Germany’s Energiewende Is Not Just Unworkable, It Might be Illegal

The implications for the already struggling continent are enormous

By Walter Russell Mead

Germany’s Energiewende, or “energy revolution,” has been heralded by greens as a shining example of the kind of true commitment to renewable energy that our planet requires, but in practice it’s been a flop. As the country phased out its nuclear reactors in the wake of the Fukushima disaster, it heavily subsidized wind and solar farms, passing the costs of these subsidies to consumers in the form of higher electricity prices. In a bid to keep them competitive—and, well, to keep them in Germany—Berlin decided to exempt many of its energy-intensive industries from these high energy prices.

But now the EU is stepping in. The European Commission, concerned that these exemptions violate competitions laws within the trading bloc, will open up an investigation on the matter this Wednesday, Spiegel reports:

[EU Energy Commissioner Günther Oettinger] said many provisions in the law appeared to be in breach of EU single market rules and competition law. For example, he said, it wasn’t acceptable that Germay subsidizes its own wind power but makes no subsidies available to operators from Denmark and Norway that deliver windpower to Germany. [...]

The Commission plans to launch proceedings aimed not only at banning such exemptions in the future, but also requiring companies to repay the charges they were exempted from in the past.

This all goes back to the decision to prop up technologies that weren’t ready to compete on their own merits. Any country that tries to phase in large amounts of wind and solar at this point in time will be saddling their industries and households with higher prices. That’s going to hurt that country’s competitiveness and rankle voters.

Angela Merkel seems to have realized this and has pledged to reform the Energiewende if re-elected this September. Germany’s Environment Minister has pledged to phase out solar subsidies by 2018. Walking back from this idealistic overextension is certainly a step in the right direction, but if the Commission decides to force companies to go back and repay charges they were previously exempted from, Europe’s engine could sputter. And the implications of that for the already struggling continent are enormous.