Lured by subsidies, the power companies went green. But to keep the lights on they have to burn coal.
Sixty miles northeast of Düsseldorf, outside the town of Hamm in northwest Germany, workers are giving a final tune-up to a glittering new power station. Germany is the biggest proponent of the green electricity revolution, but this plant won’t be powered by the sun, wind or woodchips — it will burn dirty old coal.
Built by German energy giant RWE at a cost of €2bn (£1.6bn), the plant is no aberration. This year the company, which owns Npower in Britain, and its rivals have poured billions of euros into a fleet of new coal-fired plants, the most polluting form of power generation. When finished they will be capable of supplying more than 8m households.
The boom runs entirely counter to the European Union’s mission, led by Germany and Britain, to replace the old fossil fuel-based energy system with a cleaner alternative. Indeed, the Germans source a quarter of their power from solar, wind and other renewables. Yet last year, carbon dioxide emissions actually rose 1.2%, partly due to the resurgence of coal.
This is just one of the surprising and unintended consequences of Europe’s troubled effort to lead the world into the low-carbon era. And the fallout is set to become even more extreme.
Governments from Berlin to Madrid — and London — are dramatically scaling back the huge subsidy programmes introduced over the past decade to underwrite the revolution.
All are struggling to come to grips with an industry transformed by America’s shale gas boom.
In July, Germany — Europe’s biggest power market — passed a new renewable energy act that slashed taxpayer support by a quarter for solar and wind energy.
The reduction is partly a reaction to plummeting costs. Ben Warren, head of environmental finance at the consultants EY, said: “Policymakers underestimated how quickly costs would fall. Five years ago it cost €6m to install a megawatt of solar. That same megawatt today could cost as little as €700,000.”
That drop is what led the Department of Energy and Climate Change to slash subsidies for solar generators in Britain two years ago. A less dramatic drop in costs has meant cuts to aid for wind farms, both onshore and at sea.
In Germany, however, the trend has been much more dramatic. Since 2004 the share of energy generated from renewable sources has jumped sixfold to 27% — nearly double the ratio in Britain.
The boom was much bigger than Berlin bargained for, which means the country is now saddled with a huge supply surplus.
One might reasonably expect a big drop in household bills to follow. That hasn’t happened. Over the decade when renewables exploded onto the scene, Germany’s annual household bills increased by nearly two-thirds to €1,020 (£815) .
Indeed, even though the wholesale power price has fallen by nearly 40% in the past five years, German consumer rates have risen steadily. Why? Because more than half the bill is now made up of taxes and ever-rising green charges.