Renewable Energy: At What Cost to Industry?

By Clive Wakely. In the light of Germany’s decision to abandon nuclear energy can German industry both afford the cost of green energy and remain competitive on the world stage?

We reported very recently on Germany’s plan to phase out nuclear power and work towards sourcing 80 percent of its electricity needs from renewables by 2050; this policy is already raising eyebrows – particularly those belonging to senior executives on the boards of some very major German multinationals.

It has been reported that a number of high energy usage companies are considering relocating from Germany to other countries in search of cheaper energy; echoing the Spanish experience of earlier this millennium.

A spokesman for Bayer (the huge pharmaceuticals group responsible, amongst other things, for the production of Genetically Modified Organisms) is reported as explaining: “It is important that we remain competitive compared with other countries. Otherwise, a global company like Bayer will have to consider relocating its production to countries with lower energy costs.”

Following a review of energy policy in the wake of the Fukishima incident the federal German government has announced that it intends decommissioning all nuclear power generation facilities in the country by 2022.

Analysts claim that the move will hit energy companies hard, contribute to an increase in electricity prices, impact on employment and be damaging to the general competitiveness of the German economy.

Higher consumer prices, are of course, a recognized disadvantage of renewables; a disadvantage that may (or may not) be overcome by the proposed massive ramping up of Germany’s renewables sector.

The Bayer spokesman went on to explain that Germany’s electricity costs (17 per cent derived from renewables presently) were the highest in the EU, making the country “unattractive” for the chemicals industry.

Bayer, which employs more than 35,000 people in Germany, has also announced that it intended to reduce its international workforce by 4,500 (including 1,700 in Germany) to save money; yet it also intends to create over 2,500 new jobs in countries like Brazil, India, Russia and China.”

Bayer is not alone in its high cost energy concerns.

A spokesman for a leading German communications company has also complained that taxes imposed to subsidise renewable energy generation were too high.

The spokesman explained that his company was not only paying for the energy it used but also towards subsidizing the renewables sector, he said: “Essentially, we’re subsidising the construction of solar-powered roofs… So we end up paying double.”

In a report released only last week, the Swedish energy company Vattenfall attributed a fall of 10.2bn Swedish krona (£1bn) in operating profit for the second quarter of 2011 to “a one-off effect of the German parliament’s decision to phase out the country’s nuclear power”.

Other German companies, unhappy over their government’s decision, are said to be considering relocating to other countries where “green electricity exists without the extra costs”.

All of which underlines the need, as previously emphasized on this site, for Britain to look carefully at the German’s ambitious renewables programme and learn from it.

What is clear is that the lessons to be learnt should encompass not only the environmental and technical issues but also the wider economical ones as well.