More on the Cost of Renewables from Germany

It is very curious how the ‘Greens’ occasionally let the cat out of the bag regarding the real cost of renewable energy. I just found one such article on Spiegel online. Here, it is their desire to take a swipe at business that creates the revelation. As regular readers will know, I have been detailing the shocking costs that are being loaded on German households and firms as Germany dashes for a renewable future (e.g. see here).

The German government will exempt some 1,550 industrial companies from electricity cost increases in 2013, SPIEGEL has learned.

The Federal Office for Economics and Export Control informed the firms in mid-December that they won’t have to pay a special charge imposed on electricity customers under the country’s Renewable Energy Act to help cover the cost of expanding the production of energy from renewable sources.

The opposition Green Party estimates that the companies will save up to €4 billion ($5.3 billion) as a result. The electricity bills for private energy customers and smaller businesses will increase by a commensurate amount.

Note the number of companies and the cost quoted by the Green Party. The really curious part is that the government believes that it is necessary to exempt companies in the first place, if renewable energy is a viable plan for an economy. Implicit in the subsidy is a recognition that, in some way, the industries being exempted are threatened by the soaring costs of energy. Of course, the Green Party are right about the increase being diverted to other energy users, but the key difference with other energy users is that they are presumably smaller, and there will be no headlines as major businesses shut down due to higher energy costs. The German government has good reason to be concerned. Their next door neighbour of Poland is one of the least ‘green’ in Europe:

Poland is the 10th largest consumer of coal in the world and produces 92 percent of its electricity from coal, according to the World Coal Association. And despite EU targets for curbing greenhouse gas emissions, Poland is pressing forward with plans replace old coal plants with massive new ones.

Incidentally, the article that this quote comes from is one in which carbon dioxide is termed a pollutant; a curious description for a gas which is essential to all life on earth. However, returning to the main point, it is possible to guess why the exemptions were given. The companies granted the exemptions probably simply said that, with such high costs, they would decamp from Germany to a more business conducive economy such as Poland.

If I were German, I would not so much be worrying about the exempted companies, but rather the companies that are not exempted. These are presumably smaller concerns, and ones without the scale and resources to lobby the government. For these companies, the higher costs will go ahead, and for higher energy users they will undoubtedly give consideration as to whether they wish to continue to operate in Germany. This will not happen overnight; moving is a complex and expensive business. Rather, when it is time for the next major investment, for example a major capital expenditure, this is when the factories start to relocate.

The impact on lighter energy users is less dramatic, but is still there. The added energy costs will appear in their prices, and that cost will then be passed on to consumers as higher prices, and those consumers will already be paying higher prices for their own energy usage. Furthermore, each firm engaged in exports, or competing with imports, will be less competitive. That will mean less sales, and less sales means less jobs. Furthermore, the increased cost of living will see pressure for higher wages to make up for the inflationary effects of higher energy costs, and this will further dent their ability to compete.

The simple point is this. Energy costs can have a major impact on the competitiveness of an economy. Moving to renewable energy, as is being clearly demonstrated in Germany, creates a huge increase in energy costs. The ‘green’ dreamers have long claimed that ‘green’ energy is good for the economy; it is an absurd idea, and Germany continues to provide the evidence.

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5 responses to “More on the Cost of Renewables from Germany

  1. The big companies get to lobby the government and threaten to leave if they don’t give them concessions. We have seen this in NZ with the free allocation of units under the ETS.

    I imagine that a lot of smaller German businesses will shut down as a result.

    • Yes, there has to be a consequence in the end. It is all about appearances when a smaller firm shuts down. Even if in aggregate small firm closures amount to more job losses than the closure of a large firm, it is the large firm that gets into the news.

  2. Autonomous Mind also picks up on the Spiegel story and notes that Germany is actually planning 24 new coal fired power stations.

    http://autonomousmind.wordpress.com/2012/12/24/real-economics-blog-technologically-literate-historically-informed-politically-progressive/

  3. Pingback: The Chaos of German ‘Renewable’ Energy | New Zealand Climate Change

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