STAFF NEWS & ANALYSIS
Central Planning Is Responsible for Germany's Green Catastrophe
By Staff News & Analysis - June 18, 2013

Tilting at windmills in Germany … The wheels are falling off of Germany's green energy revolution … The quiet backwater in the Ruhr, close to Düsseldorf, is the proposed site for the biggest converter station in Europe. This vast installation will transform high-voltage direct current to alternating current. It will be an important link in Germany's new "power highway", a network of transmission lines that will send electricity generated by wind farms in the north of the country, and offshore in the North and Baltic Seas, to the manufacturing belt in the south. Osterath's residents reckon it will be a monstrous eyesore, and intend to stop it. This kind of nimbyism is only one of many problems facing Germany's Energiewende. The literal translation is energy change or turn … – The Economist

Dominant Social Theme: Green energy can be difficult to implement but is worthwhile, nonetheless!

Free-Market Analysis: This Economist blog article starts out in a promising way by analyzing the reality surrounding Germany's power industry: State policies are contradictory and not working.

In fact, the Energiewende was destined not to work because Germany's energy policy, like Europe's, is basically a political construct. The muddle is complicated by the entire "green" debate. Green alternative power is simply not as reliable or cheap as coal and oil … or even nuclear.

Replacing efficient, utile programs with inefficient and costly ones is a recipe for disaster. And according to this article, that's what Germany has. Here's more:

By 2022 all nuclear power plants, which now produce 16% of the country's electricity, are to be switched off. And by 2050 about 80% of electricity is to come from renewable sources, compared with 22% now. Businessmen say the Energiewende will kill German industry. Power experts worry about blackouts. Voters are furious about ever higher fuel bills. The chaos undermines Germany's claim to efficiency, threatens its vaunted competitiveness and unnecessarily burdens households.

It also demonstrates Germany's curious refusal to think about Europe strategically. The result is a web of grotesque distortions. On sunny days Germany pushes its excess power into the European grid at a loss. Because producers of renewables are paid a fixed price, their subsidy rises as the spot price of electricity falls. On cloudy days Germany relies ever more on brown coal. Last year its CO2 emissions rose. The cost of this mess is passed on to electricity users. Household fuel bills have gone up by a quarter over the past three years, to 40-50% above the EU average.

And because the contracts guaranteeing renewables prices are set for 20 years, the problem will get worse as more such supplies come on stream. Thomas Vahlenkamp of McKinsey reckons that the cost of the Energiewende will double over the next decade. Rising electricity bills will dampen German consumers' spending, exactly the opposite of what is needed to rebalance the economy.

All this is happening as prices for natural gas and electricity in North America are plunging, thanks to the shale revolution, so Germany's most energy-intensive industries are now eyeing expansion on the other side of the Atlantic. There is a risk of a ripple effect as their customers start to move, too. The strategically minded are pushing for more fundamental overhauls.

If you read the above closely, you can see where this article is going. The key is this statement: "It also demonstrates Germany's curious refusal to think about Europe strategically."

Not so. First of all, there is no "Germany." There are German politicians and business leaders – with competing agendas.

And the idea that these groups will be more efficient if they interact formally with Brussels is probably a bad one. The tangle of competing interests in Brussels is far worse than in Germany.

The way out of Germany's mess – and surely Europe generally suffers from the same difficulties – is to reinstall some of the inputs of the free market. But Economist journos, like many others, are simply incapable of suggesting that the Invisible Hand of the free market be allowed to operate. The idea remains that central planning can do the trick, even though modern Western history shows it cannot.

The article concludes with this statement: "Instead of a national Energiewende marked by U-turns and uncertainty, Germany needs to think European."

Again, there is no "Germany" – as it is only lines on a map. There is German culture, of course, and German leaders, just as there are European leaders, though whether there is a "European" culture is questionable, as well.

Europe is a made-up entity. Germany cannot "think." These are metaphors – code words – for something far more fundamental … the idea that German industry ought to be more closely integrated with European industry, especially from a power perspective.

After Thoughts

The German energy grid has become insufficient and contradictory. Until the fascination with central planning loosens its hold there likely won't be any marked improvement and probably further deterioration.

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