The Expensive Dream of Clean Energy Will High Costs Kill Merkel's Green Revolution?


Part 7: The High Cost of Saving Money

The German government plans a radical increase in energy efficiency, especially in buildings and private homes. This is the sixth cost factor. By 2050, according to the government's energy plan, no building will be wasting energy any more and the nation's heating requirements will have fallen by 80 percent. Homeowners will save energy costs as a result, but they will first have to spend vast sums of money. Insulating a building costs between €35 ($47) and €350 ($470) per square meter.

Julia Klöckner, the CDU's main candidate in the regional election in the western state of Rhineland-Palatinate in 2011, has pointed out how explosive this issue could be. "For many people an enforced expensive refurbishment is tantamount to expropriation," she says. "The CDU as the party of property mustn't allow that to happen."

Stalling Tactics

If Germans really want to banish fossil and nuclear power they will have to face up to the cost of doing so. And they will have to break the resistance of the big power companies who have been secretly trying to stall the transition.

For years, the utilities comfortably raked in billions in profits with their classic business model. They built huge coal, nuclear or gas power stations near conurbations and supplied customers with easily affordable power. Electricity bosses such as RWE head Jürgen Grossmann keep repeating that renewable energies are the future. But behind the scenes they and their lobbyists are working to cement the status quo and are even attacking the government's move to give priority to green power.

The more renewable energy that is pumped into the grid, the more frequently the utilities have to power down their nuclear and coal power stations, which makes them more expensive to operate. As a result, the firms are considering charging customers a new fee for simply making power stations available even if they aren't needed.

Industrial companies, especially the energy guzzlers in the heavy industry sectors such as steel, cement and aluminium production, are also trying to slow down the transition. Industry consumes a quarter of Germany's electricity and gas requirements and has been lobbying against the upcoming electricity price increases and the recent scrapping of tax exemptions on energy taxes.

Germany's heavy industry is a powerful lobby because it employs some 875,000 workers. The CEO of chemicals group BASF, Jürgen Hambrecht, fears a "creeping deindustrialization in Germany." Firms are starting to threaten that they will build their next plant abroad where energy costs are lower and environmental regulations less strict.

Grassroots Revolution

It's doubtful whether firms will carry out such threats. And many companies have the potential to make huge energy savings. Besides, who is to say that it wouldn't make sense to sacrifice traditional heavy industry for the emergence of new, modern businesses?

Take the northern port of Emden, for example. The Nordseewerke shipyard has converted from building frigates to constructing masts for wind turbines. Such a transition may be painful, but it could well end up boosting the economy. And every euro spent on solar, wind and biomass power is an investment that benefits not just major companies like Siemens, but small businesses as well.

Companies such as Juwi, founded by Matthias Willenbacher, which advises local authorities and firms on the mix of solar, wind, biomass and hydroelectric power that is suitable for them and then builds the required plants. Willenbacher, a physicist, employed a staff of 30 a decade ago. His workforce has since grown to almost 1,000. This year Juwi will generate sales of €900 million, a 50 percent increase on its turnover in 2009. Willenbacher represents a trend that is emerging across the German energy sector -- a return to regionalism.

Local authorities want to wean themselves off the large power suppliers and are investing in renewable energies and small heating plants that supply power and heating to nearby customers such as schools. The regional enterprises are quietly pushing ahead with the green revolution, from the bottom up. "It would be much more economic to cover the whole country with small, decentralized power stations," says Willenbacher.

The energy changeover mustn't confine itself to trans-continental power lines, storage plants in the mountains and wind farms along the coasts. The changeover must start at the bottom, in countless regional initiatives which can grow together step by step. The government hasn't taken enough account of this maxim in its energy plan.

It's clear that the costs of the green revolution will be tremendous. The government will have to make sure that they don't become uncontrollable. But foregoing the necessary investments could turn out to be far more expensive because that would increase Germany's dependence on raw materials imports and worsen climate change.

Whether Merkel's master plan will ever be realized in its current form is doubtful, not least because energy policy these days is mainly drafted at the European Union level, in Brussels. European Energy Commissioner Günther Oettinger plans to present a new plan in February to show how Europe's energy markets can grow together. It will contain proposals for the location of power lines and how to remove the major differences in national subsidies for green power.

It's already clear that the Berlin energy plan won't be the last one. A new one is bound to be drafted -- not necessarily by Merkel.


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