German Wind Power Policy: an Economic Suicide Pact

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For anyone looking for a taste of Australia’s economic future, then look no further than Germany. For that reason, over the next few posts, STT is going to have a close look at the debacle that is German wind power policy and its disastrous impacts on German business and households.

Germany’s renewable policy – referred to as the “Energiewende” – has seen €billions in power/taxpayer subsidies thrown at wind and solar power at the expense of German industry, manufacturing and families.

Skyrocketing renewables driven power prices are sending once competitive manufacturers and industries to the USA to benefit from energy made cheap by its recent shale oil and gas bonanza (see our post here).

For the same reason, more than 800,000 German homes are without power simply because they can no longer afford to pay their bills (see our post here). That number can only escalate – from the pieces below something like 300,000 households are being disconnected from the grid annually. And, beyond that, an even larger number suffer from what is euphemistically called “fuel poverty” – which is where a household spends more than 10% of its disposable income on energy – leaving them with the stark choice of “heat or eat” – simply because they can no longer afford both.

The fact that – for all the €billions thrown at wind and solar power – German CO2 emissions have increased not decreased – as coal-fired plants are cranked-up to keep the grid from collapsing – simply adds insult to injury (see our post here).

Here are a couple of reports from NoTricksZone on the German wind power disaster.

Max Planck Institute Economist: Germany’s Energiewende “Bordering On Suicide”… “Unimaginably Expensive Folly”
NoTricksZone
P Gosselin
6 April 2014

Richard Tol tweeted here a link to an article appearing at the Deutsche Wirtschafts Nachrichten (German Business News) about the country’s much ballyhooed Energiewende, in English: transition to renewable energies. The title:

“Max Planck economist: ‘Transition To Renewable Energy Borders On Suicide’

Leading economic experts are firing harsh criticism at the energy policy of federal super minister Sigmar Gabriel. Germany as a friendly location for business is not only being weakened, the transition to renewable energy even borders on suicide and is an unimaginably expensive folly.”

Recently Angela Merkel’s grand coalition government just decided they would water down the scale-back in renewable energy subsidies. The Deutsche Wirtschafts Nachrichten quotes Max Planck Institute researcher Axel Börsch-Supan, who has fired harsh words at Federal Economics Minister Sigmar Gabriel:

“With their policy, the grand coalition is weakening Germany’s location as a place to do business. This is especially true when it comes to the Energiewende, which is bordering on suicide.”

According to the Deutsche Wirtschafts Nachrichten, other experts are also slamming Germany’s “Energiewende”. For example Ifo Institute director Hans-Werner Sinn calls it an “unimaginably expensive folly”. Marc Tüngler director of a German financial association, calls it “a planned economy without a plan” that makes the Energiewende “unbearably expensive”.

The Deutsche Wirtschafts Nachrichten concludes:

According to experts, the big losers are the consumers, who will have to expect continued increasing electricity prices.

NoTricksZone

And what follows Germany’s insane wind and solar power policy?

Over to NoTricksZone again.

More Germans Getting Their Power Cut Off Because They Can’t Afford Paying Sky-High Green Electric Bills
NoTricksZone
P Gosselin
19 April 2014

Just a few days ago, the IPCC WG III report claimed that CO2 emissions could be curbed with little pain involved. Well, go tell it to the more than 300,000 Germans who have had their power shut off in a single year because they no longer can afford skyrocketing electric bills. And these people live in a rich country!

And imagine what expensive power means for poor, developing countries. In such countries it’s nothing short of widespread catastrophe and grinding misery.

The online site of German news television station NTV writes of a threatening energy poverty taking hold in Europe and that”more and more people are unable to pay for the electricity that they consume. More than 300,000 German citizens are going to have their power shut off each year.”

NTV cites a report from German nation daily Die Welt, which writes German power companies turned off the power for 321,539 people because of non-payment in 2012, up from 312,500 people in 2011.

The reason for the high prices? NTV writes:

“A reason for the increased number of power shutoffs is the rash expansion of renewable energies, which lead to higher energy prices.”

Two years ago NoTricksZone reported on an article also from Die Welt who claimed that 600,000 households were getting their power cut off. The figures on power service cutoffs vary broadly. Whichever figure is correct, the scale of the social disaster is immense no matter how you look at it.

It’s time to make energy affordable and attractive for every socioeconomic level, and not a luxury good for the upper classes.
NoTricksZone

Our current (and completely unsustainable) 41,000 GW/h annual mandatory Renewable Energy Target places Australia on the same path to economic suicide.

The cost of building wind power generating capacity – and the duplicated grid infrastructure to support it – will cost in excess of $80 billion (with that cost added to Australian power consumers’ power bills) and to subsidise this colossal rort – a further $54 billion worth of Renewable Energy Certificates would be issued to wind power generators between now and 2031 when the RET expires – which, as a Federal Tax on all Australian electricity consumers, will also be slapped on top of our power bills (see our post here).

By 2020, Australian power prices are forecast to double as a result of the current RET (see our post here).

All of this will simply render Australia’s energy intensive industries – such as mineral processors and manufacturers – economically uncompetitive.

But Australians don’t have to look to Germany to see what a disaster wind power is. South Australia is Australia’s “wind power capital” – with close to half of Australia’s total installed wind power generating capacity.

As a consequence of its “brilliant” wind power policy, SA pays the highest power prices in Australia by a substantial margin and jockeys with wind power mad Denmark and the Germans for the honour of having the highest power prices in the world. Some honour!

Following Germany’s lead, SA (population 1.6 million) has more than 50,000 homes disconnected from the grid because they can no longer afford to pay their power bills – – with more being cut-off daily. These people have taken to lighting their homes with candles – and cooking on wood stoves and barbeques. As to why South Australians suffer the highest power prices in the world (see our post here).

South Australia is going backwards as a result. Mining investment has more or less ground to a halt – the promised mining boom went out with a wimper; manufacturing is a dead duck – well, at least a lame one – with the carmaker Holden promising to limp along at Elizabeth for another year or two. After which, it’ll be a case of last man out turn out the lights.

South Australia not only suffers the highest power prices in Australia, it also recently snared the dubious honour of having the highest rate of unemployment on the mainland – rising from 6.7% to 7.1% – the highest level of unemployment among mainland states by a substantial margin (Western Australia’s rate is 4.9% – down from 5.9%).

So much for all those hollow wind industry promises of thousands of green jobs for South Australians.

The equation is simple: increase the cost of an essential input to businesses and those businesses will react by cutting their other operating costs in order to maintain a profit margin and stay in business.

That leaves a business with some options: employ fewer people, pay them less or relocate the business to countries with lower operating costs. And that is precisely what is happening in Germany and South Australia.

A bright young Scot, Adam Smith was all over the relationship between input costs, profits and employment over 240 years ago when he sat down to pen a little book with a big impact: An Inquiry into the Nature and Causes of the Wealth of Nations. 

This is not rocket science – it’s Economics 101.