.
9/24/14, "Germany's Coal Binge," Wall St. Journal Editorial
"Green energy mandates have achieved the opposite of their intent."
"Berlin's "energy revolution" is going great—if you own a coal mine.
The German shift to renewable power sources that started in 2000 has
brought the green share of German electricity up to around 25%. But the
rest of the energy mix has become more heavily concentrated on coal,
which now accounts for some 45% of power generation and growing.
Embarrassingly for such an eco-conscious country, Germany is on track to
miss its carbon emissions reduction goal by 2020.
Greens profess
horror at this result, but no one who knows anything about economics
will be surprised. It's the result of Chancellor
Angela Merkel's
Energiewende, or energy revolution, a drive to thwart
market forces and especially price signals, that might otherwise
allocate energy resources.
Now the market is striking back.
Take
the so-called feed-in tariff, which requires distributors to buy
electricity from green generators at fixed prices before buying power
from other sources. Greens tout the measure because it has encouraged
renewable generation to the point that Germany now sometimes experiences
electricity gluts if the weather is particularly sunny or windy.
Yet
by diverting demand to renewables, the tariff deprives traditional
generators of revenue and makes it harder for them to forecast demand
for thermal power plants that require millions of euros of investment
and years to build. No wonder utilities favor cheaper coal plants to
pick up the slack whenever renewables don't deliver as promised.
Mrs. Merkel's accelerated phase-out of nuclear power after the 2011
Fukushima disaster in Japan has had a similar effect. Shutting
profitable nuclear plants deprives utilities of revenue and saddles them
with steep decommissioning costs, which makes cheaper coal more
appealing.
To top it off, Berlin has imposed a moratorium on
fracking. By preventing exploitation of ample shale-gas reserves, the
ban leaves Germany more exposed to strategic pressure from gas exporters
(read: Russia) and raises the cost of gas relative to coal. This is
another reason cheap, local coal is back in favor.
Ordinary
Germans foot the bill for these market distortions, having ponied up an
estimated €100 billion ($129 billion) extra on their electricity bills
since 2000 to fund the renewable drive. The government estimates this
revolution could cost a total of €1 trillion by 2040.
Berlin is
scaling back some taxpayer subsidies for green power. But Germans still
also pay for the energy revolution when job-creating investment goes to
countries with lower power costs, as happened earlier this year when
chemical company BASF said it would cut its investments in Germany to
one-quarter of its global total from one-third, and when bad incentives
skew generation toward dirtier coal instead of cleaner natural gas.
None
of this is what environmentalists promise voters when they plug the
virtues of a low-carbon future. Germany's coal renaissance is a
cautionary tale in what happens when you try to substitute green dreams
for economic realities." via Climate Depot, Hockey Schtick
.
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