Readers of this column have surely noticed that I have used Germany as the exemplar of the European Union’s (EU’s) disastrous energy policies. The reason I do this is simple: Others continue to hold up Germany’s Energiewende as an example the U.S. should emulate. Even Bloomberg has fallen for the chimera that 80% of electricity from renewable energy sources by 2050 can be achieved without economic chaos.
In the May 15 Bloomberg article “U.S. Energy Policy Should Take a Lesson from Germany’s Energiewende,” the writers propose three lessons the U.S. should learn from Germany’s experiment:
- Germany has a national vision and commitment to renewable energy.
- Germany’s policies are consistent, but still flexible.
- Germany is showing that transforming the electricity system can be done economically and affordably.
I believe the facts make each assertion disingenuous. The Bloomberg writers have fallen into the familiar trap of mistaking commitment to a national political goal with the well-being of its citizens, the prime purpose for the existence of any government. Just because something can be done, doesn’t mean it should be done, particularly when the collateral damage to its citizens and economy are ignored. Let’s consider the costs and side effects of Energiewende.
Continuous Rate Shock
Ratepayers in Germany and many EU countries are feeling the buzz of rate shock that will soon grow to economic life-threatening electrocution unless energy policy is soon balanced with ratepayers’ ability to pay their energy bills. As it is, residential electricity users in Germany, as well as other EU countries, have to make the choice between “eating or heating.”
The latest Eurostat data shows the average household in Germany pays 35 cents/kWh (you read that correctly). That represents an increase of almost 6% over the past 12 months alone. Industrial users averaged 17cents/kWh, showing the renewables mandates are being paid for by the residential consumer. Still, the cost to industrial users of natural gas is $18.54/MMBtu! It’s no wonder that so many large industrial corporations are migrating out of the country—the price of energy makes products manufactured in Germany noncompetitive in the global market. Germany, or any of the EU countries that must import natural gas from Russia at prices linked to the global price of oil cannot hope to complete in the global marketplace against countries with indigenously produced shale gas at $4/MMBtu. The cost to Germany to shut down its nuclear power plants was recently estimated by the environment minister as €1 trillion.
The media pressure on EU leaders to either slow or reconsider the EU’s renewable goals is steadily rising. Some may recall the EU policy statement that came out of the Lisbon Agenda in 2000: “To make the EU the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion by 2010.”
The Energiewende has produced precisely the opposite impact on the EU economies expected when the Lisbon Agenda was signed. According to Benny Peiser, director of the self-described nonpartisan, not-for-profit Global Warming Policy Foundation, located in the UK, the real effect of the EU’s renewable policies has been “the biggest wealth transfer in the history of modern Europe—from the poor to the rich.” Peiser, speaking at an energy conference in Calgary in mid-May went on to discuss the implications of these policies. Ordinary families are seeing their energy bills rise because they pay the majority of cost of Germany’s lucrative feed-in-tariffs—the industrial side of the economy pays virtually nothing toward integrating renewables. Yet industrial firms are making tracks out of Germany and other EU countries anyway, often to the U.S., where energy prices are relatively low. Peiser noted that the effect of migrating industrial users of large blocks of electricity is to further accelerate rising energy prices.
Further, Peiser observed that as this industrial migration is occurring, the cost of carbon in the EU cap-and-trade scheme has plummeted, from about €35.90 in 2008 to about €3 today. “The biggest irony is . . . that it has now become very, very cheap to burn coal and as a result, there’s a new coal boom in Europe, of all places. Germany alone is building 25 coal-fired plants,” said Peiser.
Ironically, the Energiewende is helping to continue the economic collapse of Germany and is “killing the environment,” all unintended but nonetheless very tangible results. In addition to rapidly rising rates and industry migration, Peiser noted that the Swiss Banking firm UBS recently said that the EU carbon emission trading scheme has cost EU consumers $287 billion for “almost zero impact.” The Washington Post has also taken note of the EU problems, saying Europe “has become the green-energy basket case.”
Be Careful What You Ask For
Instead of a model for the U.S. to emulate, Europe has become a model of a failed energy policy. Peiser noted that as many as nine million British families pay 10% or more of household income toward heat and electricity. There were reports last winter from the UK that about a half million pensioners were burning books to stay warm because used books were cheaper than burning coal. Energiewende has produced similar horror stories in Germany, with 600,000 people having their power cut off for nonpayment of their energy bills. The increase in “energy poverty” is frightening.
The authors of the Bloomberg article are right that we can learn something from Germany’s Energiewende. It’s an energy policy that is destructive to the economy and to its citizens’ quality of life and should be avoided.
—Dr. Robert Peltier, PE is POWER’s editor-in-chief.