Poverty an issue for social policy, not energy policy
Yesterday, the New York Times published an astonishingly misleading article, depicting Germany as a country in which poor people are suffering from the high cost of renewables. Here's what you need to know.
If you have not yet read the article at the New York Times, at least have a look at the opening photo there before you continue reading here. It depicts a German man trying to make do with a single lightbulb in his kitchen. The text explains that he cannot pay his power bill, so he is trying to prevent his power provider from switching off his electricity.
What is the impact of the cost of renewables on his power bill? Below I provide figures both for single-person households and four-person households in Germany.
|Household||Power consumption / year||Monthly bill||Of which, RE|
|1 person||1,800 kWh||€40.5||€7.95|
|2 people||2,700 kWh||€60.75||€11.70|
|3 people||3,400 kWh||€76.5||€15.02|
|4 people||4,000 kWh||€90||€17.67|
|5 people||4,600 kWh||€103.5||€20.32|
As you can see, the average monthly power bill for a single-person household in Germany comes in at €40.50, equivalent to around $55 at current exchange rates. Of that, around eight euros is attributable to green power alone – roughly the cost of one and a half of those packs of cigarettes on the German man's kitchen table. For a family of four, the figure rises to €90, equivalent to around $120, with roughly €18 then devoted to renewable electricity.
How much welfare do such households receive in Germany? It's not possible to say in general because the calculation depends partly on how much rent you pay – and on your heating costs. But there are calculators online to provide estimates. I used the one at the highly respected German daily newspaper Süddeutsche Zeitung. From the screenshot below, you can see that question 9 specifically asks what your "utilities (without heat)" are, while question 10 asks "how much do you pay for heat each month," and question 11 reads "do the heating costs also contain expenses for hot water?"
The German welfare system does not ask any such questions about electricity, which is one thing that welfare organizations and consumer advocacy groups – all of which wholeheartedly support the energy transition – want to change.
The online calculator indicated that a single-person household in Germany would only get €382 a month to live off of, but the €400 I estimated for rent would be covered in addition entirely along with all of the €100 in heating costs and the €100 in other utilities. Note that, in German, "Nebenkosten” (which I am translating here as "utilities") never includes the power bill. Per month, that is nearly €1,000 in welfare in this generalized case, equivalent to around $1,300 a month.
For a family of four, the online calculator estimates that I would stand to get €1,268 a month, and I increased the rent to 600 a month without changing the €200 in "Nebenkosten." The outcome was just over €2,000 a month.
Personally, I would find €1,000 a month to be a fairly tight budget as a single, and as a father of two children I can assure you that we spend more than €2,000 a month. Both of these levels of income just barely allow you to get by in Germany, but it is also worth considering a comparison with the United States. After all, €2,000 a month is €24,000 a year, equivalent to around $32,500 a year at current exchange rates.
The German welfare system would thus put a family of four nearly 50 percent above the poverty level in the United States, which was just over $23,000 a year in 2011 (PDF). For a single person living alone, the poverty level in the US was around $11,500, which is also a full 10 percent below the approximately $13,000 a year that that person would receive in Germany according to the online calculator above.
Here's something the New York Times did not tell you: that German guy, who gets his power from the German subsidiary of Swedish firm Vattenfall, can switch power providers at the end of the month to get a cheaper offer. I went over to German electricity consumer portal Verivox to compare Vattenfall’s basic product in Berlin to the competition. The portal found 40 providers who would have been cheaper over the year, eleven of them by at least €12 euros a month.
So why are so many German households having their power cut off? How much is a lot? According to the latest figures (PDF), 312,059 households in Germany had their power cut off in 2011, equivalent to around 0.7 percent of the country's roughly 40 million households. Unfortunately, there are almost no similar figures from the US. One occasionally stumbles across a trickle of examples, such as this report about Seattle from Wednesday, which says that Seattle City Light "cut power to about 7,000 households for nonpayment” in 2012, equivalent to around 1.7 percent of the utility's roughly 400,000 metered customers. The reconnection fee in Seattle is $164, compared to the average of €32 (around $42) in Germany.
If things are not that bad, why are so many Germans up in arms about the cost of the energy transition? Germans are not up in arms about the cost of the energy transition. In fact, in the recent TV debate between German Chancellor Angela Merkel and her Social Democrat opponent, the issue "was hardly mentioned," as an astonished (and otherwise also completely misinformed) journalist at the British Telegraph recently stated. The Germans realize that €10-20 a month is not much compared to the absolutely wild estimates of German liability in the current euro crisis, which one paper has put at up to €1 trillion (others say it is closer to 70 billion, which is still nearly €1,000 per person).
Germans have bigger problems than the cost of renewable electricity anyway. One major thing on the agenda is the cost of childcare. German news weekly Die Zeit published the results of a survey this week and says it was overwhelmed by reader participation – an obvious sign of how important this issue is. It turns out that households spend an average of €277-329 a month on kindergartens and day care centers. The cost of electricity pales in comparison, not to mention the extra cost of green power.
Healthcare costs are another major concern in Germany. German health insurers posted 1.2 billion euros in excess revenue last year, bringing their total stockpile of liquid reserves up to €29 billion at the end of June – equivalent to around €750 per household. Nonetheless, insurers continue to raise monthly insurance bills (mine have risen from just over €300 in 2009 to €420 a month now).
If Germans have so many other things to worry about, why are the media so focused on the cost of the energy transition? The media in Germany are not; we have very good reports over here on television and in the press, with the big exception being, unfortunately, Der Spiegel, which also happens to be one of the only German news organizations that publishes regularly in English.
Keep in mind that media from the US reporting on this issue do not necessarily know the country well, and because they do not understand that the energy transition is also a democratic grassroots movement to push back energy corporations, they do not know how silly it is to ask corporations what they think about the transition. I get one or two calls a week from journalists in the English-speaking world asking me to answer some questions. Yesterday, it was a journalist from a major international newspaper in English. She asked me what Germany looked like – can you see solar roofs and windmills everywhere you go? It turned out she has never been to the country, and she was reporting on the matter from London.
Is that why large energy corporations complain so much – they are becoming irrelevant during the energy transition? Yes. Cherish the irony – the very corporations, like Sweden's Vattenfall, who are cutting off poor people's power are the ones complaining about the impact of the cost of renewables on the poor. They complain not because of genuine concern, but because they would prefer to have the government reliably pay these power bills; otherwise, they have to spend time and money trying to collect outstanding receivables. To the extent they are publicly traded stock corporations, they are prohibited by law from cutting the poor too much slack; their stated business purpose is to provide shareholder value, and if they start being too lenient on people who don't pay, shareholders can sue them.
But isn't large industry complaining? Yes, that is their job. Companies everywhere complain incessantly about government policies. The private sector constantly puts pressure on politicians to make countries more "business-friendly." In reality, power prices for German industry are increasingly competitive. And most of the countries complaining are not only almost entirely exempt from the renewables surcharge (2,276 in total, not the 700 claimed by the New York Times), but also from grid fees. Don't worry about German industry; Germany has a major trade surplus (even larger than the US trade deficit), and firms are not leaving the country.
Conclusion: As an American, I always have a culture shock when I arrive back home and see the squalor in which so many of my fellow Americans live. So I'd like to close with a slideshow of what Poverty USA looks like. Compare these photos (the first one is from New Orleans, where I was born) to the one of the poor German in the New York Times article and decide for yourself where our attention is most directly needed. (Craig Morris)