February made them shiver
Some Anglo-Saxon media last week announced the death of the German Energiewende, as CDU Environment Minister Altmaier announced measures to curb rising energy prices. But this is a misunderstanding of how the ruling German conservatives of CDU and CSU feel about renewable energy. Which is very different from their UK and US counterparts.
Last year in February, when Europe went through an extreme cold spell, Germany came close to a major blackout. The reason was a sharp rise in power demand from France (electric heaters!) combined of course with sharply reduced power production capacity in the south of Germany (Atomausstieg!). And little wind or sunshine to fill the gaps.
In the end, though, the blackout did not happen. Nor did it happen this winter - not so far anyway.
So is the Great German Energy Experiment sailing smoothly ahead then? For make no mistake: the "Energiewende" is an astoundingly ambitious project. Its goals are to have Germany, one of the greatest industrial nations on earth, run for at least 80% on renewables, to reduce electricity consumption by 25% and to be "self-sufficient" in power production, all by 2050.
Well, no, actually, things are not sailing smoothly at all. As most of our readers presumably know, one problem at this moment is that gas-fired power production is increasingly being replaced by coal-fired power in Germany, leading to higher CO2 emissions. Just last Wednesday, Eon, one of the top two German power producers, announced that it is considering closing many of its gas-fired power plants in Germany (and other European countries), because gas cannot compete with coal anymore. This "new combination" of coal and renewables is not exactly what the architects of the Energiewende had in mind.
In addition, Germany's massive subsidies for solar and wind power, which are paid for by the consumers, are driving up electricity prices to unprecedented heights. According to news agency Reuters, the chief executive of Austrian energy group Verbund, Wolfgang Anzengruber, raised the alarm last week, saying that Germany's power market was "about to collapse". While consumer prices are at a 15-year high in Germany, wholesale prices are languishing, as subsidised renewables are driving down electricity prices across the board. Anzengruber spoke of a "broken pricing model" and said "a very quick correction is needed". Analysts at investment bank Macquarie said that Germany's strong support for renewable energy had "broken" its electricity market, according to Reuters.
At the same time, German industrial manufacturers are warning that the high electricity prices are driving investment abroad - to the US for example, which is enjoying very low energy prices, only a third of German prices, thanks to the shale gas revolution. Gisbert Rühl, chief of steel trader Kloeckner, recently said that "many industrial companies are planning to build new factories in the US and not in Europe because of low energy prices there," according to a news story in Finanz Nachrichten.
This situation has put the Berlin government in a bind. With national elections coming up in September, it does not want to be seen to desert the Energiewende, which enjoys broad support in Germany, but it also wants to put the lid on rising prices, which - needless to say - are not very popular either. (Does the German public perhaps want to eat its cake and have it too? Yes, well, "voting publics" often have that annoying habit.)
That's why Environment Minister Peter Altmaier announced last week that he wanted to "cut power prices for consumers". More precisely: he proposed a freeze on the renewable energy subsidy and suggested that both industry and renewable power producers themselves had to contribute more to the cost of the system.
So is this then the death of the Energiewende, as some Anglo-Saxon media interpreted Altmaier's move? Is the Merkel cabinet finally backtracking on the Energiewende? Well, no again. Things are not nearly that simple, as our Berlin correspondent Paul Hockenos explains in a penetrating new analysis of the ruling German conservatives' attitudes towards "things green". Although there is a faction inside the conservative CDU party that cherishes no warm feelings for renewables, writes Paul, most conservatives in the ruling CDU do not share this dislike. On the contrary. Even the arch-conservative, Bayern-based CSU, supports the Energiewende - for certain, very practical reasons.
If you want to find out more, do read Paul's fascinating story. Must reading for those outside Germany who are mystified by what is going on inside that country. And that includes me!
Note that we also have an article today by Danila Bochkarev of the EastWest Institute in Brussels about the rise of independent gas producers in Russia, and what this could mean for the European gas market.