Günther Oettinger: Unfair energy subsidy to German business

Posted: May 30, 2013 by tallbloke in government, Politics, Robber Barons

From Der Speigel

oettingerThe audience was small and exclusive, which helps explain why little has emerged thus far of what European Energy Commissioner Günther Oettinger said at the Hotel Stanhope in Brussels on May 6. It was enough to cause something of a stir among his listeners.

For the European Commission and for Competition Commissioner Joaquín Almunia, Oettinger said during a dinner event, it is clear that price concessions for energy-intensive companies in Germany amount to an inadmissible subsidy. In the best-case scenario, he said, the Commission would ban such subsidies. But, he added, the worst case could see Brussels demanding that such companies pay back the money they had saved as a result of the discounts they have received.

Competitors and neighboring countries had filed an official complaint about these benefits with the European Commission, prompting the EU competition authority to launch an investigation. The German commissioner had sought to assure industry representatives that the process was only just beginning and that the outcome remained unclear.

That, though, seems to only have been partly accurate, which helps explain the current agitation. The scenario Oettinger outlined at the Brussels dinner is a horrifying one for parts of German industry and for the government in Berlin. The prospect of having to repay several billion euros is certainly a daunting one. Even worse, though, is that the competitiveness of entire industrial sectors would be put at risk. Also at stake is the Renewable Energies Act (EEG), a central component of Berlin’s shift away from nuclear power and toward green energy, also known as the Energiewende.

Since 2000, Germany has used the EEG to promote the expansion of renewable forms of energy. To ensure that the construction of expensive solar and wind farms is worthwhile for private individuals and investors, they receive a guarantee that the electricity they produce will be purchased at a fixed price for a period of several years.

Alternate Reality

The costs of start-up financing for green energy and the compensation for expansion of the power grid are added to customers’ electricity bills in the form of a special tax. The entire subsidy system is supposed to come to an end when green energy becomes competitive. That, at least, is the theory.

But the reality is different. No longer can one simply describe the tax as a way to get renewable energies off the ground. Indeed, following Berlin’s decision two years ago to shelve nuclear energy and accelerate the expansion of renewables, the EEG has become a giant redistribution machine.

Owners of wind and solar farms were paid about €14 billion ($18 billion) last year alone. This is the difference between the guaranteed EEG price and the proceeds actually achieved on the market for the electricity they fed into the grid. Experts with the Institute of Energy Economics at the University of Cologne estimate that consumers will have to pay more than €100 billion by 2022 for renewable energy facilities that have already been installed. Of the 28 cents household customers pay per kilowatt-hour of electricity today, 5.28 cents already applies to the EEG levy, and that figure is growing.

There are many reasons for the cost explosion. Contrary to earlier forecasts, solar and wind farms are a long way from being able to produce energy at the prices possible in coal-fired or nuclear power plants. There are also high costs associated with grid expansion and electricity storage facilities — both necessary for a system more reliant on renewables — as well as for backup power plants, which take up the slack when the sun isn’t shining or the wind isn’t blowing. In addition, the German government failed to define upper limits for solar energy, an expensive form of energy that is inefficient in a country like Germany, with its relative lack of sunshine.

Even more vexing, consumer advocates and Green Party politicians like energy expert Bärbel Höhn have been saying for months, are the special provisions that enable “supposedly energy-intensive companies” to exempt themselves from the EEG levy and grid charges.

A Farce

The exceptions, introduced in 2003, were intended primarily for industries and companies that consume large amounts of energy and compete internationally. On the international market, they face off against competitors who can buy electricity in their home countries at significantly lower prices. This applies, in particular, to sectors like steel, aluminum and chemicals.

But as costs have risen, what was once a reasonable tool has become a farce. Because the German government lowered the limit at which a company is considered energy-intensive from 10 gigawatt-hours a year to only 1 gigawatt-hour a year, large corporations are now not the only ones able to enjoy the exemption. Discount markets, furniture stores and retail chains have combined the electricity consumption of their branches nationwide to qualify and submit exemption applications.

The number of company sites with an EEG exemption has jumped from 979 in 2012 to the current figure of 2,245. According to a parliamentary inquiry submitted by the Green Party, applications for exemptions from grid charges more than doubled, from 1,600 in 2011 to 3,400 in 2012. This has allowed companies and larger corporations to save close to €5 billion.

Consumer advocates, Greens and small and mid-sized business owners unanimously complain that small companies and household customers are expected to make up the difference. “They are the ones ultimately footing the bill,” says Höhn.

Read the rest here

  1. Joe Public says:

    And the UK’s Pottery Industry too receives a special dispensation to pay lower Climate Change Levy

  2. oldbrew says:

    ‘The entire subsidy system is supposed to come to an end when green energy becomes competitive’

    When might that be? Jerry Lee Lewis has the likely answer…

  3. […] Click here to read the full article _____________________________________________ […]

  4. Tenuc says:

    So Germany is suffering from the same sort of problems with expensive energy causing problems for industry and the consumer. Small signs that this madness is ending and with record cold spring governments are coming under ever more pressure to reverse their ‘green’ policies.

    UK has had the coldest spring since 1962 – when, if you remember, all the MSM talk was of an imminent ice age!

    2013 – Coldest spring for more than 50 years

    So where’s the modelled warming? Just love it when the useless MO is forced to eat crow… 🙂

  5. Caro Oettinger,
    non disprezzare sempre l’Italia, perchè ti diedi un ottimo consiglio che era rivolto all’Eu-27,ai 10 milioni di posti che vorrei nelle filiere rinnovabili e al fatto che ti levavo le esondazioni in Germania introducendo il mio tridimensional phs.E’ complicato spiegarlo senza algoritmi ma ci provo.Ti dissi che i tedeschi bravissimi nel vento,avevano fatto un errore,non avevano stoccato il vento nell’acqua.Ti dissi come fare perchè agivo su 3 livelli.Costruivo un canale Adige-Inn-Donau per cui levano le esondazioni a Passau perchè se l’acqua era troppo come oggi le mie turbine pompaggio la pompavano verso l’Austria e l’Italia e se si vuole anche Svizzera perchè collegavo il Po-Ticino al Roane.Il lago di Garda con l’Adige ed il Po stoccavano enormi quantitativi che passano attraverso un sistema intelligente vie d’acqua-invasi alpini manovrando le turbine pumped che sono vitali nei fiumi tedeschi-austriaci-cechi.Poi mi bilanciavo con il lago di mare di Bremenhaven e quello sul Baltico che hanno lo scopo primario di assistere il vento del Nord(Benelux-Germania-Danimarca).
    Dobbiamo costruire solo tante turbine di pompaggio e qui dividiam il lavoro tra Siemens,Androz,Ansaldo e Alsthom sempre che i francesi vogliano lo step tridimensional di caffese che leva le esondazioni ed utilizza il suo leverage 40 GW di vento diventano 200 GW nell’hydro modulare.
    Pier luigi caffese [email snipped — mod] Milano 3.6.13.

  6. Brian H says:

    Sometimes the Invisible Hand becomes visible, as it enforces (with brass knuckles, if necessary) its fundamental decree: “Like it or not, eventually you will ALL pay FULL price.”