Saturday, July 9, 2016

GWPF Newsletter: Climate Plan Endangers Germany, Party Leaders Warn








Germany’s Biggest Energy Company Faces Bankruptcy

In this newsletter:

1) Climate Plan Endangers Germany, Party Leaders Warn
Frankfurter Allgemeine Zeitung, 8 July 2016
 
2) Germany’s Biggest Energy Company Faces Bankruptcy
Frankfurter Allgemeine Zeitung, 6 July 2016
 
3) Brexit: Energy Chiefs Call For UK Energy Policy Overhaul
The Daily Telegraph, 7 July 2016
 
4) Brexit Uncertainty Strengthens The Case For UK Shale
Proactive Investor, 1 July 2016
 
5) UK Government Confirms Shale Development Won’t Affect Climate Policy
Alliance News, 7 July 2016
 
6) Germany’s Energiewende Sticks It to the Poor
The American Interest, 7 July 2016

Full details:

1) Climate Plan Endangers Germany, Party Leaders Warn
Frankfurter Allgemeine Zeitung, 8 July 2016

The “Climate Protection Plan 2050″ is supposed to make Germany’s economy more environmentally friendly. But it is stirring resistance among Christian Democratic leaders who fear the plan endangers Germany’s prosperity and social peace.
 



There is great discontent among the parliamentary Christian Democratic Party (CDU) about the “Climate Protection Plan 2050″ presented by Federal Environment Minister Barbara Hendricks (SPD). With her draft, which is currently under review at the Federal Chancellery and which should be decided in the autumn by the Cabinet, Hendricks is essentially “proscribing a command economy.” According to a report by Frankfurter Allgemeine Zeitung, the accusation is being made by four deputy parliamentary leaders of the CDU and CSU in a letter to Chancellery minister Peter Altmaier (CDU).

In their letter, the leaders call for early discussions about the basic thrust of the climate plan before the government takes any decisions. The CDU politicians Georg Nüßlein (CSU), Gitta Connemann (CDU), Michael Fuchs (CDU) and Arnold Vaatz (CDU) claim that the plan is “basically wrong”, that it would have “a massive impact on the future competitiveness of the business location Germany” and was likely to “jeopardise the economy, prosperity and social peace in our country.”

The Chancellery is currently examining Hendricks’ plan before it goes to further consultation in other ministries. The Cabinet is expected to decide the “plan” in the autumn. It is supposed to be a kind of road map for German climate policy in the coming decades and will be updated regularly.

According to the plan, Germany will essentially be completely decarbonised. It includes the progressive withdrew from coal, the full conversion of the transport system to electrical cars by 2030, the ban of central gas and oil heating systems for new buildings, the promotion of cycling and organic farming, the reducing of meat consumption by at least half by 2050 and a rise in taxes that take into consideration environmental issues.

Frankfurter Allgemeine Zeitung, 8 July 2016

Translation GWPF

2) Germany’s Biggest Energy Company Faces Bankruptcy
Frankfurter Allgemeine Zeitung, 6 July 2016
Sebastian Balzter

RWE, Germany’s biggest energy company, is in danger of going belly up. It would be the biggest bankruptcy in German economic history.
 

Infografik / Der Niedergang von RWE / Kursverluste der Versorger-Aktien
RWE has no future. Germany’s biggest power producer, founded in 1898 – has acknowledged as much. Any new business, new ideas, new technologies, and therefore the future, will no longer be part of the traditional company, according to the plans by CEO Peter Terium. Instead, a new company will be set up to join the stock market by year’s end.

It is the sheer distress which is behind the project. That’s because RWE needs huge amounts of money very pretty soon. Especially for its nuclear phase-out. A good 10 billion euros have been reserved already. But that is hardly enough. The Initial public offering (IPO) is presumed to generate the additional resources that are required. RWE cannot afford to accumulate more debt. It is already loaded with €45 billion long-term liabilities on the balance sheet, almost eight times its equity, a menacing rate, while the rating agencies have given RWE just above “junk” status.

