BERLIN – For British entrepreneur Timothy Porter and millions of other Europeans who get generous financial incentives for solar panels, the sun has been very lucrative.
Not only does the government pay Porter for producing solar energy he produces, at far higher than the market rate for electricity, but he can also use what he generates for himself.
“It’s fantastic,” he said, admiring the solar panel he installed on the roof of his home in the English West Midlands two years ago.
Such subsidies are widespread in Europe, where policymakers say that energy from wind and the sun will stave global temperature increases they blame on the use of fossil fuels like oil and coal. But Europe’s debt crisis has many countries worrying more about their bottom line than climate.
Governments around the world have watched Europe as it has moved to implement generous subsidy schemes like Porter’s to meet ambitious green energy goals and race towards a future free of fossil fuels.
But with skyrocketing costs, major infrastructure challenges and biting austerity measures brought on by the debt crisis, some wonder why Europe has gone through the trouble of promising so much green so soon.
Across the English Channel, Germans consumers are waking up to the costs of going green: As of Jan. 1, they are paying 11% more for electricity than they did last year thanks to government plans to replace nuclear plants with wind and solar power that requires significant and constant public money to be made cost effective.
There were a few reasons the subsidies were put in place years ago.
There was a general desire for energy independence from Russia, where natural gas had sometimes been used as a weapon to pressure nations on political matters and the cost was unpredictable. Renewable energy was also seen as a source for jobs and income.
There was also concern for the climate, say analysts: a 2011 Eurobarometer poll showed that Europeans believe climate change to be a graver problem than the financial crisis plaguing Europe.
Nowhere is this concern more acute than in Germany. The country has long had an ambitious clean energy plan that aims to have the entire country running on 80% renewable energies by the year 2050.
That plan was fast-tracked following the accident at Japan’s Fukushima reactor in March 2011, and by Germans’ overwhelming opposition to nuclear power stemming from the lingering memories of the nuclear disaster at Chernobyl in the former Soviet Union more than two decades ago. For years after, forest-loving Germans worried about picking wild mushrooms.
Chancellor Angela Merkel – once a champion of nukes – did an about-face on her nuclear policy. She announced that all of Germany’s 17 nuclear plants would be shut down by the year 2022, 14 years ahead of schedule and closed eight immediately.
But her decision had little to do with the safety of Germany’s nuclear reactors, say analysts. Merkel’s conservative Christian Democratic Union were worried over regional elections, and federal elections in September: If she wants to remain chancellor she needed to siphon votes from the Greens and Social Democrats, both anti-nuke.
Dubbed the “energy transition,” the move has become a logistical and financial headache for Berlin. Nuclear power had represented one-fifth of the country’s energy supply, and Environment Minister Peter Altmaier recently estimated the shift to renewables could total up to $1.3 trillion by 2030.
The move left some of Germany’s neighbors grumbling.
“Outside of Germany, we’ve noticed that there are two perspectives,” said Gerd Rosenkranz, a spokesman for the non-profit German Environmental Aid. “One is, ‘there go those crazy Germans again’ and the other is ‘there go those crazy Germans again’ – but it’s possible that they’ll succeed.'”
But at what price?
In Germany, the rapid switch to renewables has sent electricity prices soaring. In January, the extra charges paid by German consumers to suppliers of renewable energy alone rose 47%. That, say analysts, means annual electricity bills will rise by nearly $258 for households across Germany.
“Because of the additional supply of electricity offered from renewables, the price for electricity has fallen – that’s good for corporate or industry clients, but not so for private homes,” said Claudia Kemfert, an energy analyst at the German Institute for Economic Research in Berlin. “That’s a crooked picture that nobody really expected beforehand.”
Analysts say that Germans are willing to pay for renewable energy out of concern for the environment and climate change.
“It’s taken so seriously because we see that climate change is already happening, that CO2 emissions are already causing some droughts, floods and melting of the ice sheets,” said Brigitte Knopf, head of the
Sustainable Solutions group at the Potsdam Institute for Climate Impact Research (PIK) near Berlin.
Skeptics of Germany’s energy transition at home and abroad say that that it is a waste of money, that data indicates that global warming may not be what had been predicted.
For example, they point to data released last year that some scientists say shows global warming stopped 16 years ago. Professor Judith Curry, head of the climate science department at Georgia Tech, says the data confirms the existence of a “pause” in warming.
While German consumers have so far been tolerant of price hikes in the name of going green, the government is nervous, especially in light of upcoming elections in September – Germany’s energy transition is a hot issue here.
“Eighty percent of households don’t even know what their electricity bill is,” she added. “A lot of people simply don’t think about it – they know their computer bill, their flat-rate (phone bill), their iPad well, but when you ask about electricity they don’t know.”
Politicians in Germany are worried over consumers aka voters waking up and the backlash it could create.
And data is seeping out that indicates global warming may not be what had been predicted.
