Essay by Eric Worrall

The plan is to continue the subsidy, until investment in renewables brings energy prices down.

Germany considers electricity price cap to support industry

05/05/2023May 5, 2023

Economy Minister Robert Habeck wants to support German industry for years to come with lower electricity prices. His electricity price cap proposal is intended to ensure that energy-intensive companies remain in Germany.

Germany’s Economy Minister Robert Habeck on Friday unveiled plans to cap electricity prices for energy-intensive industries to protect the sector from sharp cost increases.

According to the plan, the upper limit of €0.06 (roughly $0.07) per kilowatt hour (KWh) should apply until 2030.

It should cover at least 80% of the electricity consumption of a clearly defined group of German companies from energy-intensive industries such as chemicals, steel and glass manufacturing.

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Habeck, who represents the Greens in the government, is perhaps counterintuitively recommending that the taxpayer subsidize some of Germany’s biggest polluters. He described the proposal as a necessary long-term “bridge” solution until renewable capacity is expanded and prices fall. Otherwise, the government argues, there’s a risk that the major employers and sometimes systemically important industries relocate from the country. 

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The idea was “economically unwise”, said Lindner, whose party the FDP has championed Germany’s balanced-budget orthodoxy.

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Read more: https://www.dw.com/en/germany-considers-electricity-price-cap-to-support-industry/a-65531798

I had high hopes for Habeck, the green leader who admitted coal is required to solve Germany’s energy crisis. I thought, maybe it is possible a green finally came to his senses.

I guess I was wrong.

This latest plan is economic insanity. Renewables will not produce a sustained fall in energy prices. Even if renewables were theoretically capable of delivering a sustained fall in energy prices, Germany is too far North. German solar panels barely work in Summer. In winter at best Germany sees a few hours sunlight per day, and the skies are frequently overcast.

What about wind power?

If you think wind power will be enough, think again. Europe experienced a prolonged wind drought in 2021, prompting fears of “global stilling”, a global warming driven reduction in wind speed. The wind drought which engulfed Europe in 2021 will happen again.

Lets hope German leaders regain their senses, before they run out of money.