GWPF Newsletter: Germany’s “Silent Catastrophe”

330,000 Households See Power Turned Off In One Year

In this newsletter:

1) Germany’s “Silent Catastrophe” …330,000 Households See Power Turned Off In One Year
NoTricks Zone, 3 March 2017

2) Report: Germany's Energyewende Threatens To Become An Economic Disaster
Die Welt, 6 March 2017

3) Germany's Once Powerful Green Party Fears General Election Crash
Deutsche Wirtschafte Nachrichten, 6 March 2017

4) Budget 2017: British Solar Industry Faces Devastating 800% Tax Increase
The Independent, 8 March 2017

5) China Bans Wind Power Projects In 6 Regions
China Daily, 23 February 2017

6) John Constable: Industrial Strategy Or Political Tactics?
Global Warming Policy Forum, 6 March 2017

Full details:

1) Germany’s “Silent Catastrophe” …330,000 Households See Power Turned Off In One Year

NoTricks Zone, 3 March 2017

P Gosselin

The DPA German press agency reported yesterday on the rapidly spreading energy poverty now engulfing the country.

The main driver is Germany’s skyrocketing electricity prices – primarily due to the legally mandatory feeding-in of wind and solar power. Currently regular household consumers are paying nearly 30 cents a kilowatt-hour – almost three times the rate paid in the USA.

Back to the 19th century

Many households are no longer able to afford electricity and are seeing themselves catapulted back to the 19th century. According to t-online.de here, “More than 330,000 households in Germany have seen their electricity cut off over the past year alone.”

The German site writes that those hit the hardest are households on welfare, i.e. society’s poorest and most vulnerable.

German politician Eva Bulling-Schröter of the Left Party has called it “a silent catastrophe“.

Not only have the poor been broadsided by the high electricity prices, but so have energy intensive industries. This all makes many average workers uneasy. Over the past years a number of German plants have been moving their operations to less expensive locations abroad, especially in the chemical industry. Traditional power companies have also been getting creamed, seeing billions of losses and thousands of layoffs.

6.2 million threats to cut off service were made!

T-online cites the German Bundesnetzagentur, adding that in 2015 also 44,000 households saw their natural gas turned off. T-online adds that millions more have been threatened with the loss of electric power: “Power cut-offs were threatened 6.2 million times. The average outstanding amount that electricity providers demanded from the impacted households was 119 euros.”

According to Bulling-Schröter: “Energy poverty in Germany is a silent catastrophe for millions of people, especially in the cold and dark winter months.”

T-online.de calls letting hundreds of thousands of “children, the elderly, and the sick” go without power while the country posts record electricity exports an “injustice” and that the German government “does not want to see the energy poverty” that is rampant throughout the country.

Full post & comments

2) Report: Germany's Energyewende Threatens To Become An Economic Disaster
Die Welt, 6 March 2017
Daniel Wetzel
 

As the cost of Germany’s green energy transition continues to rise, the number of green energy jobs is falling. That is the conclusion of a new study by McKinsey. What is more, Government policy is failing the most important goal of the Energiewende.

 

The cost of Germany’s Energiewende continues to rise – by 14 billion euros by the year 2025. The overall cost then will be 77 billion euros per year.
 

The views of the Federal Government and those of the consulting company, could not be more different. The new Federal Minister of Economics, Brigitte Zypries (SPD) recently published a brochure with the title “Energiewende – our success story”.

On 20 pages it proclaims that Germany has now reached a renewables share of 32 percent, that power supply is still the safest in the world and that electricity prices for households have stabilized. According to Zypries, the energy supply is “sustainable and safe, affordable and predictable, reliable and intelligent”.

The picture that the consulting company McKinsey draws in its latest update of its “Energiewende Index” looks very different. Every six months the expert team lead by Senior Partner Thomas Vahlenkamp ​​checks — on the basis of 15 quantitatively measurable criteria — whether the targets set by government are still achievable. The title of their latest study: “The costs continue to rise.”

Nearly all indicators getting worse

In McKinsey’s evaluation, 11 out of a total of 15 indicators have changed compared to their last survey in autumn 2016 – all for the worse.

