How to Strangle German Capitalism: Renewable Electricity

UPDATE: below


Germany is the least damaged country in the Euro-zone. And although that status has lost much of its luster, Germany's continued growth and economic reform is necessary for preservation of the Euro (leaving aside whether saving the common currency is worth it).

A problem: Germans were more committed to un-competitive renewable energy than to competitiveness and prosperity. Most of the EU implemented solar power subsidies that upped electricity prices by over €60 billion or, in Germany, €130 per household annually. This was done via artificial "feed-in tariffs," that over-paid for wind and solar generation, stimulating economically inefficient power production that accounted for a fraction of Germany electric generation demand. Unsurprisingly, it didn't work, according to Der Spiegel:

The Baedeker travel guide is now available in an environmentally-friendly version. The 200-page book, entitled "Germany -- Discover Renewable Energy," lists the sights of the solar age: the solar café in Kirchzarten, the solar golf course in Bad Saulgau, the light tower in Solingen and the "Alster Sun" in Hamburg, possibly the largest solar boat in the world.

The only thing that's missing at the moment is sunshine. For weeks now, the 1.1 million solar power systems in Germany have generated almost no electricity. The days are short, the weather is bad and the sky is overcast.

As is so often the case in winter, all solar panels more or less stopped generating electricity at the same time. To avert power shortages, Germany currently has to import large amounts of electricity generated at nuclear power plants in France and the Czech Republic. To offset the temporary loss of solar power, grid operator Tennet resorted to an emergency backup plan, powering up an old oil-fired plant in the Austrian city of Graz.

Solar energy has gone from being the great white hope, to an impediment, to a reliable energy supply. Solar farm operators and homeowners with solar panels on their roofs collected more than €8 billion ($10.2 billion) in subsidies in 2011, but the electricity they generated made up only about 3 percent of the total power supply, and that at unpredictable times.

The distribution networks are not designed to allow tens of thousands of solar panel owners to switch at will between drawing electricity from the grid and feeding power into it. Because there are almost no storage options, the excess energy has to be destroyed at substantial cost. German consumers already complain about having to pay the second-highest electricity prices in Europe.

Having already wasted over €100 billion on solar subsidies, and with German wind power "in the doldrums," Germany's Environment Minister Norbert Röttgen recently decided to start scaling back the solar subsidy immediately, ending it in 2017 (automatic translation here). Share prices in solar companies promptly sunk like a stone.

An overdue correction. But though the operation could be a success, the German economy may die on the table. Already burdened by the country's likely decision to close its nuclear generation plants -- at a cost of €1.7 trillion ($2.15 trillion) by 2030 -- German industry may already have fled. According to the January 18th Südwest Presse (Ulm) (automatic translation here):

One fifth of every German industrial company has moved activities to foreign countries, or plans to do so, because of the uncertain energy and raw material supply. This is the outcome of a survey conducted by the German Chamber of Industry and Commerce (DIHK), in which 1520 companies participated. DIHK-President Hans Heinrich Driftmann finds this alarming: He fears that Germany is losing its appeal for foreign investors in the wake of its energy supply transformation.

Not the euro crisis, but rising energy prices, are cited as by companies as their biggest problem: 86 percent fear it's getting worse for their business. More than half also identified worry about possible power outages or voltage fluctuations.

Conclusion: Planning for predicted increases in power demand isn't easy; India, for one, could fall well short (despite abundant coal), because of corruption and market inefficiencies. But Germany has has no such excuses:

Unfortunately, Germany’s green politicians here were too dim-witted to foresee the obvious consequences. Now reality has since caught up. The German electricity market is on the verge of collapse. The scale of the EEG Renewable Energy Feed-in Act is of unprecedented stupidity, a folly that will certainly go down in German history textbooks.

Let the record reflect that it took a concept as crazy as green energy to destroy German industrial capitalism--the engine of the country's post-war success. And if Germany falters, Greece, Italy, Spain, France, etc., are doomed.

MORE:

Et tu the United States?, wonders Robert Samuelson in Wednesday's Washington Post:

But we don’t view energy this way. We clamor for grander goals: becoming energy "independent" or stopping global warming. And these -- as the EIA report also shows -- are unreachable anytime soon, if ever. Barring vast new discoveries, we won’t produce enough oil to meet our needs. Indeed, the EIA’s assumption about biofuels, which roughly triple by 2035, could be too optimistic. If so, oil imports would exceed EIA projections. (In 2035, the EIA expects biofuels to account for 12 percent of liquid fuel use, up from 4 percent in 2010.)

The same is true of global warming. It’s hard to see how, under plausible assumptions, greenhouse gas emissions could be reduced substantially in the foreseeable future. The pressures of population and economic growth overwhelm improved energy efficiency or shifts to "green" energy. For example, renewable fuels (wind, solar, geothermal, biomass) are projected to more than double by 2035. Still, including hydropower, they account for only 16 percent of electricity generation in 2035. Coal and natural gas dominate.

We need to view matters as they are, not as we wish them.

(via Global Warming Policy Foundation)