RON CLUTZ
Tilak Doshi describes the self-inflicted German downfall in his Daily Sceptic article Germany’s Economic and Political Suicide. Excerpts in italics with my bolds and added images.
It’s that festive time of the year when interesting tales get told around a fireplace. So here goes (minus the fireplace).
Once upon a time there lived a country that was the envy of the world. It was among the world’s pre-eminent producers of manufactured goods. From chemicals and pharmaceuticals to precision engineering and the brewing of beer, it was second to none. Its people’s work skills, industriousness and discipline became the national hallmark of civilisational success. The country gained fame and fortune in bringing the luxuries of fine automobiles to the world’s rich and aspiring middle classes.
Alas, a blight visited that once great country not more than a score of years ago, though its destructive seed had been planted earlier. It was not some external force or act of God. Rather it was a sickness of the mind, a debilitating disease of the soul, that vexed that country’s ruling class. In restless search for virtue, the country’s rulers paid obeisance to the Goddess Gaia and promised the nation’s blood and treasure to satiate her inviolable sovereignty over her earthly domains.
This, then, is a tale of woe and misery. This Christmas shall not have been one of unalloyed merry times and good cheer. And while beer will have been drunk and dinners eaten in many a hearth and eating place, the lifeblood of that nation shall be constricted and its breathing blocked by a cursed phlegm as normal life resumes in the New Year.
Within the fateful score of years of becoming afflicted by the primordial cult of Gaia, the world’s envy has now become a sad basket case. Its economy has been tarnished as “the sick man of Europe”.
The beginning of the end of the German miracle
While the travails of Germany along with the economic stagnation of Europe as a whole have been apparent for some years now, the spate of dire headlines have gathered pace in recent weeks as the coalition government collapsed.
“Behind Germany’s Political Turmoil, a Stagnating Economy” — New York Times (December 17th)
“Germany Is Unraveling Just When Europe Needs It Most” – Bloomberg (December 15th)
“Europe’s Economic Apocalypse Is Now” – Politico (December 19th):
If Europe – and its economic powerhouse Germany – remains on its current trajectory, its future, Politico says, “will also be Italian: that of a decaying, if beautiful, debt-ridden, open-air museum for American and Chinese tourists”.
The economic rot induced by the adoption of Energiewende policies for the “energy transition” in 2010 resulted ultimately in the recession of the German economy in the last two years. Among the manifestations of this rot are the growth of corporate bankruptcies in double digits, soaring layoffs as the Federal Employment Agency said that the unemployment figure could exceed the three million mark for the first time in 10 years at the beginning of 2025, and the crown jewel of German industry, its automative sector, announcing massive job cuts.
According to a recent poll, 40% of industrial companies are currently considering reducing their production in Germany or relocating it abroad due to the energy situation; among industrial companies with more than 500 employees, more than half are now considering this. High labour costs, caused by the myriad regulations of a hyperactive administrative state, and among the world’s highest energy prices brought about by its Energiewende folly, have led to the nation’s de-industrialisation.
Germany’s governing coalition collapsed after Chancellor Olaf Scholz fired Finance Minister Christian Lindner, plunging Europe’s largest economy into political chaos. This occurred barely hours after Donald Trump’s U.S. election victory triggered existential questions about the future of the Continent’s economy and its energy security. Mr. Trump – a climate sceptic who has promised to bring the U.S. out of the UN’s Paris Agreement and its financial commitments for large scale transfers of funds to developing countries – will pull the rug out from under the EU’s famed if quixotic climate leadership.
Europe’s economic implosion is self-induced. Its ruling elites over-tax and over-regulate the private sector and obsess with promoting unreliable renewable energy to replace fossil and nuclear fuels in its crusade to ‘save the planet’ from an alleged impending climate apocalypse. Its attempt to blame Russia’s President Putin for high energy prices is hollow and self-serving.
Perhaps most revealing of Europe’s regulatory hubris is the Qatari Energy Minister’s recent statement that “I am not bluffing”. He warned that Qatar, one of the world’s largest natural gas suppliers, would cease gas exports to the EU if the bloc’s countries imposed penalties under recently adopted legislation on “sustainability due diligence”. For Europe to tell the world that it would punish foreign countries that did not buy into their “sustainability” beliefs might seem to most non-European observers as the height of arrogance. But such is the delusionary might of the Gaia cult.
The EU’s “Corporate Sustainability Due Diligence Directive”, which entered into force in July, allows for fines of up to 5% of a company’s annual global revenue “if the management fails to address adverse human rights or environmental impacts”. Bumptious Brussels bureaucrats seem to believe that their ideas of “sustainability” command universal acceptance. This, in a world where China, India, Indonesia, Vietnam and other populous developing countries, accounting for most of the world’s population, are busy expanding their capacity to mine coal and other fossil fuels so as to afford their citizens access to affordable and reliable energy.
Back to barbarism
“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.”
So said Adam Smith, the great sage of political economy, over 250 years ago. Germany has shown that the converse may also be true. To go from opulence to poverty and potential barbarism is but a short road, assured by the burden of high taxes in service of an alleged climate crisis, and an intolerable administration of “climate justice” that demands suffocating regulations on the private sector.
Why Germany’s wind fiasco is a stark warning for Ed Miliband
An explosion of renewable capacity is creating chronic bottlenecks and rocketing bills
A massive floating crane works round the clock in the North Sea, ramming foundations into the seabed for what will soon become Germany’s biggest wind farm.
The He Dreiht development – which translates literally to “he turns” – sits more than 50 miles off the coast and is being rigged in a hurry after Russia’s invasion of Ukraine sparked fears about energy security.
