Renewable energy advocates hold up the German experience as an example of successful energy policymaking with some going so far as to call it a model for Wisconsin. Germany’s energy transformation or “Energiewende” calls for a nuclear-free and carbon-reduced economy through the vast deployment of renewable technologies but its results thus far have been higher prices, greater carbon intensity and a less reliable electric delivery network.
As an organization focused on maintaining reliable and affordable power in Wisconsin, we view Germany as providing valuable lessons on missteps that the state of Wisconsin should avoid. Indeed, policymakers in Germany now are reversing course on the large cost of renewable subsidies and the impact of those subsidies on residential and industrial electric rates and CO2 emissions.
German consumers already pay the highest electricity prices in Europe and about double what most Americans pay. An average German household pays an extra $355 a year just to subsidize renewables.
Costs also are going up for German employers, making them less competitive than rivals from America. Average electricity prices for German businesses and manufacturers have jumped 60 percent over the past five years because of costs passed along as part of government subsidies of renewable energy developments.
Germany’s transformational energy policies have put the country’s future economic competitiveness at risk. GDP growth shrank in the second quarter and industrial output and exports are plunging. The biggest concern is that German industry, the mainstay of its economy, is becoming less competitive. According to a recent survey by PricewaterhouseCoopers and the Federation of German Industry, nearly 75 percent of Germany’s small- and medium-sized industrial businesses are most concerned with risks associated with rising energy costs.
Moreover, Germany is highly dependent on the success of its manufacturing sector, and high energy costs are leading to industrial investment losses as German companies are being forced to invest abroad to stay competitive.
Renewable energy subsidies are also having a regressive effect on wealth distribution as poor and middleclass families pay higher rates to subsidize solar panels for the more affluent. Should Wisconsin go down this same path, forcing someone living in a small rental apartment, for instance, to subsidize a wealthy homeowner’s roof-mounted solar panels through their electricity bill? Fundamental fairness dictates no.
In addition to increasing energy costs for families and businesses and contributing to the loss of domestic investment, Energiewende has recently had the perverse effect of actually increasing CO2 emissions in Germany. The combination of a nuclear phase-out, dependency on high-priced Russian natural gas, and the tremendous inefficiencies of renewables have all combined to force Germany to burn more lignite and hard coal hiking greenhouse gas emissions.
Germany is a classic example of the severe consequences of adding extensive amounts of distributed generation without an integrated approach. Policymakers are increasingly realizing that they must reform Energiewende to maintain the vitality of the German economy. The lessons learned in Europe prove that the large-scale integration of renewable power will result in increased costs to consumers and other stakeholders and may not actually achieve well intended environmental goals.
Wisconsin should heed the lessons learned in Germany as opposed to repeating the same mistakes.
Founded in 1911, Wisconsin Manufacturers & Commerce (WMC) is the state’s chamber of commerce and leading business association representing 3,800 employers of all sizes and from all sectors of the economy.