Bjorn Lomborg: spells out Germany’s renewables disaster.

In our last post we covered the fact that German economists have (uncharacteristically) united in their opposition to Germany’s renewables policy – referred to as the “Energiewende” – which has seen thousands of giant fans – and millions of solar panels – rolled out across Deutschland: one of their number, Max Planck concluding that the policy “borders on suicide and is an unimaginably expensive folly“.

The consequence of Germany’s great wind-rush has been spiralling electricity prices that have resulted in major German industries relocating to the US – or planning to do so asap – to take the benefit of substantially lower energy costs there.

The policy has left 800,000 German households disconnected from the grid – with that number growing by 300,000 each year – simply because they can no longer afford what was once a basic commodity, affordable to all. Add to that number, the millions more that are suffering “fuel poverty” – where the stark choice is between eating and heating – and you have a government engineered social and economic disaster of the kind that Generalissimo Stalin would have seen as a great day at the office.

Dear Angela, congrats on punishing the kulaks who thought access to power was a right. Keep up the good work, you’ll have them starving in no time. Yours, Jo.

Here’s Bjorn Lomborg laying out the scale of the tragedy.

Germany’s energy policy is expensive, harmful and short-sighted
Financial Times
By Bjorn Lomborg
16 March 2014

The Ukrainian crisis has again put German energy policy in the spotlight. As long as Europe’s green energy is expensive and unreliable, it favours Russian gas and leaves the continent’s energy policy unsustainable.

Germany’s energiewende, the country’s move away from nuclear and fossil fuels towards renewable energies has been regarded by some commentators as an example for the rest of the world. But now Germany shows the globe how not to make green policy. It is failing the poor, while protecting neither energy security nor the climate.

Last month, the government said that 6.9m households live in energy poverty, defined as spending more than 10 per cent of their income on energy. This is largely a result of the surcharge for renewable energy. Between 2000 and 2013, electricity prices for households have increased 80 per cent in real terms, according to data from the OECD and the International Energy Agency.

This means more and more money is going from the poor to the rich. Low-income tenants in the Ruhr area or Berlin are paying high energy prices to subsidise wealthy homeowners in Bavaria who put solar panels on their roofs.

Some have argued that Germany’s energy policy could be seen as a huge bet on developing the energy of the future – and if it works, it would secure Germany’s engineering future.

However, most of Germany’s money was spent, not on research into future technology, but on buying existing inefficient green technology. Three weeks ago, in a report to the German parliament, a group of energy experts delivered a damning indictment of the current subsidies. They said that the policy has had a “very low technology-specific innovation impact in Germany”. Essentially, it is much safer for companies to keep selling more of the old technologies of wind, solar and biomass because these are already getting huge subsidies instead of trying to develop new and better technologies that have similar pay-offs but much higher risk.

The legislation does not offer more protection for the climate. Instead, it makes such protection much more expensive. “There is no justification for a continuation of the Renewable Energies Act”, the report concludes.

German energy policy is an expensive way to achieve almost nothing. For solar alone, Germany has committed to pay subsidies of more than €100bn over the next 20 years, even though it contributes only 0.7 per cent of primary energy consumption. These solar panels’ net effect for the climate will be to delay global warming by a mere 37 hours by the end of the century, according to a report cited in Der Spiegel.

A McKinsey study published earlier this year found that Germany energy prices for households are now 48 per cent above the European average. At the same time, European power prices have risen almost 40 per cent since 2005, while US electricity prices have declined.

Despite exemptions from renewable obligations for energy-intensive companies, German industrial power costs are 19 per cent higher than the EU average. German industrial costs have risen 60 per cent since 2007, compared to increases of about 10 per cent in the US and China. This makes Germany an ever less attractive place for industry. German chemical giant BASF has already said it will make most if its future investments outside of Europe.

Green energy cannot meet Germany’s need for reliable electricity. That is why Germany still needs copious amounts of fossil fuels; German CO2-emissions have risen since the nuclear power phase-out of 2011, despite the incredible subsidies for renewables.

Germany is an example of how not to do green energy. Instead the solution is to research and develop better green energy technology. A study by some of the world’s top climate economists including three Nobel Laureates for the Copenhagen Consensus Center shows that subsidising existing renewables does so little good that for every euro spent, 97 cents are wasted. However, every euro spent on green innovation could avoid €11 in long-term damages from global warming.

If we can reduce the price of future green technology below the cost of fossil fuels, everyone will switch. And such cheap green energy will not leave us at the mercy of Russia, it will actually fix global warming – and it will help rather than hurt the poor.
Financial Times

Before you start feeling oh so smug to not be German, the same fundamental policy has been adopted in Australia with our mandatory RET – the real impact of which on power prices doesn’t begin to be felt until 2015 when the annual target begins to ratchet upwards to its (current) final figure of 41,000 GW/h in 2020. By then, Australian power prices are forecast to double from current levels as a direct result of the “investment” that would be made in wind power capacity and the value of RECs issued – all added to power bills – as pointed out in the last post.

The Canadians, Brits and Irish are all in the same boat too, so brace yourselves.

And things are no better in the USA – where those States that have piled into giant fans – hoisted on a pile of massive taxpayer subsidies – have seen their power prices rise more than four times as fast as the national average since 2008.

The wind industry and its parasites have lately been running media interference trying to deflect attention from the obvious impact renewable policy, generally, and wind power, in particular is having on retail power prices. Tricks include pointing to wholesale prices – about which power punters couldn’t care less – and never discussing Power Purchase Agreements; or the fact that Renewable Energy Certificates issued to wind power generators are a Federal Tax on all Australian power consumers that has added over $8 billion to power bills, so far, and will add a further $54 billion between now and 2031, when the RET expires; and never, ever talking about INSANE peaking power costs that hit the roof when wind-watts disappear every day and, frequently, for days on end (see our postshere and here and here and here).

No doubt, on those few rare occasions when wind power adds something meaningful to the grid, the dispatch price falls as wind power is – by operation of the mandatory RET – given absolute priority and dumped into the dispatch market.

Wind power generators are happy see the dispatch price fall to zero or below as their returns from their retail are guaranteed in any event – at minimums of $90-120 per MW/h via 15 year Power Purchase Agreements (3-4 times the cost of coal/gas thermal power). It’s that cost that gets passed directly to power consumers and goes to explain why power prices in Australia’s “wind power capital”, South Australia are right up there with power prices in Germany and wind power mad Denmark (see page 11 of this paper: FINAL-INTERNATIONAL-PRICE-COMPARISON-FOR-PUBLIC-RELEASE-19-MARCH-2012 – the figures are from 2011 and SA has seen prices jump since then).

For the thousands of Germans and South Australians being cut from the grid on a daily basis wind industry spin is cheap – and the proof of crippling wind-power-driven-power-prices is in the pudding.

And policy makers beware: the economic and social damage caused as a result of insanely costly and totally ineffectual renewables policy will haunt you for the rest of your days.

Driving people in 1st World economies into abject poverty on a whim is one thing; that the policy has, in fact, completely failed to decrease CO2 emissions – such that their suffering is both pointless and unnecessary – is the stuff that revolutions are made of.

And this apparently started because they were told to “eat cake”!