Merkel's Switch to Renewables: Rising Energy Prices Endanger German Industry

By Frank Dohmen and Alexander Neubacher

Part 2: A Lack of Direction in Berlin

Photo Gallery: High Energy Prices Hurt German Industry Photos
DPA

The operators of the major power grids have been in a state of alarm for weeks. Operator TenneT has had to draw on reserve capacity. Nevertheless, there have already been some serious problems caused by split-second power outages, which ordinary consumers don't even notice, but that create difficulties for industry, with its highly complex production processes. Since Merkel's new energy policy was introduced, aluminum manufacturer Norsk Hydro has registered half a million euros in losses at its German plants because of power fluctuations. Even minimal power outages can cause the company's sensitive rollers to seize up.

The losses could have been even greater if Hydro hadn't already substantially cut back production in Neuss, near Düsseldorf. For more than two years, two production lines have been shut down completely, and many of the plant's 450 workers have been working reduced hours since then. It is not, however, the result of fewer orders being placed with the Neuss plant.

Electricity and CO2-emissions costs are so high that the energy-intensive processes in the aluminum smelters is no longer profitable. Energy eats up about 50 percent of costs.

The management hopes that legislation pending in the European Union will at least eliminate its CO2-emissions costs, so that the plant can return to normal production. But given the ongoing steep rise in electricity costs, it is uncertain whether that will be enough, leading to an uncertain future for both the plant and its employees. It's an impasse, says an employee who maintains the smelters, which are slowly rusting away in the giant buildings at the plant.

The leaders of affected companies, like ThyssenKrupp CEO Heinrich Hiesinger, say that the goal is not to reverse the nuclear phase-out. But, Hiesinger adds, the industry does need "a reliable foundation. What we want is to keep our production in Germany competitive." To that end, Hiesinger plans to propose a sort of benchmark system to the federal government. Under the plan, average European electricity prices would be used as the benchmark for what German industry would pay.

The Search for a Plausible Answer

The industry is concerned that it isn't clear how the government intends to guarantee the power supply in the future. Pumped-storage hydroelectricity plants would have to be built to store energy for periods when there is little wind or solar energy. But hardly any new facilities are currently in the works. Billions would also have to be invested in reliable power grids so that wind-generated electricity can be transported from the coast to the industrial Ruhr region and to the southern states of Bavaria and Baden-Württemberg. But national and state politicians are still fighting over where the lines should be installed and whether it will be necessary to bury all cables underground. Finally, additional natural gas-fired power plants are urgently needed. Not surprising, however, very few companies are prepared to invest in facilities that may or may not be profitable, depending on which way the political winds happen to be blowing.

"In Berlin, they apparently believe that the new energy plan will somehow work itself out," complains one industry representative. "There is no evidence of any coordination of key tasks," says Birgit Ortlieb of the Association of German Industrial Energy Consumers (VIK), which includes many energy-intensive companies. Even parliamentarians from Merkel's governing coalition concede that it can't go on like this. Environment Minister Röttgen, in particular, is playing for time and needs to be pushed to take action, says Martin Lindner, an economic policy expert with the FDP. Thomas Bareiss, energy policy coordinator for Merkel's conservatives, has always been somewhat skeptical of the government's new energy policy, proposed creating a separate energy ministry due to the ongoing disagreements between Ministers Röttgen and Rösler.

At ThyssenKrupp headquarters in Essen, employees are determined to no longer take the federal government's energy policy lying down. In the run-up to German general elections in 2013 and prior to state elections, works council member Kalwa and his colleagues plan to march into party meetings and ask how the candidates intend to regulate the energy supply in Germany in a cost-effective and reliable manner.

"Only those who can provide a plausible answer," says the member of the metalworkers' union, "can expect to receive our votes."

Translated from the German by Christopher Sultan

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