German Green Energy a Failure, Studies Show

Germany competitiveness is undermined by green energy laws that do little to reduce greenhouse emissions.

Wind turbines off the coast of Friedrichskoog in northwest Germany, January 2, 2012
Wind turbines off the coast of Friedrichskoog in northwest Germany, January 2, 2012 (Flickr/BlueRidgeKitties)

Two new studies provided a damning indictment of Germany’s green energy program this week, claiming it had done little to halt climate change but undermined exports by €15 billion last year.

The first report, which came from a commission of experts that had been appointed by the German parliament to study the country’s energy laws, recommended Chancellor Angela Merkel’s government on Wednesday to abolish all subsidies for green energy which cost the state some €20 billion per year.

It concluded that the current system, in which green power producers are paid guaranteed, above market prices to put electricity on the grid, is financially unsound and not producing a measurable effect on innovation. “For both these reasons, there is no justification for a continuation of the [policy],” it said.

The second study, released by IHS consultants the next day, found that as a consequence of energy being more expensive in Germany than in other European countries, its manufacturing sector lost €52 billion in net export revenue between 2008 to 2013.

Almost 60 percent of the loss came in energy intensive industries such as chemicals and pharmaceuticals.

“Smaller companies were disproportionately affected,” reports the Financial Times. “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.”

German law prioritizes access on the country’s power transmission grid for electricity that is produced by renewable sources such as solar and wind. On days when there is plenty of sunshine or wind, Germany produces an energy surplus. On other days, more pollutant coal and gas stations have to make up the difference. The switch could cause blackouts which forces manufacturers to temporarily shut down their production — for which they are financially compensated at the expense of the German taxpayer who is already paying a higher electricity bill than consumers elsewhere in Europe.

The Economist last year described the result as “a web of grotesque distortions. On sunny days Germany pushes its excess power into the European grid at a loss. Because producers of renewables are paid a fixed price, their subsidy rises as the spot price of electricity falls. On cloudy days Germany relies ever more on brown coal.” Its greenhouse gas emissions — which are believed to cause global warming — have thus risen.

Germany’s economy minister Sigmar Gabriel, who is also responsible for energy policy, has acknowledged that the subsidy scheme is in need of reform. Finance minister Wolfgang Schäuble has similarly admitted that the country may have gone too far. Yet the government is unlikely to significantly overhaul the program. As The American Interest‘s Walter Russell Mead points out, “the Energiewende has been embraced by both of Germany’s main political parties and remains wildly popular with the electorate.” A recent survey even showed 83 percent of Germans favoring more stringent emission reduction targets at the European level as well. Writes Mead, “That way, at least, everyone can suffer.”

Green energy accounts for about a quarter of German power generation, up from 7 percent in 2000 when the laws were introduced. The government aims for a level of 40 to 45 percent by 2025.

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