Yet there is a significant and growing problem: much of the power generated by wind farms like He Dreiht is being thrown away because of Germany’s basket-case electricity grid.
This might sound eerily familiar to politicians over in Britain, where Ed Miliband, the Energy Secretary, is pressing ahead with his own plans for a clean power system by 2030.
Just like Germany, most of the UK’s wind power is generated in the North while demand tends to be concentrated in the South. And as is the case there, chronic bottlenecks in the system are stopping electricity from getting to where it needs to be – pushing up bills for all consumers.
Over the past decade, the cost of German network congestion, which is paid for through energy bills, has skyrocketed from a few hundred million euros per year to billions of euros.
The problems are a taste of the dysfunction that could lie ahead for Mr Miliband if he cannot sort out Britain’s own grid, experts warn.
Already, wind farms in Scotland are regularly handed millions of pounds to switch off when there is nowhere to send their power.
“The UK’s clean power target is very aggressive, and my worry is that if we don’t get things right, because of these very short timescales, we risk running into the same issues that countries like Germany have experienced,” says Jan Rosenow, an energy markets expert at the Regulatory Assistance Project (Rap).
“We’re actually in a situation that is not that dissimilar. And so if we cannot build up the grid quickly enough, we will run into similar constraints.”
Germany was an early adopter of wind power, with community cooperative schemes helping to boost public support for a plethora of small projects across northern regions such as North Rhine-Westphalia.
However, the past 10 years has seen a further explosion of capacity growth amid a push to reduce carbon emissions and a more recent realisation that the country had become far too dependent on Russia for its energy needs. That has seen total capacity leap from around 38.6 gigawatts (GW) in 2014 to just shy of 70 GW today.
The spread of wind farms has not been equal across the country, however. Most onshore developments are in the north and around three-quarters of offshore capacity is located in the North Sea, with the rest in the Baltic Sea.
Germany’s automotive and manufacturing industries, meanwhile, are concentrated in the powerhouse regions of Baden-Württemberg and Bavaria – meaning the biggest centres of power demand are at the opposite side of the country to the biggest generators.
At busy times, this leads to crippling bottlenecks, mostly on the high-voltage transmission “super highways” running north to south, when the notional volumes of power being traded collide with physical reality.
For example, a company that owns a wind farm in the North Sea might have an agreement to sell power to a company in the south. But if the power transmission lines are too congested, the grid operator still has to make good the transaction while keeping the system balanced.
This usually involves paying the wind farm to turn down its output and firing up a different power source somewhere in the south, for instance, a coal or gas-fired plant.
Amprion, Germany’s largest grid operator, which boasts a transmission network running from Lower Saxony to the Alps, estimates that managing congestion cost almost €3.5bn (£2.9bn) across the country in 2023.
That was down from around €4.2bn in 2022, when concerns about European gas supplies sent power prices soaring. The previous bills for 2021 and 2020 were €2.3bn and €1.4bn respectively.
Yet the amount of power being “redispatched” because of bottlenecks has continued to rise in terms of volume, from around 30 terawatt hours (TWh) in 2022 to around 34 TWh in 2023, according to Amprion.
Overall, the amount of renewable energy going to waste in Germany has more than doubled to 4pc in the past 10 years.
These shortfalls in transmission capacity have been blamed on a lack of coordination, with the national network divided between four different operators, as well as local opposition to pylons and delays in securing planning permits, says Andreas Jahn, a power markets expert at Rap.
Grid capacity is being further constrained by “feed-in” rooftop solar panels that incur no penalty for producing even when the network is already rammed, he says.
“Now we have these skyrocketing redispatch costs, because we don’t have the copper wires in place,” Jahn adds.
‘Postcode lottery’ energy prices
But the issues are becoming a growing thorn in the side of German politicians, who face complaints about high network charges and warnings from neighbours, including Sweden, that they will not agree to more cross-border interconnectors without reform.
This is because the national pricing system used in Germany, coupled with the north-south blockages, lead to quirks such as power being sucked out of Sweden and funnelled into northern regions, where it isn’t actually needed, pushing up prices for Swedes in the process.
One potential solution being looked at, which supporters say would force generators and grid operators to become more efficient, is a switch to regional pricing, where Germany’s southern regions would pay more than the north when demand is highest. This would theoretically provide stronger incentives for generators to locate closer to southern demand centres.
But that is proving politically unpopular in some quarters, says Jahn.
In the UK, the idea has run into similar opposition as critics claim it will lead to a “postcode lottery” for households and businesses. Building more wind and solar farms in the countryside surrounding major cities is also controversial, with German parties including the hard-Right AfD campaigning against such developments.
However, Greg Jackson, chief executive of Octopus Energy, is among those who argue it is the best solution and will ultimately lead to cheaper bills for consumers, including free electricity for those who live near wind turbines when supplies are abundant.
“Like the UK, Germany is taking a brute force approach to its grid – costing a fortune and slowing down investment in electricity-intensive industries,” he says.
“They need locational pricing to enable better balancing of supply and demand, drive down costs and incentivise investment in the most efficient locations.”
For now, it is unclear which way Germany will go on that particular issue, but in the meantime the country is ploughing billions of euros into grid upgrades.
Britain is doing much the same, with ministers putting off any decision on market reform until at least summer 2025.
What is clear, however, is that the status quo cannot hold for long. Without change, wind farms like He Dreiht risk becoming inert monuments that will end up costing consumers untold billions, unable to do the job they were designed for.
The Telegraph: continue reading
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