Germanys shift to renewable energy was once Angela Merkel’s flagship policy – now it has become her biggest headache.
“For me, the most urgent problem is the design of the energy revolution,” said the German Chancellor in her first television interview after being re-elected last month. “We are under a lot of pressure. The future of jobs and the future of Germany as a business location depend on it.”
She is not wrong: Europe’s largest country and economy faces a crisis. Such is the mess over energy that the future of Germany’s much-vaunted economic competitiveness is now seriously threatened.
Ms Merkel is currently Europe’s most popular leader but there is a growing backlash against her ill-thought-out energy policies.
And, to cap it all, policies hailed as saving the world from climate change have, in fact, increased CO2 emissions.
The plan was called energiewende, which can be translated as energy transition or even revolution. But despite Germany’s shift to renewable solar and wind energies, and amid a recession, its carbon emissions rose by 1.8pc last year.
In the European Union, as a whole, emissions fell by 1.3pc, mainly due to recession, according to the Centre for International Climate and Environmental Research in Oslo.
Ms Merkel has no one to blame but herself. Germany’s shift to renewables was very much along the norms of the European model, with the aim of going beyond EU targets. Then along came Fukushima and the wave of anti-nuclear hysteria that followed the 2011 Tohoku earthquake and tsunami in Japan.
The once-in-a-millennium event at the Fukushima reactor killed nobody, although the tsunami claimed 16,000 lives. However, it was enough to panic Germany’s green middle class.
Ms Merkel caved in to shrill demands for the country’s atomic reactors to be closed. This decision, from a former chemist, who is personally pro-nuclear, is perhaps the most important economic call she has made. It is a disaster.
In March 2011, at the height of the eurozone recession, Germany switched off eight of its 17 nuclear reactors, cutting 7pc of electricity generation, with another 18pc to go over the next decade. The other nine reactors will be phased out from 2015 to 2022, bringing forward a previous 2036 deadline by 14 years.
Germany has also stepped up energiewende, as it switches to meet a target of producing 80pc of the country’s electricity from renewable, wind and solar power by 2050. The fields carpeted with solar panels and the North Sea wind farms may have gratified the green conceits of Germany’s middle class but they have come at a terrible economic and social cost. According to Nature, the international science magazine, this year German consumers will be forced to pay €20bn (£17bn) to subsidise electricity from solar, wind and bio-gas plants, power with a real market price of €3bn.
To pay for this green adventure, surcharges on electricity for households have increased by 47pc, or €15bn, in the past year alone. German consumers already pay the highest electricity prices in Europe; before long, the average three-person household will spend around €90 a month for electricity, almost twice as much as in 2000. Currently, more than 300,000 German households a year are seeing their power shut off because of unpaid bills.
Two-thirds of the electricity price increase is due to new government surcharges and taxes to subsidise renewable energy. While electricity prices have rocketed and the middle classes receive handouts to put solar panels on their houses, pensions and wages have not kept up, hitting Germany’s poorest hardest.
There are some serious practical problems emerging. Solar and wind power is erratic, which means that Germany will require storage capacity for 20bn to 30bn kilowatt-hours by 2050. So far, the storage capacity has grown by little more than 70m kilowatt-hours.
Compounding problems, when the wind stops blowing or the sun disappears, the electricity supply needed to power the national grid becomes scarce. This has pushed Germany into increased use of heavy oil and coal power plants, which is why the country released more carbon dioxide into the atmosphere in 2012 than in 2011.
Its decision to phase out nuclear power also led to a rise in coal prices, as traders realised that it was likely to keep more coal for domestic consumption.
Germany has got used to delivering economic homilies on competitiveness to the rest of Europe. But a new picture is emerging: German industry is in trouble. Energy prices are 40pc more expensive than in France and the Netherlands, and the bills are 15pc higher than the EU average. Even though Germany’s energy-intensive manufacturing sector is given a break with reduced levies, industries such as chemicals and steel are among the hardest hit, with energiewende costs of up to €740m a year. The burden could get even worse after the European Commission (EC) launched an investigation into the reduced levies.
The Verband der Industriellen Energie- und Kraftwirtschaft, which represents high-energy manufacturing, is alarmed that the commission could be about to rule that the levies are in breach of EU competition rules on state aid to industry. It is concerned that the EC will levy full charges on companies with immediate effect, and maybe even retroactively, a move it says could “destroy Germany’s industrial core”.
Germany has become a cautionary tale for Europe, an example of where the wrong energy policies are damaging, perhaps mortally wounding, its economy, punishing consumers and the poor while undermining the green objectives, of reduced CO2 emissions, it set out to achieve.
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