Although seven energy targets set by the Federal Government are still achievable (“realistic”), the experts qualify their judgment in a way that is sobering. These targets can only succeed by way of direct subsidies. In fact, the Energiewende is unable to be self-sufficient even 17 years after the entry into force of the Renewable Energies Act.

“The current data show that the previous success of the Energiewende has come primarily from expensive subsidies,” the McKinsey study concludes: “At the same time, those goals that do not depend on direct financial support are becoming increasingly unrealistic — foremost the reduction in CO2 emissions. ”

The latter conclusion must hurt the federal government particularly badly. After all, the high CO2 emissions from power plants in addition to the nuclear accident in Fukushima were their most important reasons to accelerate the green energy transition. “CO2 emissions are far above the targets,” the McKinsey study notes.

Last year, CO2 emissions amounted to around 916 million tonnes. “This represents a slight increase compared to the previous year.” The actual target for 2016 was 812 million tonnes.

Central target missed by far

According to McKinsey, the central goal of CO2 reduction is “now just as far from the target corridor as the targets for primary energy and electricity”. That’s because, as before, in 2016 too, German power consumption failed to decline – despite all efficiency programmes. At 593 Terawatt hours consumption was almost the same as in the previous year. The government’s goal of reducing consumption down to 553 terawatt hours by 2020 is “moving more and more into the far distance”. Just 54% of this goal has been reached by now.

Now, however, it looks as if one of the most important arguments by proponents of the Energiewende has vanished, i.e. that the green energy transition is not only ecologically valuable, but also a job engine for the German economy.

The McKinsey figures speak a different language. “For the fourth year in a row, the number of employees in the renewable energy sector has declined, from 355,400 to 330,000.” The strongest decline is reported by the wind industry (minus 8,000 employees) and the photovoltaics sector (minus 7,000).

The federal government has set a goal of steadily increasing the number of jobs in the renewable energy sector. The number of green energy jobs should not fall below the level of 2008, when 322,000 people were employed in the sector. Now, however, McKinsey is describing the possibility that this goal will also be missed “in the medium-term” if job cuts continue.

Job losses in energy-intensive industries

There is another government promise that is slowly becoming questionable: that the Energiewende will not cost jobs, especially in industries that depend particularly on affordable energy. According to McKinsey’s survey, there has been “a drop in the workforce in energy-intensive industries” for the first time in 2016. In March 2016, there were a total of 15,000 workers less than half a year earlier. With a total of 1.65 million employees, the government target – stable employment figures at the level of the base year 2008 – is still reachable as “realistic”.

And finally: the costs. Here too, McKinsey cannot share the optimism of the Federal Minister of Economics. Early this year, the renewable energy levy by which Germans pay for renewable energies via their electricity account was increased yet again. This time by 8.3 percent – to 6.88 cents per kilowatt hour. “This trend continues to rise,” McKinsey notes. “Only in the years after 2020 older energy projects will, to a greater extent, drop from the feed-in tariff – from then on, it is to be expected that the levy will gradually decrease.”

For the time being, however, household electricity prices continue to rise, from 29.35 cents per kilowatt hour to now 30.38 cents. “The European average energy price has declined slightly over the same period,” the McKinsey study says. “Meanwhile, the price level for German household electricity is 47.3 percent above the European average.” The overall costs will thus continue to rise – by 14 billion euros by the year 2025. The costs then would be at 77 billion euro per annum.

“The question of how to share the cost burden,” says McKinsey partner Vahlenkamp, ​​”is likely to become a key element of the Energiewende in the coming years.”

Translation GWPF

Full story (in German)

3) Germany's Once Powerful Green Party Fears General Election Crash
Deutsche Wirtschafte Nachrichten, 6 March 2017

Germany’s Green Party must fear to miss the five percent threshold to get into the Bundestag at the general elections later this year.

According to a recent INSA opinion poll, support for Germany’s Green Party stands at a meager 6.5 percent. Not long ago, the Greens had hoped to be able to move into the Bundestag with double-digit figures.

For a time, the Greens were thought to be favorites for the next coalition government with Angela Merkel. Over the last few years, the programmes of both parties had looked increasingly similar.

