Unreliable German Solar and Wind Forcing New Coal Boom
Not surprisingly, a wind farm operator is at the center of Germany's latest major financial swindle.
With 1,300 employees, Prokon is a relatively small company. Yet its advertisements were well-known to Germans. They always had three parts: pictures of a wind farm; a vague message that “something” had to be “changed”; and a request to make a loan to Prokon. In return, one was promised nothing less than “a future worth living,” and 8 percent interest per annum.
One of these propositions must have been alluring to many Germans, for the company successfully gathered about 1.3 billion euros (2 billion dollars) in borrowed capital. That's small money compared to Enron, Lehman Brothers, or Greece, but in the case of Prokon, no banks or equity funds were involved. All of the capital came from retail investors, some of whom gave a big chunk of their lifetime savings, according to media reports.
Now, we know that the whole operation was a Ponzi scheme. The interest was paid with the money from newcomers. Journalists are adding insult to injury, asking how Prokon´s creditors could have been so naïve with such an “extraordinarily high” interest rate being promised. Some coverage has mentioned that many of the investors were allegedly “elderly people.”
According to this media, one has to be well beyond the peak of cerebral activity to believe that a windfarm could generate enough profit to pay an 8 percent interest. Very well, then. But if so, how can it possibly be wise that windmills are supposed to become the backbone of the German electricity grid?
Is Germany a gigantic Prokon?
In his “climate change speech” at Georgetown University in June 2013, President Obama said:
Countries like China and Germany are going all in the race for clean energy. I want America to win that race, but we can't win it if we're not in it.
If it were up to the majority of the German people, however, they would rather opt out and let someone else win. According to surveys, only 18 percent approve of the current energy policy. Sixty percent of Germans reject the push for so-called “green” energy if it leads to higher prices, and the same amount think it inevitably does.
They are correct: the electricity price in Germany has doubled between 2000 and 2013. It is now about three times pricier than electricity in the U.S. because staggering amounts of money were channeled into solar and windmill companies. Last year alone, German households paid 20 billion euros (27 billion USD) for a “renewable energies surcharge,” which amounts to 240 euros (325 USD) for every citizen. More than 100 billion euros have been sunk into solar energy, which is the least efficient source and contributes only four percent to German electricity production. Germany has as many solar panels as the rest of the world combined -- in a country where the sky is usually overcast.
Outside of the urban areas, there are windmills everywhere. Residents complain about the destruction of the landscape, the health hazards of infrasound, and plummeting real estate prices.
Electricity prices rise further with every windmill and solar panel installation because of how the “renewable energies surcharge” is calculated. The law is based on the idea that the owner of a windmill or a solar panel deserves a fixed return on his investment. Owners are guaranteed a long-term feed-in tariff -- which is way above the market price. The consequence has been a massive overbuilding of “renewables” at the expense of consumers (industrial companies with high electricity consumption are exempted from the surcharge). This has triggered a debate about families with low incomes who have to spend an ever-growing segment of their budget on electricity.
Common sense suggests that nobody should pay for unsolicited goods. Unfortunately, common sense has no jurisdiction here. Instead, statist remedies are being discussed to cure an illness caused by statism.
Last year, Peter Altmaier – then the German minister for the environment -- proposed that the state provide the poor with new refrigerators. Next, he said the unemployed could be trained to become advisors on energy saving. Like members of a Soviet Komsomol brigade, they would go door-to-door telling people to put a lid on the pot when cooking. Nobody embraced Altmaier´s ideas, but nobody offered a different proposition. So the question was dropped altogether.
It has become clear that “renewable” energies cause problems for the grid. There are no viable means for storing the electricity; it has to be consumed as it is produced. Production and consumption have to match. The larger the percentage of production coming from fickle solar and wind energy, the more difficult the job of the grid operator is. When Germany doesn't produce enough electricity, it needs to import it from its neighbors, like it did in 2011 and 2012, when Merkel's decision to immediately shut down eight nuclear power plants (out of fear that a tsunami like in Japan could strike them) would have caused a blackout. Austria and France stepped in to fill the gap. Sure enough, nobody ever thanked Germany’s friends. Instead, German environmentalists bragged about Germany's record electricity exports.