If the IPO goes wrong, then RWE is – as is usual for companies without a future – a case for the administrator. […]   It would be the largest bankruptcy in German economic history.

Full story (in German)

Translation GWPF

3) Brexit: Energy Chiefs Call For UK Energy Policy Overhaul
The Daily Telegraph, 7 July 2016
Emily Gosden

Two of Britain’s biggest energy suppliers have called for an overhaul of the “regressive” and unfair way policy and network costs are charged to consumer energy bills.

Iain Conn, chief executive of British Gas owner Centrica, and Vincent de Rivaz, chief executive of EDF Energy, both argued that levies added on to bills placed a disproportionate burden on the poorest customers.

About 13pc of a typical household electricity bill is made up of environmental and social levies to fund green subsidies and insulation schemes, while a further 25pc of an electricity bill consists of levies to fund network infrastructure.

Mr Conn said: “I think we will, post-Brexit, need to look at our policy slate and say, are we happy with all of the inputs? Because so far the biggest single thing that has been going up in consumers’ bills in the UK is the cost of transmission and distribution of energy.

“The second biggest thing that has been going up is actually government policy on ECO [an insulation scheme] and other things.”

Mr Conn said it would be “less regressive” to recoup policy costs through general taxation.

“The poorest people in our society have energy as a higher proportion of their outgoings, and they are the ones that end up paying if it all gets slammed on the bill,” he told the Utility Week Energy Summit. “I think we should look at paying for more of it through general taxation.”

Energy suppliers are particularly keen to see the levy system overhauled because green levies are forecast to keep rising in coming years to fund new infrastructure, forcing companies to put through price rises that bring added scrutiny of their profits.

Full story

4) Brexit Uncertainty Strengthens The Case For UK Shale
Proactive Investor, 1 July 2016
Jamie Ashcroft

Shale gas may prove strategically important for an independent Britain

The pending exit from the European Union strengthens the argument for the development of Britain’s currently untapped shale gas resources.

Britain’s energy security should be a concern whether it remains in the EU or not, though the vote to leave makes this an increasingly acute issue.

Quite simply Britain doesn’t produce enough gas of its own.

Currently around half of Britain’s gas demand is met by foreign supplies – most of which is piped into the country via Europe.

Immediately that gas became more costly with the Brexit verdict, as a result of the pound plummeting, because it is a dollar denominated commodity.

Britain depends upon foreign gas
In the past two year gas imports as a percentage of demand amounted to 48% and 44% respectively, and, according to forecasts from the UK Oil & Gas Authority imports will hit 50% this year. Ten years ago the figure was just 12%.

Moreover, as gas operations in the UK North Sea continue to mature and decline it is expected that the country will become increasingly reliant on imports.

Current government forecasts indicate that ten years from now gas imports will account for almost 70% of demand and by 2035 that is predicted to rise further to 80%. [...]

Shale may prove strategically important for independent Britain
England does, in theory, have vast resources of gas locked in shale deposits which span large areas through the north-west, across the midlands and up into Yorkshire.

For whatever portion of the current United Kingdom emerges from this historic phase of political upheaval, these domestic resources will have added importance strategically.

Full post

5) UK Government Confirms Shale Development Won’t Affect Climate Policy
Alliance News, 7 July 2016

The UK government Thursday said developing the shale gas industry would not impact its ambition to lower carbon emissions and said there is a “clear need” to explore the resource to better understand the potential size and impact of the industry.

However, unlocking the onshore petroleum market will require the UK to lower carbon emissions elsewhere in the economy to facilitate the rise that would come from exploiting the potentially vast resource lying underneath the UK.

Current estimates from the British Geological Survey suggest there could be anywhere between 23.2 to 64.6 trillion cubic metres of gas lying within the Bowland-Hodder basin under Northern England alone – potentially equivalent to somewhere between 4.00 to 11.00 trillion barrels of oil.

However, it is not known how much of that potential resource would be extractable, either on a technical or economic basis, but the UK government is keen to open up the industry to strengthen the country’s own energy supplies.

