Industry wins in Germany’s energy transition

After Japan’s 2011 Fukushima disaster, German Chancellor Angela Merkel promised to speed up the energy shift (“Energiewende”) in Germany, through setting more ambitious goals in terms of renewables energy expansion and energy efficiency. But this transition has been dramatically increasing energy prices since 2000, and today they are the highest in the EU behind Denmark, according to Eurostat. The coalition fears to lose its popular support if the prices keep rising.

On April 8, German minister of Energy and Economic Affairs Sigmar Gabriel presented a revised draft from Merkel’s flagship policy that tries to slow down the rapid increase in prices, limiting the expansion of onshore wind and solar capacity per year and the green subsidies.

  “The law will pave the way for a gradual shift to renewable energies. The government cannot promise that electricity will become cheaper as a result”, declared Sigmar Gabriel. According to the new reform of the Renewable Energies Law, by 2025 renewables are to produce 40 to 45 percent of the total energy mix, with this figure rising to 55-60 percent by 2035.

The existing 9 nuclear plants will close their doors in 2022.

“The Feed in Tariff Reform (EEG reform) is not a big deal as it forgets important elements. The planned cap for renewable energy is luckily not as strong as it was planned before, the FIT of wind onshore and biomass will not be cut as drastically as initially planned. The Energiewende will therefore continue, but important issues such as the grid extension, the need for an increasing energy security of renewable energy by an efficient load management, smart grids, demand side management (DSM) and storage are not taken into account”, explains Claudia Kemfert, head of the department Energy, Transportation, Environment at the German Institute of Economic Research (DIW Berlin).

 

In the past weeks, representatives from the different German industries, particularly from the metalworking and chemical industry, have repeatedly warned the importance of competitive industrial energy prices for German economy.

If we do not make EEG costs reasonable for those concerned, we lose 800,000 jobs at least directly in the energy-intensive industry, and I must say, for me that is a big loss and I’m very worried,” said president of the Federal Association of German Industry (BDI) Ulrich Grillo in an interview with the German public radio.

EU’S MOST EXPENSIVE INDUSTRIAL BILL

Germany has the highest industrial electricity prices in the EU after Italy and they have risen about 37 percent since 2005, according to the Federation of German Industries. However, Germany continues subsidizing the heavy industries, which play a relevant role in the international market, from the renewable energy surcharge, worth about 5.1 billion euros a year.

“The EU allows for those exemptions, especially if they are connected with specific measures as return to improve energy efficiency. Within the emissions trading scheme, these exemptions are allowed for about 900 companies. In Germany, the EEG exempts now over 2,500 companies. This leads to a higher share for all other electricity consumer as households or small sized companies. If the EEG exemptions would be reduced to the initial number, the price of electricity for all other consumer could be reduced by 1 cent/kwh”, specifies Claudia Kemfert.

The EC announced a full assessment of EEG compliance within EU law on December because reductions should only be provided to energy-intensive companies that are really exposed to international competition.

In April, EU Competition Commissioner Joaquín Almunia announced conditions for a possible compromise and some German firms may be required to repay refunds they had received in previous years.

“The EEG reform is not an electricity price cut. The winner of this reform is the industry,” concludes the expert from the German Institute of Economic Research who claims that the electricity price could be reduced if the industry exemptions were reduced and the stock exchange price would be stabilized by the shutdown of old and inefficient coal power plants.

This is how Germany wants to become a model for the rest of the EU in the reduction of greenhouse gas emissions, development of renewables and energy efficiency.

During the discussions of EU’s 2030 framework for climate and energy policies, Minister of Energy Sigmar Gabriel recalled the member states from southern and eastern Europe about the importance of climate goals. Nevertheless, economic crisis and international competitiveness has become a more pressing issue for other European countries like Spain, where consumers have seen their electricity bills increased by 74.5% since 2007, with 4,098 million € of tariff deficit in 2013.

Meanwhile, renewable energy in Germany reached a 12,4 % share of gross final energy consumption in 2012, a figure still far from the 18% EU 2020 target for the biggest economy in Europe, according to the last oficial data.

About the Author

Alberto Lozano
Alberto Lozano is The Corner correspondent in Berlin, from where he reports about the main German and European economic and political topics. He has been a contributor to various media such as RTVE, PressEurop, Esquire and Forbes. Alberto holds a degree in Journalism from the Complutense University in Madrid and the Free University of Brussels.

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