Growth and costs

When Chancellor Angela Merkel defined her government's new energy policy two years ago, there was widespread support. Energy was to become more environmentally friendly, more social, and more competitive. The goal of the big project: using renewable energy to balance the phase-out of nuclear power. That optimism has not waned, but the implementation has become a cause for concern.

"We have conducted polls among ordinary people and some 250 companies on how they see the transition to renewables. Two-thirds of the people and 61 percent of companies replied either "good" or "very good," says Ralf Bartels of the industrial union for coal mining, chemistry and energy (IG-BCE). The problem was not the goal in itself but the implementation, as steep costs have become more and more of a problem for many companies.

Lacking investment safety

Businesses have already begun to look elsewhere. "It's a gradual process," says EU energy commissioner Günther Oettinger. Bartels wouldn't paint quite such a bleak picture, but he also warns that future investments could be affected. "When investments are being planned, will the money then go to sites in Germany or to the US, the Middle East or to China?" he asks. The decision would largely depend on energy costs.

It's a concern certainly shared by Ingo Nawrath, head of the Basi Gase + Technik company. The company has two production sites - one in France and one in Germany. "We have put our investments in Germany on hold because we currently can't invest in this unreliable political situation. We simply don't know how energy prices will develop in the next years," Nawrath explains.

Most of the company's energy needs are covered in France - 140 million kilowatt hours a year. In Germany, they only need 800,000 kilowatt hours. "If this were to become more expensive, our factory would have to close down. We'd be bankrupt because such prices cannot be sustained on the market."

Germany's renewable energy law (EEG) regulates, among other things, payment for energy from renewable sources. A current allocation of 5.3 cents per kilowatt hour is added to electricity costs. When the contribution was introduced ten years ago, it was 1.5 cents. The case of Basi Gase + Technik shows the effect such an increase can have on an enterprise. "Our energy costs in Germany rose by 270 percent in just ten years due to state allocations and taxes," Nawrath says. But not all firms are affected by the EEG allocation. As many as 2,000 companies in Germany are exempt, usually from sectors like cement factories and aluminum producers that use a lot of energy.

Advantages and disadvantages

"In fact, Germany as a location for industries faces big challenges," says Hanno Kempermann of the Cologne Institute for Economic Research. "If energy costs continue to rise sharply, we can assume there will be a threat to the competitiveness of many companies in Germany."

Many companies are already saying they have reached the limit of their capacity, the economic expert says, adding that many will have to give up if costs rise any further. According to Kempermann, firms that can't pack up and move because they use large machines, or need to be close to their customers are hit the hardest.

But other companies profit from the switch to renewables by tapping new markets. "Companies that specialize in energy-efficient technologies like thermal insulation or specific consulting services can gain an advantage and increase their competitiveness and revenue," Kempermann says.

Grid instability

The question is: how can the transition to renewables be implemented more fairly? Union representative Bartels argues that we need to think about the costs of actually developing renewable energy, instead of agonizing over how to distribute the costs. "If we produce more wind energy than the grid can withstand, we can't feed that energy into the power supply system. The grid operators are forced to turn off the wind turbines," Bartels says, before criticizing the fact that the wind park's owners receive the same payment, whether the energy is actually used or not.

Some say there needs to be a strategic political change to lower the costs for Germany's transition to renewables. And there is no lack of proposals. "If we were to place a stronger emphasis on wind energy instead of solar energy, we could save several billion euros," Kempermann says. "Energy costs would not rise as much as they do now."

Nawrath wants politicians to come up with reliable information and long-term legislation.