Worshipping the wind god
Germany has decided to worship the wind god in an attempt to meet its electrical needs.
The problem: it ain’t working. The bigger problem: it ain’t gonna work.
The Renewable Energy Act (EEG) is the biggest cost factor in Germany’s energy reorientation. The rules for the subsidies are quite simple: Operators of wind farms, solar arrays and biogas plants get a guaranteed, fixed feed-in price for all electricity they generate over a period of many years. Power companies are required to purchase this energy, but at a price much higher than what they get for it on the market. The difference is paid for by consumers through their electricity bill.
The EEG both guarantees big profits to anyone who invests in renewable-energy plants and makes the construction of such plants attractive.
Hmm…government intervention manages to distort everything, leading to inappropriate “investments” (of all sorts)? I’m shocked, shocked!
But wait, there’s more:
…[electrical] costs are rising at a faster-than-expected rate. The average household in Germany currently pays €144 ($181) a year for these subsidies, and that figure looks set to rise to more than €200 in 2013. In all, it has been estimated that the operators of green power plants have been promised more than €200 million.
Such numbers are big enough to exacerbate social inequalities in Germany. Recipients of “Hartz IV” welfare benefits for the long-term unemployed, for example, receive a fixed sum for electricity and can’t afford energy-saving fridges or washing machines. At the other end of the scale, the owners of well-located houses install solar panels on their roofs and are paid for the privilege. Meanwhile, industrial companies that use a lot of electricity are being given more and more tax breaks. Indeed, the Federal Network Agency has calculated that the country’s biggest electricity guzzlers account for 18 percent of overall consumption, but bear only 0.3 percent of the costs associated with the EEG.
So new government intervention creates a hazard for others similarly dependent on existing forms of government intervention? I remain shocked, shocked!
But, unfortunately, it is moving so rapidly that the costs in the coming years will be far higher than originally planned. To make matters worse, the government is losing control of its ability to steer and coordinate projects, causing them to run awry and costs to keep going up.
The government losing control? But, but, but… that’s impossible!
And even if this did all work, how will any of this enhance Germany’s ability to bail out the PIGS nations and save the euro?