BASF, which has been relatively quiet about German energy policy over the past few years, has come out of the woodwork in the past few months. In the German daily FAZ, board chairman Kurt Bock recently showed his poor understanding of events by charging that "renewables finally need to come out of the petting zoo of risk-free profits and enter the market so that cost increases can be reduced" ("Die Erneuerbaren müssen endlich aus dem Streichelzoo der risikolosen Profite in den Markt entlassen werden, damit die Kostensteigerungen reduziert werden können"). His statement is wrong in several ways.
- Prices are rising, but costs only rise if consumption does not decrease faster than prices rise. In fact, governments around the world have artificially increased the price of fossil fuels in particular in order to lower consumption. Note that the other way around does not necessarily work – implementing efficiency standards (such as requiring improvements in the gas mileage for cars) can just as easily encourage people to drive more. The outcome is called the rebound effect. Raising prices does, however, generally reduce consumption; this approach is called environmental taxation. Carbon taxes are one example.
- Making renewables "compete on the market" is neoliberal shorthand for "doing away with feed-in tariffs." It is unclear whether "direct marketing" (to translate the German term) will actually reduce costs, however. I do not believe these findings have been summed up in English yet, but if you can read German there is this study (PDF) published this month in German by IZES. German solar association BSW has also done the math for its sector (again, if you can read German – I'll try to sum up the arguments for you soon.)
- Finally, feed-in tariffs do not provide "risk-free profits." Rather, there are the usual risks, and a lot of investors in renewables have trouble breaking even. (Maybe Bock is thinking of the guaranteed profits for transmission grid operators.)
As I have explained before, BASF is not greatly affected by the Energiewende. It is a major consumer of natural gas. Nonetheless, in November it told German daily Handelsblatt that it is "suffering" from the Renewable Energy Act, which does not cover natural gas. In reality, the firm is exempt from the renewables surcharge, and any power it buys has been made cheaper by renewables; power prices on the spot market have fallen four years in a row. What we have here is a case of preemptive complaining – the firm says it would have to pay 300 million euros in additional costs if it had to pay the renewables surcharge (something neither Brussels nor Berlin would ever consider, so even the concern is unfounded, though the application of part of the renewables surcharge to power consumed directly could change things considerably). In that report from November, Bock says that he is looking into increasing investments in the US because of "low energy prices thanks to the shale gas boom."
Nothing Germany can do would reduce gas prices, however – not even fracking. Lower gas prices would encourage greater fossil fuel consumption, thereby undermining two goals of the energy transition: a switch to renewables and greater efficiency. Another goal – lower carbon emissions – would be promoted if gas offset coal, but most Germans would prefer that emissions trading make coal more expensive. Clearly, what the Germans want is not primarily low energy prices, but quality of life; this blogger sums up the sentiment quite well. And of course, the impact of shale gas production greatly reduces quality of life. Just imagine the flooding in Germany last year if the Germans had shale gas fields everywhere instead of wind and solar.
Finally, it is worth noting that Germany's relatively high energy prices do not seem to be hurting the economy, which continues to roar on. As the World Economic Forum recently explained in their Global Competitiveness Index 2013-2014, Germany is currently the fourth most competitive country in the world – ahead of the US in fifth place. (Craig Morris)
