After years of subsidizing green energy production, Germany may be on the brink of an imminent “energy crisis,” reports German Mittelstand News.
Some 39 power plants across the country “could be decommissioned later this year” which could “jeopardize the security of supply,” precipitating a huge energy crisis in the coming years as more plants are shuttered, according to the German Association of Energy and Water Industries — the country’s main utilities lobby.
“Every second power plant planned in Germany is about to fold,” Mittelstand News reports. “The willingness to invest is decreasing rapidly as even the most efficient gas-fired power plants can no longer be operated profitably.”
Problems will get even worse when Germany’s last nuclear power plant is retired in 2022, reports Mittelstand News. For years, the government has subsidized solar and wind energy through energy taxes that have dramatically jacked up electricity rates.
But at the same time, the flood of solar and wind energy on the grid has caused wholesale electricity prices to collapse — all while retail rates have skyrocketed. But the collapse in wholesale prices are cutting into the profitability of coal and gas plant operators that don’t get the generous subsidies that green energy does.
This problem was highlighted by a 2014 report by the Switzerland-based FAA Financial Advisory AG. The group found Germany’s green energy revolution is having “profound effects on wholesale electricity markets that could ultimately result in a deterioration of the country’s reliability.”
What’s happening is that green energy sources are given priority on the grid when meeting power demand, therefore setting the marginal price of electricity being produced — which is very low because they have no fuel costs. The prioritization of green energy has depressed wholesale prices and means that coal and gas power can’t recover their full costs.
This normally wouldn’t be a problem in a free, competitive market, but subsidies for green energy means more coal and gas plants are needed for back-up. These, plants, however, are having trouble finding investors willing to lose money because they can’t make money selling electricity.