Fuming over the Phase-Out Energy Shift Deeply Divides German Companies


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Part 2: Tough Negotiations over Subsidies

The renewable energy industry, for example, is encompassing bigger and bigger parts of the traditional economy. In the past, the revenues from the so-called feed-in compensation system went to a manageable group of small companies in the environment sector. Nowadays, steelmaker Thyssen-Krupp produces slewing bearings for wind turbines, glassmaker Schott manufactures components for rooftop solar panels, and electronics giant Siemens develops control technology for natural gas power plants. If the current feed-in government subsidies of about €13 billion ($18.6 billion) were cut back today, it would inevitably strike a blow to German industry.

The energy-hungry industrial sectors are also more dependent on state aid than ever before. To offset the consequences of rising electricity prices, the CDU/FDP government wants to create subsidies of up to €500 million a year for the major electricity customers in the steel and aluminum industry. But the plan is being met with resistance from the European Commission in Brussels.

In the coming weeks the competition watchdogs, which take a critical view of German subsidies to offset high electricity costs, will examine whether the compensation is allowable. Even Chancellor Merkel has publicly expressed her concern that "tough negotiations" lie ahead in the fight over the subsidies.

Not surprisingly, the affected companies are alarmed. "We insist that the politicians' promises be kept," says Ulrich Grillo, president of the Metal Trade Association (WVM) and CEO of the Duisburg-based Grillo-Werke AG, a maker of zinc products. "If the European Commission raises objections, the German government will have to make alternative arrangements," says Grillo.

A New Wave of Government Subsidies

Other industries are also excited about the prospect of fresh government funds. The government plans to spend about €1.5 billion a year on heat insulation for buildings built before 1995 in order to improve energy efficiency. But this isn't enough for Otto Kentzler, president of the German Confederation of Skilled Trades and Crafts (ZDH), who insists that it is critical that subsidization levels be "raised," or else "not enough will happen."

The computer industry association Bitkom wants to see government subsidies for new types of power grids. The Association of Local Utilities is calling for public financial assistance for local small power plants. Daimler CEO Dieter Zetsche wants the government to pay consumers a €5,000 incentive to buy electric cars. And the Association for Electrical, Electronic and Information Technologies (VDE) would like to see government purchasing incentives for consumers who buy energy-efficient refrigerators, dishwashers and washing machines.

The only problem is that the widespread call for new government subsidies contradicts the speeches corporate officials like to give at association conferences and annual receptions, where they are more likely to call for lower taxes and affordable electricity prices. But when it comes to the nuclear phase-out, they support a policy that achieves precisely the opposite result. "We have to be careful that we don't succumb to a gentle form of government investment control," says Hannes Hesse, chief executive of the German Engineering Federation (VDMA).

'Of Course There Will Be Opportunism'

As such, the nuclear phase-out is threatening to become a political trap for industrial associations. Although they may feel that they are in tune with the environmental zeitgeist by quickly voicing their support for the nuclear phase-out, their political influence continues to wane. In many cases, the quarreling corporate executives are no longer being taken seriously by their traditional allies in the CDU and FDP. Meanwhile, their attempts to curry favor with Green Party politicians are met with healthy skepticism.

Eveline Lemke, the economics minister of the western state of Rhineland-Palatinate, the first Green Party politician to head a state economics ministry, can hardly keep up with the inquiries she is getting. She describes enthusiastic business owners who already see the nuclear phase-out as an opportunity to win orders for the local wind energy sector. According to Lemke, local companies, including Ludwigshafen-based BASF, are practically euphoric when she discusses recycling management and securing natural resources with them.

Lemke knows all too well that the interest of many companies is not driven by environmental insights alone. But this doesn't bother her, as long as it remains clear that politicians will be setting the tone. "Of course there will be opportunism, but I don't have a problem with that," says Lemke. "If freeloaders want to invest in the nuclear phase-out -- why not?"

Translated from the German by Christopher Sultan


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