The German Renewable Energies Act (EEG) is not supported by the country’s leading economists. They are pointing out that billions of Euros invested in the “renewables” sector would only lead to marginal CO2 savings. It would be easier to create much more jobs with less money. All and above the EEG incompatible with the European Emissions Trading Scheme (ETS). Consumers will pick up the tab through high energy costs and and less supply security.
Some Facts about Renewables & Green Jobs in Germany
By Edgar L. Gärtner
The Renewable Energy Act (EEG) is leading to net job losses
When competition on the German power market was established in order to comply with EU’s power market directive, the mean power price for industrial consumers dropped to some 6 ct/kWh and the mean price for end consumers to 14 ct/kWh. But after 2000, the consumer prices began to rise continually. In 2008, industrial clients had already to pay nearly 13 ct/kWh and private clients nearly 22 ct/kWh. The main reason for this turn is the German Renewable Energy Act (EEG) which was passed in March 2000. The EEG guarantees high feed-in prices for any quantity of power generated by wind turbines, biomass converters or photovoltaic panels for a period of 20 years.
This guarantee was the key vehicle to the recent investment-boom in the German “renewables” sector, especially in wind power. Currently, some 20,000 wind turbines are generating 23,312 MW, i.e. 6.3 % of Germany’s total power supplies (639 TWh) for the guaranteed price of 9 ct/kWh. These remunerations are charged to power consumers.
German economist Wolfgang Pfaffenberger from the University of Bremen has calculated already in 2004 by order of the workers union’s Hans Böckler Foundation that on average every wind turbine in Germany is leading to a loss of 8 jobs by increasing the mean power price over 20 years. His research is based on two forecasts, one with and one without the EEG.
A research by Uwe Boehmer-Beuth of M.M. Warburg & Co (Energie aus Windkraft – Volkswirtschaftliche Fehlsteuerung und/oder risikoreiche Kapitalanlage) dated 2003 estimated the jobs in the wind sector to 20.000 (6.000-7.000 manufacturing jobs in Germany plus suppliers and service providers). Production takes increasingly place abroad (Denmark, Finland, Great Britain). The wind-power plant manufacturers are today probably the second largest customer of the German steel industry after the automotive industry.
Anyway: A certain job-creating effect cannot be dismissed. However, one should consider that the subsidy of each job in the wind industry was numbered of the former Federal Minister for Economic Affairs Werner Mueller with 150,000 euros.
Expensive Solar Boom
Only nine years after the promulgation of the EEG, the structure of energy supplies in Germany has already changed considerably. The mean power generation costs increased from 3,5 ct/kWh in 2003 to 5,61 ct/kWh in 2008. One reason of this evolution is the approaching nuclear phase out which was also decided in 2000. Another reason is the start of the European carbon emissions trading scheme (ETS). Thus, even power from lignite plants has begun to lose its advantage. Yet the main cost driver in the years to come will probably be the growing generation of solar power which is directly subsidized by all power consumers via guaranteed feed-in tariffs. From 2004 on, private producers of photovoltaic power received up to 57,4 ct/kWh. Since the beginning of this year the price guarantee was lowered to 43 ct/kWh in order to take into account some cost decrease. This is still nearly eight times higher than the mean generation costs and the double of the price that end consumers have to pay. German experts were in favor of a tougher tariff decrease, but the “renewables” lobby proved to have a stronger influence on government decisions.
The EEG in the today’s form represents “a license to funds printing” for “renewables” power plant operators and especially for plant manufacturers.
Till now, the part of solar power in total German power supplies (some 0,6 %) has remained rather modest. But taken into account its high guaranteed price, German power consumers will have to pay for this tiny power quantity over 20 years in total not less than 45 billion Euros! This means € 563 for every German citizen. Since the photovoltaic capacity in Germany is rapidly growing (additional 1,5 to 2,5 Gigawatts are expected this year for the price of the photovoltaic modules because of the financial crisis is going down faster than expected), the cumulated costs of solar power will already exceed € 70 bn in 2010, then largely surmount (with estimated € 133 to 169 bn) the € 100 bn threshold in 2015 and finally attain between € 180 and 300 bn in 2020 – or some € 3,000.- additional energy costs for every German citizen, babies included. In spite of this gigantic effort the part of photovoltaic in the German power supply mix would still not exceed 8 to 19,8 percent.