They miss an important distinction. There are two kinds of goods: those which are desired and valuable, and those which are unnecessary and worthless. Germany imports electricity when it really needs it: During calm nights there isn't much wind energy, and no solar energy at all. Then, there are sunny and windy afternoons in the summer when Germany floods the European market with electricity, and the wholesale prices at the exchange drop to zero (or even turn negative). This supply is not caused by demand. The electricity is produced regardless of whether anybody needs it. It's not a boon, it's a problem, for the glut can overload the European grid and cause blackouts in Germany as well as in other European countries to which the superfluous electricity is dumped.
The Czech Republic and Poland have already complained. Pavel Solc, Czech deputy minister of industry and trade, said:
Germany is aware of the problem, but there is not enough political will to solve the problem because it’s very costly. So we’re forced to make one-sided defensive steps to prevent accidents and destruction.
Besides the risk of a total blackout, there are growing concerns about the stability of frequency and voltage. The following report was published in Der Spiegel:
It was 3 a.m. on a Wednesday when the machines suddenly ground to a halt at Hydro Aluminium in Hamburg. The rolling mill's highly sensitive monitor stopped production so abruptly that the aluminum belts snagged. They hit the machines and destroyed a piece of the mill. The reason: The voltage off the electricity grid weakened for just a millisecond. Workers had to free half-finished aluminum rolls from the machines, and several hours passed before they could be restarted. The damage to the machines cost some €10,000 ($12,300).
There are two reasons why such accidents don't occur more often:
1. Many major companies have already detached themselves from the grid and produce the needed electricity themselves. About nine percent of the electricity consumed in Germany is produced onsite, usually from natural gas. Even private households have been installing micro power plants in their basements.
2. German electricity providers have built new coal-fired plants.
If you thought that Germany was on the verge of becoming a de-industrialized country, here's the truth: Windmills and solar plants serve just two purposes in Germany now. They enrich green cronies, and impress clueless people abroad.
In September 2005, two days after hurricane Katrina had hit New Orleans, Germany's environment minister, Jürgen Trittin (Green Party), blamed the disaster on America's rejection of the Kyoto accord on carbon dioxide emissions. "America's president," Trittin wrote in the newspaper Frankfurter Rundschau, "shuts his eyes to the economic and human damage that natural catastrophes like Katrina inflict on his country and the world's economy."
Carbon emissions in the U.S. are now at the lowest level since 1994, and the EPA is taking action to effectively ban new coal plants in the United States.
Germany, on the other hand, is becoming more and more dependent on coal.
This month, it was revealed that German coal electricity production is the highest since 1990. And the coal burned in German power plants is not like Appalachia's high-grade bituminous coal with its high-energy content and low sulphur. Most of it is brown coal (lignite), low-density, like that which is used for barbecues.
This rise in coal electricity is not, as some newspapers have written, happening “despite the country’s campaign to shift to green sources of energy." It is happening because of the shift.
The windmills and solar panels are a Potemkin village, an extremely expensive one. Since cheap natural gas is not available, Germany needs more and more coal plants to reliably produce electricity, especially since the remaining nine nuclear plants will be shut down between 2020 and 2022.
An unresolved question: where the capital for the new plants shall come from.
Germany's energy companies are deep in the red. The government has imposed high taxes on them, shut down most of their nuclear power plants, and even made sure that many of the coal plants -- critical for the country´s power supply -- can't be run profitably, since a law grants wind and solar energy priority grid access. For technical reasons, coal plants have to run 24/7. During much of that time, however, the grid is blocked, and the wholesale electricity price at the exchange is at rock-bottom.
The producers of coal and nuclear power provide a valuable good at a loss, whereas the producers of wind and solar provide a good which has little to no value at a high price arbitrarily set by the government.
How long can this continue?
A new government scheme called “demand management” will be introduced during the next four years. The plan is to install so-called “smart meters” in every house, expensive devices which tell you at what time of the day you consume the most electricity. Of course, this is a worthless piece of information unless further measures are taken to balance supply and demand.
Shortages and uncertainty come in the wake of government interventionism. As we have just seen, the result is often the opposite of what had been intended, which triggers even more state-intervention. In Germany, there are already calls for the government to “stop the shocking coal boom.” Maybe the European Commission will outlaw coal, just as it has done with … powerful vacuum cleaners, which will soon be illegal.
This is the green road to serfdom.