Generating German Energy Poverty

What began as a daring endeavor to bring Germans more renewable energy and wean the country off nuclear energy by 2022 has turned German energy into a luxury good.

The project began in 2000 with the German Renewable Energy Act. During her reelection campaign this summer, Chancellor Angela Merkel promised to reform the legislation, which she had once championed. The current plan would continue to have chilling effects on both the German people and their economy if the recently elected Merkel fails to make good on that promise.

Some of the energy policy’s rather audacious goals to accomplish by 2050 are to decrease greenhouse gas emissions 80 percent, have 80 percent of electricity generation from renewable resources, and decrease electricity consumption by 25 percent. The policy intends to accomplish these goals without any nuclear energy.

However, the Ruhr Graduate School of Economics concluded:

To the contrary, the government’s support mechanisms [for renewable energy] have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security.

The impact of this economic reality has been well chronicled:

• Energy prices have increased drastically. Costs have increased 50 percent since 2000; and electricity will cost up to 40 cents per kilowatt-hour by 2020, a 40 percent increase over today’s prices.
• Over 600,000 Germans have had their electricity cut off due to inability to pay their bills.
• Carbon dioxide emissions have actually increased. The government’s effort to eliminate nuclear power and increase intermittent renewables has burdened coal power plants to provide reliable baseload power. The rationale for this micromanagement was to reduce carbon emissions, yet emissions have actually increased. Even worse, scientific data is at best unclear about the climate’s sensitivity to carbon emissions.
• The costs of Germany’s plans are massive. Official government estimates peg the total cost at over $735 billion.
• Wood robberies and tree theft are on the rise. More Germans are buying wood- and coal-burning stoves to offset the high cost of heat in winter.

German businesses are also concerned about being able to compete internationally. The Federation of German Industries, which represents over 100,000 German companies, including Siemens and Volkswagen, is calling for a reform of the system.

Volkswagen has already begun buying some parts from other countries because of cost pressure. The biggest German utilities have seen share prices plunge by up to 60 percent, and they face diminishing earnings while also passing some of those higher costs to the German public.

Speaking in front of the Brandenburg Gate this summer, President Obama pointed to Germany as an example America should follow: “The effort to slow climate change requires bold action. And on this, Germany and Europe have led.”

The President should take a closer look at how the renewable energy policy is actually affecting Germans and the German economy. Innovation in the energy sector is good—but only if it’s driven by markets so that people can actually afford it and benefit from it.

Christina Baworowsky is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please click here.