This is the result of a realistic model calculation of Dieter Damian, a Bonn based economist. Damian says that’s a current government propaganda trick to compare only the annual costs of “renewable” energies with some 30,000 jobs allegedly created in this sector of the economy (out of a total of some 280,000 “green” jobs claimed by German government in March 2009) and to hide the total amount of money which has to be spent by all power consumers over 20 years. Damian’s unpublished calculations are confirmed by Manuel Frondel and colleagues from the Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI Essen). They have found that by the end of 2015 subsidies for solar power in Germany will attain a total amount of € 120 bn. The price digression introduced last year would lower this sum only to € 105 bn. Every job in the solar industry was subsidized, already in 2006, with € 153,000. Frondel is underlining: Since the photovoltaic modules installed in Germany are mostly assembled in countries with lower labor costs, the German EEG is creating in sum more jobs abroad than in Germany itself.
Doubling the Power Bill
Prof. Dr. Ing. Helmut Alt from the University of applied science in Aachen has calculated that with a politically correct power generation structure (complete nuclear phase out, 20 % wind power and over 6 % solar energy) would rise total German power costs from some 30 to 60 bn Euros. This would certainly cost very much more jobs than the number of employments created in the “renewables” sector. Over and above this policy is leading to real energy shortage. If the nuclear phase out is maintained, Germany will become net importer of electricity already by 2015.
Believing the study “From financial crisis to energy crisis?” published in February 2009 by A.T. Kearney consultancy actually investments of € 30 to 35 bn per annum in power generation utilities are needed in Germany in order to make generation capacity follow demand. But the financial crisis would lead to an underinvestment of € 10 bn per year because of rising borrowing costs. (http://www.atkearney.de/content/veroeffentlichungen/whitepaper.php/id/50530)
Even strong CO2-believers (for instance top economist Carl Christian von Weizsäcker from the Max Planck Institute, Cologne) are now strictly opposed to the German EEG for they realize that this law is completely distorting the energy investment structure. Most capital is directed to solar energy leading to carbon reduction costs up to € 600 or even 1,000 per ton CO2 while CO2 reduction by more efficient coal plants would cost at most € 30/t CO2 and the ETS is expected to start with a carbon tariff of some € 40/t CO2. Others like University of Cologne’s Energy Institute EWI, once directed by von Weizsäcker, are underlining technical and ecological problems of Germany’s “renewables” preference like the costs of backing up unsteadily produced wind or solar power by traditional fossil fueled power plants or soil pollution caused by the growth of fuel plants. Billions of Euros invested in the “renewables” sector would only lead to marginal CO2 savings. It would be easier to create much more jobs with less money. All these arguments are reported and weighted by the well known German economist Hans Werner Sinn, president of the Munich based IFO institute in his new book “The Green Paradox. Pleading for a Climate Policy without Illusions” (Berlin, 2008). Germany’s “renewables” policy pushed by the EEG lobby and the German government is not supported by leading economists.
The reality is sobering: Consumers pick up the tab through high energy costs and tampering with nature and the environment. Investors, individual farmers, local research institutes, some municipalities and above all the German wind industry lined their pockets.
Manuel Frondel, Nolan Ritter und Christoph M. Schmidt: Photovoltaik: Wo viel Licht ist, ist auch viel Schatten, in: List Forum für Wirtschafts- und Finanzpolitik, Bd. 34, Heft 1/2008
M. Frondel, N. Ritter, C. Schmidt: „Auswirkungen einer verschärften Degression der Einspeisevergütung für Solarstrom”. Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI). Essen, 2008
Florian Haslauer/Ulrich Hörmann (A.T.Kearney): Von der Finanzkrise zur Energiekrise? – Die Auswirkungen der Finanzkrise auf die Energiewirtschaft. Berlin 2009
Pfaffenberger, Wolfgang; Gabriel, Jürgen; Ngyuen, Quoc Khanh, Ermittlung der Arbeitsplätze und Beschäftigungswirkungen im Bereich Erneuerbarer Energien, Studie im Auftrag der Hans-Böckler-Stiftung. Düsseldorf 2004
Carl Christian von Weizsäcker: Internationale Energiepolitik, in: Peter Gruss/Ferdi Schüth (eds.): Die Zukunft der Energie. Die Antwort der Wissenschaft. C.H.Beck Verlag, München 2008
Hans Werner Sinn: Das grüne Paradoxon. Plädoyer für eine illusionsfreie Klimapolitik. Econ: Berlin, 2008
Gesamtwirtschaftliche, sektorale und ökologische Auswirkungen des Erneuerbare Energien Gesetzes (EEG). Gutachten im Auftrag des Bundesministeriums für Wirtschaft und Arbeit (BMWA). Endbericht. Gemeinsames Gutachten des Energiewirtschaftlichen Instituts an der Universität zu Köln (EWI), des Instituts für Energetik & Umwelt gGmbH (IE) und des Rheinisch-Westfälischen Instituts für Wirtschaftsforschung (RWI). Köln. Leipzig. Essen 2004 EWI/IE/RWI-Gutachten