Report: Germany’s Energiewende Threatens To Become An Economic Disaster
As the cost of Germany’s green energy transition continues to rise, the number of green energy jobs is falling. That is the conclusion of a new study by McKinsey. What is more, Government policy is failing the most important goal of the Energiewende.
The cost of Germany’s Energiewende continues to rise – by 14 billion euros by the year 2025. The overall cost then will be 77 billion euros per year.
The views of the Federal Government and those of the consulting company, could not be more different. The new Federal Minister of Economics, Brigitte Zypries (SPD) recently published a brochure with the title “Energiewende – our success story”.
On 20 pages it proclaims that Germany has now reached a renewables share of 32 percent, that power supply is still the safest in the world and that electricity prices for households have stabilized. According to Zypries, the energy supply is “sustainable and safe, affordable and predictable, reliable and intelligent”.
The picture that the consulting company McKinsey draws in its latest update of its “Energiewende Index” looks very different. Every six months the expert team lead by Senior Partner Thomas Vahlenkamp checks — on the basis of 15 quantitatively measurable criteria — whether the targets set by government are still achievable. The title of their latest study: “The costs continue to rise.”
Nearly all indicators getting worse
In McKinsey’s evaluation, 11 out of a total of 15 indicators have changed compared to their last survey in autumn 2016 – all for the worse.
Although seven energy targets set by the Federal Government are still achievable (“realistic”), the experts qualify their judgment in a way that is sobering. These targets can only succeed by way of direct subsidies. In fact, the Energiewende is unable to be self-sufficient even 17 years after the entry into force of the Renewable Energies Act.
“The current data show that the previous success of the Energiewende has come primarily from expensive subsidies,” the McKinsey study concludes: “At the same time, those goals that do not depend on direct financial support are becoming increasingly unrealistic — foremost the reduction in CO2 emissions. ”
The latter conclusion must hurt the federal government particularly badly. After all, the high CO2 emissions from power plants in addition to the nuclear accident in Fukushima were their most important reasons to accelerate the green energy transition. “CO2 emissions are far above the targets,” the McKinsey study notes. Last year, CO2 emissions amounted to around 916 million tonnes. “This represents a slight increase compared to the previous year.” The actual target for 2016 was 812 million tonnes.
Central target missed by far
According to McKinsey, the central goal of CO2 reduction is “now just as far from the target corridor as the targets for primary energy and electricity”. That’s because, as before, in 2016 too, German power consumption failed to decline – despite all efficiency programmes. At 593 Terawatt hours consumption was almost the same as in the previous year. The government’s goal of reducing consumption down to 553 terawatt hours by 2020 is “moving more and more into the far distance”. Just 54% of this goal has been reached by now.
Now, however, it looks as if one of the most important arguments by proponents of the Energiewende has vanished, i.e. that the green energy transition is not only ecologically valuable, but also a job engine for the German economy.
The McKinsey figures speak a different language. “For the fourth year in a row, the number of employees in the renewable energy sector has declined, from 355,400 to 330,000.” The strongest decline is reported by the wind industry (minus 8,000 employees) and the photovoltaics sector (minus 7,000).
The federal government has set a goal of steadily increasing the number of jobs in the renewable energy sector. The number of green energy jobs should not fall below the level of 2008, when 322,000 people were employed in the sector. Now, however, McKinsey is describing the possibility that this goal will also be missed “in the medium-term” if job cuts continue.
Job losses in energy-intensive industries
There is another government promise that is slowly becoming questionable: that the Energiewende will not cost jobs, especially in industries that depend particularly on affordable energy. According to McKinsey’s survey, there has been “a drop in the workforce in energy-intensive industries” for the first time in 2016. In March 2016, there were a total of 15,000 workers less than half a year earlier. With a total of 1.65 million employees, the government target – stable employment figures at the level of the base year 2008 – is still reachable as “realistic”.
And finally: the costs. Here too, McKinsey cannot share the optimism of the Federal Minister of Economics. Early this year, the renewable energy levy by which Germans pay for renewable energies via their electricity account was increased yet again. This time by 8.3 percent – to 6.88 cents per kilowatt hour. “This trend continues to rise,” McKinsey notes. “Only in the years after 2020 older energy projects will, to a greater extent, drop from the feed-in tariff – from then on, it is to be expected that the levy will gradually decrease.”
For the time being, however, household electricity prices continue to rise, from 29.35 cents per kilowatt hour to now 30.38 cents. “The European average energy price has declined slightly over the same period,” the McKinsey study says. “Meanwhile, the price level for German household electricity is 47.3 percent above the European average.” The overall costs will thus continue to rise – by 14 billion euros by the year 2025. The costs then would be at 77 billion euro per annum.
“The question of how to share the cost burden,” says McKinsey partner Vahlenkamp, ”is likely to become a key element of the Energiewende in the coming years.”