Monday, 1 August 2011

German energy policy: "Dumping billions into the least effective technology"

                       "Dumping billions into the least effective technology"

Hardly a week goes by in Germany without the foundation being laid somewhere for a new solar farm, another biogas plant or a huge wind turbine. Der Spiegel reports that a pioneering spirit has taken hold of the country, thanks to the government´s radical reworking of its energy policy. And all this will cost the taxpayers next to nothing, if one is to believe the government:

Chancellor Angela Merkel's government insists that electricity bills will only grow modestly as a result of the nuclear energy phase-out. Experts, however, disagree, with many pointing to Berlin's massive subsidies for solar power as the culprit.

The German government's plan calls for increasing the share of renewables in the country's energy mix to 35 percent by 2020. It is an ambitious goal in every respect. Not only will the current renewable energy share have to be doubled within a few years, the grid expanded and new power storage facilities installed. But Chancellor Angela Merkel's government is also somehow expecting the entire energy revolution to cost virtually nothing.
"According to our calculations, the cost of a kilowatt hour of electricity will go up by only one cent," says Economics Minister Philipp Rösler, head of Merkel's junior coalition partner, the Free Democrats (FDP). For an average household, this would correspond to the price of only one latte a month, says Environment Minister Norbert Röttgen, of Merkel's Christian Democrats. Germany is rapidly switching to green energy and at almost no additional cost to consumers. What conservative politician would have thought such a thing possible just a few months ago?

Systematically Overstated

In reality, though, the official calculations have little connection to reality. According to an assessment by the Rhenish-Westphalian Institute for Economic Research (RWI), the politicians' estimate of the costs of expanding renewable sources of energy is far too low, while the environmental benefits have been systematically overstated.
RWI experts estimate that the cost of electricity could increase by as much as five times the government's estimate of one cent per kilowatt hour. In an internal prognosis, the semi-governmental German Energy Agency anticipates an increase of four to five cents. According to the Federation of German Consumer Organizations, the additional cost could easily amount to "five cents or more per kilowatt hour."
An internal estimate making the rounds at the Economics Ministry also exceeds the official announcements. It concludes that an average three-person household will pay an additional 0.5 to 1.5 cents per kilowatt hour, and up to five cents more in the mid-term. This would come to an additional cost of €175 ($250) a year. "Not exactly the price of a latte," says Manuel Frondel of the RWI.
The problem is the federal government's outlandish subsidies policy. Electricity customers are already paying more than €13 billion this year to subsidize renewable energy. The largest subsidies go to solar plants, which contribute relatively little to overall power generation, as well as offshore wind farms in the north, which are far away from the countries largest electricity consumers in Germany's deep south.

When Will the Sun Shine?

Photovoltaics, in particular, is now seen as an enormous waste of money. The technology receives almost half all renewable energy subsidies, even though it makes up less than one 10th of total green electricity production. And it is unreliable -- one never knows if and when the sun will be shining in Germany.
For economic and environmental reasons, therefore, it would be best to drastically reduce solar subsidies and spend the money elsewhere, such as for a subsidy system that is not tied to any given technology. For example, wind turbines built on land are significantly more effective than solar power. They receive about the same amount of subsidy money, and yet they are already feeding about five times as much electricity into the grid. In the case of hydroelectric power plants, the relationship between subsidies and electricity generation is six times better. Biomass provides a return on subsidies that is three times as high as solar.
"We are dumping billions into the least effective technology," says Fritz Vahrenholt, the former environment minister for the city-state of Hamburg and now the head of utility RWE's renewable electricity subsidy Innogy. In its most recent report, the expert council on environmental issues assembled by the federal government advocates sharply reducing subsidies for solar power.

Read the entire article here


The German economy has been booming lately, but there are already signs of a cooling down. When the tax payers begin to feel the effects of an economic slowdown, they will also realize how unrealistic - and downright stupid - the Merkel government´s energy decisions are.

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