Saturday, 21 September 2013

Germany - the darling of the "green energy" lobby - is caught in a subsidies trap

Germany has been touted as a world leader in "green energy" by "progressive" international mainstream media. However, this reality check by the government sponsored Deutsche Welle tells another story:

German households face steeply rising electricity bills, companies threaten to move abroad, engineers raise the specter of blackouts. A reform of Germany’s green energy revolution must top the new government's agenda. --

Under an ambitious new energy policy, Germany seeks to boost renewables to make up 80 percent of total power generated by 2050. Along the way, nuclear power is to be completely phased out by 2022, and fossil-fuel based energy production sharply reduced.
However, since the EEG law was implemented in 2000, German electricity retail prices have risen from then 14 eurocents per kilowatt-hour to almost 29 cents today, according to data released by the Association of Energy and Water Industries (BDEW).
Much of the increase is the result of a surcharge on electricity bills paid by private households and businesses to finance state subsidies for renewable energies. Wind, solar and biomass energy producers are guaranteed fixed so-called feed-in tariffs above market price for 20 years. These subsidies have led to an investment boom propelling the amount of renewable energy from 15 percent of German power generation in 2008 to 23 percent in 2012. --

Curiously enough, the more renewable energy is being fed into the German power grid the more people and businesses pay for the green energy. On July 16, which was a windy as well as sunny day, the wholesale electricity price even slumped to below zero on an excess of power from those renewable sources. Consumers had to pay the price difference to the feed-in tariff guaranteed to renewable producers.
Moreover, the subsidies are further inflated under a government policy to exempt energy-intensive industries such as steel mills and aluminum smelters from paying the renewables surcharge. But those breaks, which were originally meant for only a few companies competing internationally, are meanwhile being granted to over 4,000 businesses.
In addition, the costs of massive infrastructure updates, which are needed to accommodate the vast amounts of green energy, are also footed by consumers through their electricity bills. This includes expanding the power grid as well as creating storage systems for solar and wind power. --

And, as Deutsche Welle, points out, there is no way out of the subsidies energy trap:

No matter which policy measure will be finally implemented, the renewables subsidies' bill for German consumers - currently standing at a total of 20.3 billion euros a year - won't be substantially lower in the years to come. As existing renewable power producers will continue to be guaranteed fixed feed-in prices for the next 20 years, slowing the rise in costs is the best a new government might hope to achieve.

What does this mean?

It means that the medium and long range prospects for the German economy are far from good. International investors should stay away from a country that has chosen to sacrify its present economic success in order to keep the high priests of the church of global warming happy.

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