Germany's shift away from nuclear power is in a shambles

Germany's shift away from nuclear power, the Energiewende, is in a shambles. Der Spiegel reports that the EU Commission now believes that the practice of exempting the German industry from paying higher prices associated with solar and wind energy distorts competition in the EU. Huge penalties could be in store. 

For the European Commission and for Competition Commissioner Joaquín Almunia, Oettinger said during a dinner event, it is clear that price concessions for energy-intensive companies in Germany amount to an inadmissible subsidy. In the best-case scenario, he said, the Commission would ban such subsidies. But, he added, the worst case could see Brussels demanding that such companies pay back the money they had saved as a result of the discounts they have received.

The centerpiece of the Energiewende, the Renewable Energies Act (EEG) has become a "giant redistribution machine" enriching the owners of solar and wind energy companies, which are "a long way from being able to produce energy at the prices possible in coal-fired or nuclear power plants.":  

Since 2000, Germany has used the EEG to promote the expansion of renewable forms of energy. To ensure that the construction of expensive solar and wind farms is worthwhile for private individuals and investors, they receive a guarantee that the electricity they produce will be purchased at a fixed price for a period of several years.

The costs of start-up financing for green energy and the compensation for expansion of the power grid are added to customers' electricity bills in the form of a special tax. The entire subsidy system is supposed to come to an end when green energy becomes competitive. That, at least, is the theory.

But the reality is different. No longer can one simply describe the tax as a way to get renewable energies off the ground. Indeed, following Berlin's decision two years ago to shelve nuclear energy and accelerate the expansion of renewables, the EEG has become a giant redistribution machine.

Owners of wind and solar farms were paid about €14 billion ($18 billion) last year alone. This is the difference between the guaranteed EEG price and the proceeds actually achieved on the market for the electricity they fed into the grid. Experts with the Institute of Energy Economics at the University of Cologne estimate that consumers will have to pay more than €100 billion by 2022 for renewable energy facilities that have already been installed. Of the 28 cents household customers pay per kilowatt-hour of electricity today, 5.28 cents already applies to the EEG levy, and that figure is growing.

There are many reasons for the cost explosion. Contrary to earlier forecasts, solar and wind farms are a long way from being able to produce energy at the prices possible in coal-fired or nuclear power plants. There are also high costs associated with grid expansion and electricity storage facilities -- both necessary for a system more reliant on renewables -- as well as for backup power plants, which take up the slack when the sun isn't shining or the wind isn't blowing. In addition, the German government failed to define upper limits for solar energy, an expensive form of energy that is inefficient in a country like Germany, with its relative lack of sunshine.

(bolded by NNoN)

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PS

So far the German economy has been doing quit well, But Chancellor Merkel's senseless energy transition policy is beginning to seriously hurt the engine of European growth. With Germany facing a serious self made crisis, the Euro-Titanic is slowly heading for its its final destination....

           

Germany's leading economic institutes critical of Merkel's policies

Will Merkel end up as a failure?

With only a year until the next parliamentary elections in Germany, things are looking really bad for chancellor Angela Merkel and her government. Merkel's failed euro policy and the absurd energy transition policy are seriously weakening the German economy and her chances for re-election. In order to have a chance to continue in office, Merkel must reverse both these key policies. But there are no signs that she has the courage to do that.

A report presented by Germany's leading economic institutes this week must be sober reading for the chancellor, just back from Greece: 

Just two days later, however, leading economic institutes in Germany have darkened the mood considerably. The institutes presented their autumn economic forecast on Thursday, and cast doubt on whether Greece would be able to remain part of the euro.

"We believe that Greece cannot be saved," said Joachim Scheide from the Kiel Institute for the World Economy, one of several top economic institutes tasked by the German government with examining the state of the country's economy twice a year.

Oliver Holtemöller, of the Halle Institute for Economic Research, was also pessimistic at the Thursday press conference called to present the evaluation. He said it is unlikely that Greece will ever be able to free itself from its debt burden -- and called for a new debt haircut for the country.

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Specifically, the report forecasts that German economic growth for 2012 will only end up being 0.8 percent, slightly down from recent predictions, and that growth next year will likely be weak. Instead of the 2 percent previously forecast, the report released on Thursday now estimates GDP growth of just 1 percent in Germany in 2013. That growth, such as it is, will come almost entirely from exports, which are holding up, the report says.
But that is the best-case scenario, based on the assumption that the debt crisis in the euro zone does not worsen. The report's authors, however, do not believe the worst has passed. "The current evaluation of the German economy is based on the assumption that the situation in the euro zone … will gradually stabilize and investor confidence will return. That, however, is in no way assured," the report reads. "Downside risk dominates … and the danger is great that Germany will fall into recession."
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The report was also heavily critical of the European Central Bank's plan to purchase unlimited quantities of sovereign bonds from debt-ridden euro-zone member states on secondary markets. "The ECB is becoming the guardian of national budgetary policy and possibly even holds sway over the solvency of individual countries," the report reads. "In addition to the bank's independence, its credibility is also in danger."
Furthermore, the report adds, such behavior could trigger high inflation, which would seriously damage the ECB. "Should higher rates of inflation result, it will be extremely difficult to re-establish the ECB's credibility," the report says.

What is sad, is that the opposition in Germany does not offer any credible alternative - with the socialists and the greens in charge, the situation would get from bad to worse.