Romantic Germany risks

economic decline as green

dream spoils
Germany is committing slow economic
suicide. It has staked its future on heavy
industry and manufacturing, yet has no
energy policy to back this up.

Image 2 of 4

By Ambrose Evans-Pritchard
7:35PM BST 11 Sep 2013
643 Comments
Instead, the country has a ruinously expensive
green dream, priced at 700bn (590bn) from now
until the late 2030s by environment minister Peter
Altmaier if costs are slashed - and 1 trillion if they
are not. The Germans are surely the most romantic
nation on earth.
The full implications of this may become clear over
the next decade, just as Germanys ageing crisis
hits with maximum force and its engineers retire;
and just as German voters discover - what they
suspect already - that it costs real money to hold a
half-baked euro together.
The likelihood is that Germany will start to lose its
economic halo soon, de-rated like others before
it.
America was over-rated in 2000. Russia and Britain
were over-rated in 2007. Brazil, India and a string
of mini-BRICS were over-rated in 2011. Today the
country most obviously trading at its cyclical peak is
Germany, a geostrategic short candidate that is
drawing down its credit from past efforts. However,
the slippage may be slow, since Germany has
locked in a lasting edge over southern Europe
through a fixed exchange rate.
Chancellor Angela Merkel tied a deadweight
around the ankles of her country when she
suddenly - and flippantly - abandoned her nuclear
policy after Japans Fukushima disaster in 2011.
This has forever changed the way we define risk,
she said at the time. Its over.
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She was talking about politics, of course, not
science. It was an earthquake and tsunami that
caused the Fukushima tragedy. Germanys nuclear
plants are not at risk from such flooding, nor are
they built on tectonic faultlines. As a scientist with a
PhD in subatomic reactions, Dr Merkel knows that
the post-Fukushima panic in Germany was
hysterical.
Eight nuclear reactors were shut immediately, the
rest to be wound down by 2022. This will cut off a
fifth of Germanys total power. To global
astonishment - and the Lefts chagrin - she then
unveiled her Faustian Energiewende, the grand
plan to derive half of all German electricity from
wind, solar, biomass and other renewables by
2035, and 80pc by the middle of the century.
The assumption was that Germany would gain a
first-mover lead in renewables, reaping the
reward later. They overlooked the Chinese, who
copied the technology. Chinese firms gouged the
German home market with the aid of cheap labour,
a cheap yuan, cheap state credit and a global trade
system that let them get away with it.
The German solar industry has been smashed.
QCells, Conergy, Solon and Solarworld have all
gone bust or faced debt restructuring. The
subsidies for feed-in tariffs have been leaked
abroad. Eight of the worlds 10 biggest solar firms
are now Chinese.
As a solar enthusiast, I am grateful to the Germans
for their altruism. Roughly 100bn of their money
has gone up in smoke - one way or another -
developing solar technologies that have helped
drive down costs to near grid parity in low
latitudes. The great prize of market-based solar is
within grasp. Sadly for German citizens, they will
see no special benefit.

In the end, it is wind from thousands of turbines in
the Baltic - generating 25,000 megawatts (MW) by
2030 - that is supposed to power Europes
industrial heart. This is an astounding gamble. As
of today, barely 300 megawatts of offshore wind
capacity is in place. The cables across the country
do not exist.
Utilities are turning to coal - and cheap lignite,
emitting 30pc more CO2 - to plug the gap.
Germanys greenhouse emissions rose 1.6pc last
year. In the US they fell to a 20-year low thanks to
the switch from coal to shale gas. Sudden surges
of power - the intermittency effect - are overloading
the grid and crippling utilities E.ON and RWE. The
pair have threatened to shut down 21,000MW of
power plants.
The Chemical Industry Federation has called for an
immediate freeze in costs before its members are
priced out of the global market. Spiralling energy
costs will soon drive us to the wall. It has become
dangerous, and any further rise will break the back
of small and medium firms, it said.
Electricity prices are twice as high as in America.
Natural gas costs are four times as high, forcing
the chemical giants of the Ruhr and the Rhine to
decamp across the Atlantic. BASF is building its
new site for emulsion polymers in Texas, the latest
of a 4.2bn investment blitz in the US.
Gnther Oettinger, Germanys EU commissioner,
has called for a top-to-bottom review of the policy
and a dash for shale. We need industry; we
cannot be the good guys for the whole world if no
one is follows suit, he said.
This should be the galvanizing issue in Germanys
election campaign. It was hardly mentioned in Dr
Merkels recent soporific debate with Social
Democrat leader Peer Steinbruck, eclipsed by a
clash on Autobahn speed limits.
Mr Steinbruck called the Energiewende a
disaster, but only because it has been
mismanaged. I have nothing against the idea, he
said.
It is certainly a dogs dinner, even if the origins go
back to a 20-year guarantee for subsidies issued
by the SPD-Green coalition in 2000. This is paid for
though a fund levied on all electricity users.

At the time, Green leader Jurgen Trittin said it
would cost consumers no more than a scoop of
ice cream. As a false prospectus, that surely rivals
the line by Bavarias leader in the early 1990s: that
the risk of Germany ever having to bail out a future
eurozone partner was less than the risk of famine
in Bavaria.
The levy has been rising exponentially, up 47pc
this year alone. This is added to the bills of
consumers. Households are paying ever more
because a growing army of energy-intensive
industries and firms competing in the global market
are exempt.
The assumption long ago was that global energy
costs would ratchet up, making the levy
unneccesary. The Merkel government was caught
off-guard by the US shale gas revolution, though
the writing has been on the wall since 2009.
The levy policy is turning into a nexus of distortions
- Madness, as the Handlesblatt screamed on its
front page - since firms that have slashed energy
use the most are penalised. One has taken a case
to the top court. The burden on households is
politically toxic. Property owners enjoy a solar
income. Renters suffer the extra levy. The poor
subsidise the rich. Besides, experts say it is only a
matter time before the vice tightens on industry as
well.
Stephan Kohler, from the state-funded German
Energy Agency, says the system is out of control.
He has called for the offending energy law to be
abolished. Is anybody listening?
Angela Merkel says she is more convinced than
ever that her green gamble will pay off. If anyone
can manage it, itll be the Germans. Its not easy,
but we can do it.
Famous last words.