The government's comments on Thursday were in response to the report conducted by the Committee on Climate Change that evaluated the onshore petroleum potential in the UK.

Natural gas is seen as the key to bridging the gap that is expected to emerge while coal generation is phased out and new renewable and nuclear energy comes online. The current aim is to have all coal plants closed by 2025 and although all of the current UK nuclear fleet will be decommissioned in the next two decades, at least six new sites are set to come online in the future.

Around 45% of the UK's gas consumption in 2014 was imported, and estimates show this will continue to rise in the foreseeable future, placing further pressure on the government to find new sources of domestic energy.

Compared to 2014, the oil and gas sector in the UK is expected to have cut 120,000 jobs by the end of this year, but the government plans to transfer the skills currently being lost into the wider engineering sector - and the shale industry, if unlocked, could create around 64,000 new jobs.

In tandem, investment has also slowed in the UK oil and gas industry, but the government forecasts investment into the shale industry could reach GBP33.00 billion if pursued, including the boost it would give to associated markets such as construction and engineering.

Full story

6) Germany’s Energiewende Sticks It to the Poor
The American Interest, 7 July 2016

Germany’s much-ballyhooed green energy transition—its energiewende—has run up quite a tab, and policymakers are having trouble figuring out who is actually going to pay for the policies. In an attempt to kick-start fledgling renewable energy sources like wind and solar power, Berlin guaranteed producers locked-in, long-term, above-market rates called feed-in tariffs. To their credit, this plan of pushing technologies of dubious merit at any cost worked, perhaps too well: the costs of these subsidies have been passed right along to German consumers in the form of a green surcharge on their power bills, resulting in some of Europe’s most expensive electricity.

But out of concern for its economic competitiveness on the continent, Germany has offered generous exemptions to its most energy-intensive industries, and plans to continue doing so for the foreseeable future. Bloomberg reports:

…Germany has sought to preserve its companies’ competitiveness in a European context, [said the deputy head of the Christian Democrats Michael Fuchs]…The move would retain the privileges of some 2,154 companies with heavy power bills. […]

Last year, [green surcharges] added about 23 billion euros ($25.5 billion) to power bills, making electricity in Germany the second-most expensive in the 28 EU nations after Denmark. The fee translates to 6.54 euro cents a kilowatt-hour. The surcharge may rise to 7.3 to 7.5 euro cents by the end of the decade, said Fuchs. Some forecasters predict a leap to 10 euro cents per kilowatt-hour, he said.

The privileges benefit companies from glass makers, to pig slaughterers, cement makers and steel makers. The main criterion for joining the group — and paying a fifth of the standard fee — is a power bill that adds up to a minimum 14 percent of company costs.

Germany is right to be worried about the negative effect expensive power is having on its heavy industry. It’s not a hard sell for companies to move to outsource production (and all the jobs that go with it) outside of Germany if the price of business-as-usual is too high. But exempting these big companies doesn’t do anything to address the deeper problem, namely that this eco-mania carries with it some tremendous costs that must be borne somewhere. And if industry isn’t going to shell out, that leaves smaller companies and—you guessed it—German households that are left footing that bill.

Expensive power can be thought of as a pernicious sort of regressive tax, felt most keenly by society’s poorest. Wealthier Germans might not have noticed the 6.54 euro cents a kilowatt-hour surcharge on their recent bills, but for families whose power bills make up a larger portion of their monthly budgets, these price hikes cut deep.

Berlin is slowly waking up to the fact that its energiewende has produced something of a mess. Last month German policymakers agreed on a framework deal to slow down the deployment of renewables, and according to Reuters a new revision of an energy law plans to limit offshore wind development to try and cut costs and improve grid stability. But these are half measures, and while lawmakers tinker with the energiewende on its fringes, Germany’s poorest are suffering from some of Europe’s most expensive power bills while the country’s biggest energy consumers secure exemptions. That’s some policy you’ve got there, Merkel.

The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.

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