Germany needs to dump the profligate Energiewende

The German economy is export driven.

As long as Greece and Spain and the weaker Euro zone countries were holding back the value of the Euro, German exports and its economy boomed. Unemployment reached extremely low levels. There was a shortage of qualified labour. But now the German economy is stagnating and the high cost for energy, resulting from the misguided, self-mutilating Energiewende, is one of the chief contributors. The total cost to German consumers and German industry is comparable to the bailouts of the weak Eurozone countries. For no benefit.

Der Spiegel (2013): German consumers already pay the highest electricity prices in Europe. But because the government is failing to get the costs of its new energy policy under control, rising prices are already on the horizon. Electricity is becoming a luxury good in Germany, and one of the country’s most important future-oriented projects is acutely at risk. …..

….. For society as a whole, the costs have reached levels comparable only to the euro-zone bailouts. This year, German consumers will be forced to pay €20 billion ($26 billion) for electricity from solar, wind and biogas plants — electricity with a market price of just over €3 billion. Even the figure of €20 billion is disputable if you include all the unintended costs and collateral damage associated with the project. Solar panels and wind turbines at times generate huge amounts of electricity, and sometimes none at all. Depending on the weather and the time of day, the country can face absurd states of energy surplus or deficit.

How the Energiewende has increased German electricity price graphic notrickszone

These are unsustainable costs. Industries dependent on high electricity consumption have found it increasingly difficult to compete against the lower electricity costs especially in the US. Investment and jobs have started shifting to areas with lower operating costs.

WSJ (sep 2014):

The project is the linchpin of Germany’s Energiewende, or energy revolution, a mammoth, trillion-euro plan to wean the country off nuclear and fossil fuels by midcentury and the top domestic priority of Chancellor Angela Merkel.

But many companies, economists and even Germany’s neighbors worry that the enormous cost to replace a currently working system will undermine the country’s industrial base and weigh on the entire European economy. Germany’s second-quarter GDP decline of 0.6%, reported earlier this month, put a damper on overall euro-zone growth, leaving it flat for the quarter.

Average electricity prices for companies have jumped 60% over the past five years because of costs passed along as part of government subsidies of renewable energy producers. Prices are now more than double those in the U.S.

Now the business climate is sharply down, orders are falling and costs are still increasing.

Graphic: German Economy Weakens.

Der Spiegel (Oct 2014)The problem, though, is that Europe’s motor is losing steam, with a slew of bad news about the German economy in recent weeks. The latest business climate index published by the respected Munich economic think tank Ifo, which is considered to be a reliable early indicator, fell for the fifth straight month in September to its lowest level in almost a year and a half. Furthermore, German factory orders are down and exports are collapsing. And last week, the country’s leading economic research institutes issued downward revisions of their economic forecasts for this year and next.

Merkel’s new government have been on a give-away spree and that has not helped. Now finding funds to spur investment is becoming increasingly difficult. Meanwhile the ludicrous subsidies for renewable energy continue to drain the economy. The Energiewende is profligate, has no measurable benefits and has only led to more coal being burnt.

At the very beginning of its term, Merkel’s current government approved an expensive package of what amounted to pension gifts for women and older workers that is now consuming up to €9 billion a year in public finances. In their autumn economic forecast released last week, the country’s leading economic think tanks warned that the German government has “already given away a substantial amount of its room for maneuver.”

Compounding the problem is that measures taken by the government — a coalition of Merkel’s CDU and the center-left Social Democrats (SPD) — are contributing to weak growth. The think tanks predict that projects undertaken by the coalition, including allowing people to retire at the age of 63 and the introduction of Germany’s first-ever national minimum wage, will cause around 300,000 jobs a year to disappear. The CDU and SPD haven’t done much to fuel investments to counter that trend either. Interest rates in Germany may be lower than they’ve ever been before, but few companies have plans to build new factories or buy additional heavy machinery, they warn. The report states that while the many international crises do play a role — from the Middle East to Ukraine — homegrown factors do as well, especially the hostile environment created by (the government’s) economic policies.”

In Poland a different kind of energy revolution is taking place. Two new nuclear plants are being planned. Shale gas development is inevitable but is being hampered by the environmentalists. So more coal is being burned as in Germany.

The world has more to gain from a Germany with a strong economy exporting its excellent products. The pointless and profligate Energiewende needs to be dumped. Germans and Germany and the world are paying the price of pointless political correctness.

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