You Don’t Say: Green Subsidies Have Generated German Energy Chaos
Germany’s new government will have to sort out the unholy mess that goes by the name of German energy policy. Quite simply, the state of affairs is unsustainable.
Edginess, not enthusiasm, coloured the response of German business leaders to Chancellor Angela Merkel’s commanding election victory. No sooner were the official results released than the heads of the biggest business federations called a news conference to publicise an appeal for energy and infrastructure policy initiatives. The speed of their action almost suggested that they doubted whether her next government would grasp the urgency of their plea.
One can see why. For the curious consequence of Ms Merkel’s triumph is that the only coalition partners available to her centre-right Christian Democrats occupy the left of Germany’s political spectrum. Given that she failed to construct coherent energy and infrastructure policies during the four years that she ruled Germany with her favoured political partners, the pro-business Free Democrats, why should anyone expect a more convincing outcome if she governs with her adversaries?
Yet there are reasonable grounds to think the next government, whatever its make-up, will try to put matters right by spending more on infrastructure and by sorting out the unholy mess that goes by the name of German energy policy. Quite simply, the state of affairs on both fronts is unsustainable. No event better captured the long years of under-investment than the temporary closure in March of the Kiel Canal, a vital artery of trade, because two locks were in a state of disrepair. [...]
For German business, it will be even more important to devise and implement a thorough reform of energy policy, which has been in chaos since Ms Merkel, reacting with uncharacteristic abruptness to the Fukushima disaster in 2011, ruled that Germany must abandon nuclear power and rely on a mix of other energy sources. In particular, renewables are to supply 80 per cent of electricity needs by 2050. While some companies have benefited from huge investment in renewable energy, most industrialists are still furious at the lack of forethought behind this decision: Mr Grillo, speaking at a BDI conference in June, denounced Ms Merkel’s government for “pulling the plug on German industry”. [...]
What German business wants from the next government are policies that help rather than hinder competitiveness. The top priority must be to reduce the subsidy-driven distortions of the energy market.