According to the INSA poll, support for the Social Democrats has gained two percentage points to 32 percent. The Christian Democrats (CDU/CSU) have lost a point to 30.5 percent. The AfD remains at eleven percent as in the previous week, as does the Left Party at eight percent.

Support for the  liberal FDP increased to seven percent.

Full story

4) Budget 2017: British Solar Industry Faces Devastating 800% Tax Increase
The Independent, 8 March 2017

Ian Johnson

Some businesses and schools that generate electricity from rooftop solar panels will have to pay rates for the first time, while others will face a massive tax rise.

Britain’s solar industry is facing devastation and consumers could see energy bills rise after the Chancellor Philip Hammond refused to listen to pleas to cancel a planned tax hike of up to 800 per cent on rooftop solar schemes.

The Solar Trade Association described the Government’s refusal to bend over the increase – due to come into force in April – as “nonsensical” and “absurd”.Bizarrely, state schools with solar panels will be forced to pay, while private schools will remain exempt.

Mr Hammond barely mentioned the energy sector in his speech – apart from a promise to help the oil and gas industry “maximise exploitation” of the remaining reserves in the North Sea.

According to the Government’s own figures, solar power is expected to become the cheapest form of electricity generation sometime in the 2020s.

But the UK solar industry lost 12,000 jobs last year and there has been an 85 per cent reduction in the deployment of rooftop solar schemes.

Full story

5) China Bans Wind Power Projects In 6 Regions

China Daily, 23 February 2017

The National Energy Administration (NEA) has issued red alerts, or the highest warning, in six provincial regions where new wind power projects will be prohibited this year, Securities Daily reported.

The six restricted regions include Heilongjiang, Jilin and Gansu provinces, as well as Inner Mongolia, Ningxia Hui and Xinjiang Uygur autonomous regions.

In these regions, new construction approvals and access to grid connections will be put on hold, according to an official statement published on NEA’s official website Wednesday.

The three-tier warning system distinguishes the risk levels by green, orange and red and the NEA releases the results annually.

Large amounts of wind power were wasted in these regions last year, an industry analyst told the newspaper, adding that the NEA hopes to urge local governments to more actively solve the problem through administrative measures, which have active significance for the healthy development of the industry.

According to official data, last year the waste proportion of these regions were Gansu (43 percent), Xinjiang (38 percent), Jilin (30 percent), Inner Mongolia (21 percent), Heilongjiang (19 percent).

China had 149 million kilowatts of installed wind power capacity as of the end of 2016, with 19.3 million kilowatts added last year, according to the National Energy Administration (NEA).

Wind power facilities generated 241 billion kilowatt hours of electricity in 2016, 4 percent of the country’s total electricity production, compared with 3.3 percent in 2015.

However, close to 50 billion kilowatt hours of wind power was wasted, up from 33.9 billion kilowatt hours a year earlier, due to distribution of wind resources and an imperfect grid system.

Full post

6) John Constable: Industrial Strategy Or Political Tactics?
Global Warming Policy Forum, 6 March 2017

Dr John Constable: GWPF Energy Editor
The House of Commons committee responsible for scrutinising the Department of Business, Energy and Industrial Strategy (BEIS), has just published its first review of the government’s flagship “Industrial Strategy”. While critical of the Secretary of State’s approach, the Committee’s own analysis seems to suffer from the same fundamental faults; it focuses on tactical measures that have short-run effects, and are thus relatively powerless to deliver the macroscopic outcomes that are intended. This is particularly evident in the superficial approach to energy supply, and to the supposed opportunities of a low carbon transition.

In one of the most useful passages in the BEIS Committee report the authors note that the current “Industrial Strategy” is “the latest in a long line of Government-commissioned documents, stretching back many decades, which has identified shortcomings in the UK’s economic performance on matters like low productivity, insufficient investment in infrastructure and R&D, skills deficiencies and poor export performance” (p. 11).

To illustrate the point the report quotes from an early 1960s Cabinet paper by Harold Macmillan, then Prime Minister, which, aside from the distinctive and trenchant elegance of its phrasing, could easily be mistaken for a passage from this year’s Industrial Strategy paper, or indeed from the Committee’s own review.