The world’s leading climate data center in Britain issued numbers last year that some scientists say shows global warming stopped 16 years ago. Professor Judith Curry, head of the climate science department at Georgia Tech, says the data confirm the existence of a “pause” in warming. Professor Phil Jones, director of the Climatic Research Unit at the University of East Anglia, told the Mail that 16 years is too short a period from which to draw conclusions.Curry, a former US National Research Council Climate Research Committee member and the author of more than 190 peer-reviewed papers, responded:
The Research Council of Norway stated recently that global warming is likely to be much less severe than previous estimates of up to 4.5 degrees C. And Germany just went through five colder than normal winters in a row.
Still, the cost of trying to change the climate by reducing CO2 emissions has become too much to bear for other European nations mired in debt or hobbled by overspending.
As austerity measures take hold from Spain to the Netherlands, governments have been rushing to cut the very subsidies for green energy they once eagerly waved through to help the infant sectors grow.
Those subsidies – pioneered by Germany in 2000 to help meeting Europe-wide climate goals enshrined in European Union law – spurred an unsustainable, artificial boom in solar, wind and other renewables, which some analysts say have contributed to financial meltdown on the continent.
Similar policies have spread to 50 countries worldwide, including 16 of the 27 EU member states. As a result the renewables sector boomed, in particular solar, even in countries such as Germany where a sunny day is far more rare than in Spain.
“It’s government subsidized electricity prices that have given rise to the current problems in Europe, not renewable energy,” said Sebastian Mariz, managing partner at EPPA consultancy firm in Madrid. “[Subsidies] are just one of the external costs which increase this electricity deficit.”
That has left Europeans struggling to figure out what to do next. In Spain, a country on the brink of economic collapse, the situation is dire: Madrid owes a whopping $35 billion to Spanish utility companies – debt accumulated over a decade of government-regulated electricity prices.
“The whole Spanish electricity system is in debt,” said Paolo Frankl, head of the Renewable Energy Unit at the International Energy Agency in Paris who called the situation “completely unsustainable.”
European governments have now realized this growth – which saw consumers footing the bill for investors’ soaring profit margins – was out of control: The UK and Czech Republic have already cut their subsidies in half, while Italy imposed a cap on new renewable energy providers. Germany cut subsidies by up to 30%.
“Germany needed to act,” said Matthias Lang, an attorney with Bird & Bird in Dusseldorf that specializes in energy. “The previous rate was simply not sustainable. There is a limit where even the most willing consumers will object.”
The problem now, says Lang, is that with the shutdown of eight nuclear reactors and more to close, something has to fill the gap quickly. And in Germany, renewables are supposed to do so but no one knows how to do that affordably.
The German government has poured millions of euros in the past two years into trying to update the electricity grid system, and plans to build thousands of miles of electricity lines to accommodate the increasing influx of renewables. But huge gaps still exist because the infrastructure wasn’t in place when the decision to accelerate the nuclear exit was made.
Also, the technology to store energy or move it from offshore wind farms is still lagging. Until it catches up, Germany can’t fulfill its energy transition.
Analysts say that whether it is renewables or fossil fuels, EU energy infrastructure overall is aging – about half of the continent’s existing power generating capacity from coal, nuclear and gas will have to be replaced in the next 10 years, despite austerity, and that is expensive – for fossil fuel production or renewables.
“Investment will have to happen, there is little choice,” said Frauke Thies, EU energy policy advisor at Greenpeace. “The question is where these investments happen and which technologies Europe invests in.”
Analysts say the cost burden of moving to renewables is one Europeans will only shoulder in the immediate future. As the technology and infrastructure improve at a rapid pace, the expense will shrink dramatically.
“There are higher electricity prices and they will be higher for a certain time period because of the transition, but at some point this system will be the cheaper one because the nuclear reactors and conventional power plants are getting increasingly expensive,” said Rosenkranz of German Environmental Aid.
Analysts and industry scoff at such claims, saying the true costs of both nuclear energy as well as renewables in the long-term is unknown. And where the money will come from to expand renewable energy production has been left unsaid.
A recent study published by Bloomberg New Energy Finance showed that the cost of onshore wind energy will actually pull even with fossil fuels by the year 2016, as both turbine costs fall and productivity rises.
Their price has already begun to fall over the past few years and they have other advantages, says Raffaele Piria, the program director of the Smart Energy for Europe Platform (SEFEP).
“(Fossil fuels) are scarcer sources and the gas that is burned today can’t be burned again tomorrow, whereas the wind that blows today will blow tomorrow again in the same place,” he said. “Renewables in the long term have the advantage because they are not finite.”
is needed at a time when some EU states are struggling to stay financially afloat, and money for renewable energy expansion simply isn’t there. Without investment and development, clean energy will remain prohibitively expensive.
“The problem is with the financial crisis there is not much cash at the moment and to get there you need to invest the cash now,” said Stephane Bourgeois, head of Regulatory Affairs at The European Wind Energy Association (EWEA). “It’s a chicken and egg problem to get the costs down further.”
Even so, say analysts, one thing is clear: It is too late for Europe to go back on its green dream now.
“You go for it, you jump off the 10 meter board,” said Kemfer. “And once you’ve decided to jump you can’t change your mind halfway down.”
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