European governments have realized that the growth in green energy subsidies – with consumers footing the bill for investors’ soaring profit margins – is out of control: The UK and Czech Republic have already cut their subsidies in half, while Italy imposed a cap on new renewable energy providers. Germany cut subsidies by up to 30%.
For British entrepreneur Timothy Porter and millions of other Europeans who get generous financial incentives for solar panels, the sun has been very lucrative.
Not only does the government pay Porter for producing solar energy he produces, at far higher than the market rate for electricity, but he can also use what he generates for himself.
“It’s fantastic,” he said, admiring the solar panel he installed on the roof of his home in the English West Midlands two years ago.
Such subsidies are widespread in Europe, where policymakers say that energy from wind and the sun will stave global temperature increases they blame on the use of fossil fuels like oil and coal. But Europe’s debt crisis has many countries worrying more about their bottom line than climate.
Governments around the world have watched Europe as it has moved to implement generous subsidy schemes like Porter’s to meet ambitious green energy goals and race towards a future free of fossil fuels.
But with skyrocketing costs, major infrastructure challenges and biting austerity measures brought on by the debt crisis, some wonder why Europe has gone through the trouble of promising so much green so soon.
Across the English Channel, Germans consumers are waking up to the costs of going green: As of Jan. 1, they are paying 11% more for electricity than they did last year thanks to government plans to replace nuclear plants with wind and solar power that requires significant and constant public money to be made cost effective.
There were a few reasons the subsidies were put in place years ago.
There was a general desire for energy independence from Russia, where natural gas had sometimes been used as a weapon to pressure nations on political matters and the cost was unpredictable. Renewable energy was also seen as a source for jobs and income.
There was also concern for the climate, say analysts: a 2011 Eurobarometer poll showed that Europeans believe climate change to be a graver problem than the financial crisis plaguing Europe.
Nowhere is this concern more acute than in Germany. The country has long had an ambitious clean energy plan that aims to have the entire country running on 80% renewable energies by the year 2050.
That plan was fast-tracked following the accident at Japan’s Fukushima reactor in March 2011, and by Germans’ overwhelming opposition to nuclear power stemming from the lingering memories of the nuclear disaster at Chernobyl in the former Soviet Union more than two decades ago. For years after, forest-loving Germans worried about picking wild mushrooms.
Chancellor Angela Merkel – once a champion of nukes – did an about-face on her nuclear policy. She announced that all of Germany’s 17 nuclear plants would be shut down by the year 2022, 14 years ahead of schedule and closed eight immediately.
But her decision had little to do with the safety of Germany’s nuclear reactors, say analysts. Merkel’s conservative Christian Democratic Union were worried over regional elections, and federal elections in September: If she wants to remain chancellor she needed to siphon votes from the Greens and Social Democrats, both anti-nuke.
Dubbed the “energy transition,” the move has become a logistical and financial headache for Berlin. Nuclear power had represented one-fifth of the country’s energy supply, and Environment Minister Peter Altmaier recently estimated the shift to renewables could total up to $1.3 trillion by 2030.
The move left some of Germany’s neighbors grumbling.
“Outside of Germany, we’ve noticed that there are two perspectives,” said Gerd Rosenkranz, a spokesman for the non-profit German Environmental Aid. “One is, ‘there go those crazy Germans again’ and the other is ‘there go those crazy Germans again’ – but it’s possible that they’ll succeed.'”
But at what price?