Macmillan writes of making a “radical attack” on the “productive and structural” “weaknesses of our economy”, of enhancing “competitive power” by measures to “increase our productivity”, and not only observes that “Britain needs to be brought up to date in almost every sphere of life”, but that steps must be taken to “rectify the imbalance between south and north”, the “’rich’ areas and the ‘poor’ regions”, so that the resulting “grave social anomalies” are addressed.

Understandably, the Committee finds little reason for supposing that the latest iteration will be any more successful than those that have gone before, but its own criticisms struggle to be constructive. They correctly note that “the Green Paper has little discussion of the implicit tensions and conflicting demands that exist in policy making”, but in its own comments on “Affordable energy and clean growth” the authors provide a clear example of the same superficial engagement, for example when they carelessly write of “security of supply, decarbonisation and affordability as equal priorities” (my italics), or blithely assume that it is easy for the promised but as yet unpublished Emissions Reduction Plan to be “coherent and consistent” with the Industrial Strategy (p. 50).

But of course it is not straightforward, for rather than just a marginal trade off, there is a fundamental conflict requiring that one or other of the objectives is substantially sacrificed in order to meet the other. Indeed, the Committee must have some inkling of this because elsewhere it expresses the fear that government will, after all, put a “higher priority” on affordability than on “progress against carbon budgets” (p. 48).

In fact this concern is probably groundless, at least for the time being, since there is every sign that government, or at least Mr Clark, Secretary of State for BEIS, is clinging to the idea that it is possible “to keep costs down for businesses” while decarbonising, and that there are “economic benefits”, rather than net costs, to “the transition to a low-carbon economy” (Industrial Strategy, p. 11). With subsidies to renewable electricity currently running at about £5 billion a year in the UK, and stretching out at this rate for decades, such a view is nothing short of bizarre. Indeed, the committed oncost will be a grave obstacle to economic stability let alone growth even if the claimed and somewhat implausible capital cost reductions in offshore wind, for example, are supported by dramatic and at present unlikely reductions in the system costs need to address intermittency.

Read alongside each other, both the government’s Strategy and the Committee’s review seem to agree in their errors, but at least the Committee succeeds in pointing to the principal weakness affecting both analyses. The Strategy, they say, “provides a long list of policy interventions but little by way of ground rules to provide a framework for future decision making which […] should be the core of any long-term strategy.” In response it is true that the Committee does little better, but they are unquestionably right in saying that what government has so far outlined does not have the structural simplicity of a strategy aiming at long term changes, but rather exhibits the detailed messiness of short-run tactics. A cold-hearted observer noting, for example, the still secret support offered to Nissan (repeatedly cited with approval in the Committee report) might wish to add that these are political not than industrial tactics.

But, assuming that one agreed that Government should have an Industrial Strategy, what would it look like? It would be certainly be simple, aiming to control only primary variables under government control and with undoubted macro-economic consequences. The secondary and tertiary phenomena,the selection of sectors for development, determination and creation of appropriate workforce skills, regional distribution of industries, scale and character of industrial R&D, and so on, would be allowed to emerge spontaneously in response to short-term and localised signals as appropriate. Emergent phenomena are not the proper subject of a strategy.

The primary variables essential to a strategy would be corporate and personal taxation, international trade tariffs, and, crucially, general regulation. Indeed, given the growing recognition that economics has hitherto underestimated the importance of energy in the theories of growth and particularly capital formation and cost (a point discussed on this blog elsewhere: “Energy and the Theory of Growth”) the character of any regulation coercing an economy in its choice of fuels would probably be of the first importance.

Indeed, in this sense we already have an Industrial Strategy, though it is one inhibiting rather than encouraging industrial activity. Successive governments, at least since Mr Blair’s Energy White Paper of 2002, have determined to compel the economy to use expensive rather than cheap energy, a decision that has had short term effects which are already visible, and which, if maintained, will have very long term, systemic consequences that are not yet evident.

If Mrs May is sincerely determined to favour re-industrialisation of the UK economy, removal of coercions favouring costly energy sources over less expensive ones is an essential strategic, long term decision. It would also, as it happens, be very good tactics.

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.