Jürgen Krönig: Energy Policy In Germany – Big Problems In Europe’s Powerhouse

  • Date: 27/03/14
  • Jürgen Krönig, Policy Network

The coalition agreement between the German Social Democrats (SPD) and the Christian Democrats (CDU) has seen SPD leader Sigmar Gabriel become Minister for Economy and Energy in the Merkel cabinet. In a country with spiralling energy costs, he faces a daunting challenge to balance industrial competitiveness, social justice, green goals and energy security.

 

[...] Sigmar Gabriel, the SPD leader in charge of the Economy and Energy portfolio, is without doubt the most important minister in the cabinet of Angela Merkel but he is facing the most difficult task too. His job is to secure the competitiveness of Germany and its industries and he has to reform the German energy revolution, the “Energiewende”, which cannot be done without upsetting what the scientist James Lovelock in his book “The vanishing face of Gaia – a final warning” called the “green – industrial complex” that has established itself over the last twenty or so years and is determined to defend its vested interests, not least the enormous subsidies for wind turbines. Lovelock predicted then that “Europe’s massive use of wind for baseload electricity will be remembered as one of the great industrial follies of the twenty first century”.

Energiewende is committed to Germany’s energy transition to 100% renewables.Furthermore, Sigmar Gabriel will have to find a way to explain how the architects of the Energiewende came to ignore its flawed design based on miscalculations, lack of realism and wishful thinking. This uncomfortable task might be slightly easier because the Energiewende has many political parents, Greens, Social Democrats and Christian Democrats.

One especially disastrous element of the Energiewende, the rushed nuclear exit after Fukushima, was furthermore the responsibility of Merkel’s coalition with the Liberals.Business as usual is no longer an option. Without drastic changes the Energiewende will be even more threatening for Germany’s industrial base. German exports would have been €15bn higher last year if its industry had not paid a premium for electricity compared with international competitors, according to a recent analysis by the Energy Consultancy IHS.Germany’s manufacturing suffered already €52bn in net export losses for the six-year period from 2008 to 2013. The figure was calculated by linking changes in the net volume of German manufacturing exports to changes in energy costs, using an economic model that accounted for other variables such as exchange rates. Almost 60 per cent of the total loss (or €30bn) came in energy-intensive industries: paper, chemicals and pharmaceuticals, non-metallic mineral products and basic metals.

Smaller companies were disproportionately affected. Unlike heavy energy users such as BASF and Thyssen/Krupp, small companies are not eligible for exemptions from the energy bill surcharges that cover the costs of the move to clean energy. Even more worrying for Germany is a clear trend for investment to go abroad. IHS found that direct investment abroad has accelerated at the expense of domestic investment and the cost of energy was the most important driver of this shift. [...]

The utopian dream of an economy powered by renewables is more and more turning into a nightmare. In his recently published book “Klare Worte”, which means “blunt words”, ex-Chancellor Gerhard Schröder, under whom the “green energy revolution” started, is now calling for a revision of this policy; he warns of more damaging and unachievable targets for renewable energy and for CO2 reduction by the EU Commission and advocates a longer life for Germany’s remaining nuclear power stations that according to the official time table will have to shut down in 2022, thus increasing the fear of blackouts in Germany.

But the present coalition government, despite its intention to lower the burden for consumers and industries, is still determined to double the amount of renewables till 2030. So far it does not show any willingness to consider prolonging the life of the remaining nuclear reactors, despite now facing the Ukrainian crisis that should have alerted Berlin and other European capitals to the risk of diminished energy security and growing dependency on Putin’s Russia. [...]

Germany is not alone

Germany is not alone in Europe. The UK and other EU countries are facing similar problems in regards to the price of energy and the competitiveness of industries. But for Germany it is more difficult to turn around and admit mistakes. So much money has been spent, so much prestige and pride is at stake, and, in contrast to the more pragmatic British and the less easily frightened French, green convictions are much more deeply embedded in institutions, in culture, in the media and in politics – and Germany is a country with a strong, long established tradition of anti-modernism, nature worship and suspicion of technological and scientific progress.

During the heyday of climate fears in the last decade, centre-left politicians in Britain and Germany were united in the belief that climate change would be the new mass mobilising topic that would help save their parties. A more likely outcome is that this strategy will neither save the centre-left nor will it help to prevent climate change. The fate of the SPD may serve as an interesting lesson for other centre left parties. It is telling that according to the latest survey only 24% of Germans feel confident about their countries energy policy while 73 percent are dissatisfied and are ill at ease. This may be a warning that Sigmar Gabriel should heed. It is unlikely that most of those 73% demand even more wind turbines that blight so many landscapes of their country already without delivering the life blood on which an industrial nation depends.

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