German industry set to flee renewable power price punishment

In a recent post we detailed the German Chancellor, Angela Merkel’s response to the consumer and business backlash against the insane costs of electricity in the Fatherland. German power prices are being driven sky-high by out-of-control German renewables policy, and the Germans have had enough.

****

Deutsche Welle reports on a pending exodus by German businesses looking to avoid spiraling power prices in their homeland.

High Energy Costs Drive German Firms To US
Deutsche Welle
22 May 2013

Soaring German energy costs in the wake of the country’s transition to renewable energy have seen more and more firms thinking abut relocating their operations. The US looks like a sound alternative, associations claim.

German industry lobby associations on Wednesday sent a warning shot towards the government in Berlin, saying that rising energy costs in the country would drive away more and more German companies.

“If we don’t get on top of the country’s energy transition to renewables and are not able to rein in energy costs in the process, German industry’s competitiveness stands to suffer,” the chief of the Federation of German Industry (BDI), Ulrich Grillo, told the business newspaper “Handelsblatt.”

He said that while Germans are embroiled in a debate about the right energy mix, the US was getting more and more attractive as a business location for German firms, thanks not least to President Barack Obama’s support for the fracking technology resulting in much cheaper energy prices.

Time to act

“That means that German companies are bound to invest a lot more in the US,” Grillo commented. Energy-intensive firms like Wacker and BASF speak of clear competitive advantages in the US, with the first already building a production facility in Tennessee.

The Association of German Chambers of Commerce and Industry (DIHK) said its own surveys had shown German companies’ increasing willingness to move parts of their operations to the US rather than to fellow European nations in search of more favorable framework conditions.

“The US has become much more attractive to companies than Europe,” DIHK chief Martin Wansleben told the “Handelsblatt”. “Germany is in the process of getting sandwiched between eastern Europe with its low labor costs and the US with low energy costs,” Wansleben claimed.
Deutsche Welle

With energy prices plummeting in the US, thanks to its recent flood of cheap gas, that German manufacturers have announced their intention to relocate power hungry industries to the land of the Free is no surprise.

One of the rules of economics is that wherever capital is mobile (and with the exception of North Korea and Cuba, it is) the owners of that capital will send it to wherever the best returns can be found.

The lesson for Australia is that, unless renewable energy policy is scrapped, we will see a complete hollowing out of industry, manufacturing and mining, as investors direct capital to China, in the case of manufacturing and the processing of minerals, and Africa and South America in the case of mining – simply because, all things being equal, electricity prices are substantially lower than in Australia, where retail power prices are rocketing Northwards at 25% each year.

The long boom in mining infrastructure investment is over, as the key players are now scoping out resources in Africa, Brazil and Chile.

In a taste of things to come, Australia has lost 2 aluminium smelters in the last 12 months.

For investors, it’s a “no-brainer”. Take your money and run.

As STT sees it Australia has a choice. Either the RET/REC scam is pulled to a halt now, or we get used to living like cave dwelling troglodytes.

****

While the Green-Labor alliance is hell-bent on making sure we all end up living on mung beans and wearing possum skins while we freeze in the dark, STT is pretty sure that most Australians are keen to be part of a Country in which their grandkids will get to live better than they did. STT calls it progress.

See you at the Rally, June 18, Parliament House, Canberra.