly to wane itself of coal, natural gas and nuclear, but that achievement will come at a price: literally for the German consumer, who will be paying a higher electricity rate than his European counterparts, but more importantly to the European single market which is now one bit less integrated.