2013-09-17

What The U.S. Can Learn From Germany's Costly Clean Energy Push

The U.S. should look at Sweden—not Germany—for a better way forward.

A state-led, green energy revolution may seem like a pipe dream in the United States, but in Germany, it’s policy. It’s called "Energiewende"—literally "energy revolution." It has made the country a leader both in practice—more than 20% of Germany's energy use is clean—and in promise, setting an ambitious goal of 80% by 2050. Those goals have become even more ambitious after the Fukushima disaster in Japan, which led Germany to decide to shut down all nuclear energy plants by 2022.

But the rapid transition to renewable energy has had its costs, and Der Spiegel reports German ratepayers are bearing them.

German consumers already pay the highest electricity prices in Europe. But because the government is failing to get the costs of its new energy policy under control, rising prices are already on the horizon. Electricity is becoming a luxury good in Germany, and one of the country's most important future-oriented projects is acutely at risk.

Part of the problem, according to the report, is the regressive nature of Germany’s clean-energy subsidies. More than 2,000 companies have found loopholes from green energy surcharges, while even the poorest ratepayers face significant price hikes.

In the near future, an average three-person household will spend about €90 a month for electricity. That's about twice as much as in 2000.

Two-thirds of the price increase is due to new government fees, surcharges and taxes. But despite those price hikes, government pensions and social welfare payments have not been adjusted. As a result, every new fee becomes a threat to low-income consumers.

There are many complications to the general picture Der Spiegel presents, but it seems clear that a course correction of some kind is needed. The authors advocate looking to yet another bright spot in Western Europe: Sweden.

In Sweden, the system ensures that the electric utilities' investments automatically flow into the technology they see as the most cost-effective. This doesn't always have to be the cheapest technology at a given time. But like any normal company, the Swedish utilities have an interest in maximizing their return on investment. This is different in Germany, where the most inefficient technology at a given time is the most heavily subsidized, based on the bizarre logic that it has to be brought into the market over a particularly lengthy period of time.

To prevent energy providers from cheating the quota model, Sweden requires them to submit a certain number of green energy certificates. Each certificate represents one megawatt-hour of clean electricity. Those that cannot prove they have met their quotas are slapped with a hefty fine.

The Swedish model for renewable energy has been getting lip service here in the United States, too. At a meeting in Stockholm, President Obama said: "The goal of achieving a carbon-neutral economy is remarkable, and Sweden is well on its way. We deeply respect and admire that and think we can learn from it."

[Image: Abstract via Shutterstock]

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