German industrials are concerned they will lose a competitive edge against U.S. rivals where a boom in unconventional shale gas production has led to a sharp drop in industrial energy costs, the country’s industry lobby group BDI said on Thursday.
German energy costs, by contrast, are rising as its government has decided to exit nuclear power generation, invest billions of euros into expanding the renewable generation sector while largely relying on imports to meet its natural gas demand.
“The strong expansion of shale gas since the start of the century has brought in a period of lower gas prices in the United States and more stable power prices so that industry is now profiting from historically low gas prices and, in international comparison, low electricity prices,” the BDI said in a report published on Thursday.
Germany’s economy, Europe’s biggest, relies heavily on energy intensive industries such as chemical production from industry leaders such as BASF or Bayer or the automobile sector.
Quoting industry experts, the BDI said the U.S. shale gas boom could lead to a re-industrialisation of the United States and warned that this effect will not be replicated to the same extent in Europe.
“Therefore European industrial companies will in all probability have significantly higher electricity and gas prices for the foreseeable future than U.S. companies,” the BDI said.
U.S. wholesale natural gas prices currently cost around $3.5 per million British thermal units (mmBtu), compared with $9 per mmBtu in Europe.
The lobby group said that Germany’s energy policy of exiting nuclear power generation and investing heavily into renewables, which require government subsidies to operate profitably, would cost Germany 150 to 350 billion euros ($446.42 billion) by 2030.
“The economic viability of the energy switch is in acute danger. Politicians must urgently take care of the overall economic efficiency of its planned measures,” the BDI’s head Hans-Peter Keitel said.