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The Growing Absurdity Of German Energy Policy

Editorial, Financial Times

Berlin increasingly needs dirty coal to make up for scrapping nuclear. Germany’s Energiewende is increasingly seen by other nations as a lesson in the danger of doing too much too quickly.

In 2000, Gerhard Schröder’s government launched the Energiewende when it announced subsidies for any company that produced green energy. This led to the explosive growth of renewables, which this year supplied more than a quarter of all German electricity. The pace of Germany’s energy transition was accelerated by Angela Merkel in 2011 after the Fukushima nuclear disaster. The German chancellor promptly shut eight nuclear reactors out of 17, announcing that the rest would be closed by 2022.

The thrust of these policies is popular with Germans. Although the Green party is outside the ruling coalition, public sentiment on environmental matters remains strong. On the nuclear issue, many remain haunted by memories of the 1986 Chernobyl disaster. But Germany has been left facing two serious problems.

First, the unreliability of renewables and the exit from nuclear have created an energy supply problem that is likely to dog Germany for years. To fill the gap, Berlin has little choice but to rely on electricity generation from dirty coal-fired power stations.

A striking example of the absurdity of this emerged this week with the publication of a letter from Germany’s vice-chancellor to the new Swedish centre-left government. Ms Merkel’s deputy warned of serious consequences for electricity supplies and jobs if Vattenfall, Sweden’s state-owned utility, ditched plans to expand two coal mines in Germany. While the Germans may need the dirty lignite these facilities produce, the Swedes are under pressure to scale back the mines because of popular concerns in Sweden about CO2 emissions.

The second problem is the impact of the Energiewende on the economy. The cost of government subsidies for green energy is passed directly through to consumers. As a result, German households pay twice as much for electricity as their US counterparts. Prices for industrial customers have risen more than 30 per cent over the past four years. With the German economy narrowly avoiding a technical recession this autumn, the burden on competitiveness is proving increasingly acute.

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