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German energy debate in week of elections

The whole story: a luxury item in contemporary journalism

This week, we focus on the energy debate for the upcoming elections in Germany on Sunday. A recent report by Germany's Der Spiegel has gone too viral to ignore. The main problem is not that the weekly gets a lot of its individual facts wrong, but that the overall picture is unrecognizable – it reads more like a shopping list than an analysis.

I was hoping to be able to ignore the recent Spiegel article entitled "How electricity became a luxury good" after this brief mention recently, but the article is has gone viral. In my short rebuttal, I merely point out the article's most absurd point: the average German power bill could soon rise to €90 a month. But while Spiegel speaks of a return to the "Stone Age" for those who cannot afford to pay, it fails to mention that Americans already pay that much.

In that one example, we see how the article works – individual facts may be correct, but context is left out. Yet, list of ingredients does not a recipe make. So let’s do some down-home cooking.

Shopping list

The article is guilty of exactly what it accuses German politicians of: "[German Economics Minister] Rösler and then Environment Minister Norbert Röttgen shifted blame instead of coming up with a solution." Disparate problems are listed as though they were related, and almost no solutions are mentioned though several have been proposed for practically everything. What's more, the big challenge in getting down the cost of renewable electricity is not even mentioned.

Let's start with these two passages, which are especially unfortunate for international audiences:

After the Fukushima nuclear accident in Japan two and a half years ago, Merkel quickly decided to begin phasing out nuclear power and lead the country into the age of wind and solar.

In fact, the age of wind began in 1991 with the Feed-in Act, followed by the Renewable Energy Act of 2000; solar, however, did not really get started until that Act was amended in 2004. Likewise, the nuclear phaseout began in 2002 under Chancellor Schroeder. Chancellor Merkel simply reversed that policy in 2010 and then did an about-face in the wake of the disaster at Fukushima.

Later, the Spiegel article sticks to this misrepresentation:

… the amount of electricity from renewable energy rose by 10.2 percent in 2012, the first year of the new energy policy…

In fact, though there were a lot of changes to energy policy in 2011/2012, there was more continuity than change for renewables; the main changes concerned nuclear.

As mentioned above, the Spiegel article seems concerned about the impact of renewables on the poor:

Today, more than 300,000 households a year are seeing their power shut off because of unpaid bills. Caritas and other charity groups call it "energy poverty."

Indeed, it is the job of Caritas (the German word for "charity") to protect the poor. But the Spiegel article makes it sound like Caritas opposes the Energiewende, when in fact they "have long preferred renewable energy" for the "ecological and economical" benefits, as the organization's own website puts it (in German). The organization is not calling for an end to the energy transition, but rather for welfare payments to include an allowance for electricity – like the one for heat (again, see the organization's website in German). The way to mitigate the impact on the poor is to change social policy, not energy policy. And that's exactly what Caritas is proposing.

So is 300,000 households having their power cut off a lot in an international comparison? I don't know, because I have not seen any statistics from other countries on this despite my research over the past year (please use the comment section below if you have data). We do know that an additional 300,000 households in the UK were reportedly living in "energy poverty" (not just electricity) in 2012. Other figures from the US and Australia, though not nationwide, suggest much higher rates of power disconnections as a result of unpaid bills.

Then there is the strawman of bottom-to-top redistribution:

… renewable energy subsidies redistribute money from the poor to the more affluent, like when someone living in small rental apartment subsidizes a homeowner's roof-mounted solar panels through his electricity bill.

In reality, you don't need to own your own roof, and Germany is switching to renewables with community ownership.

Then, there is this misquote about cost:

Former Environment Minister Jürgen Tritten (sic) of the Green Party once claimed that switching Germany to renewable energy wasn't going to cost citizens more than one scoop of ice cream.

In fact, Trittin never said the transition would not cost more than a scoop of ice cream a month; rather, he stated in 2004 that that was what it cost at the time, as even this German climate change denial website (yes, even Germany has one) knows.

Der Spiegel is generally concerned about the rise of coal power in Germany:

A study released last week by the Federal Network Agency shows that energy generated with brown coal will remain virtually stabile, at 148 terawatt-hours, until 2022. It reached the depressing conclusion that brown coal's competitive position will be "hardly diminished by an increasing share of renewable energy in the mix."

A lot of German environmentalists are also concerned. But the problem is not restricted to Germany; coal is booming worldwide. Here, one solution is fairly obvious: make emissions trading stricter so that more gas turbines run than coal plants do. The Spiegel article does not mention that option, and indeed whenever it is proposed all the magazine writes is that "nobody knows if the system will really help the environment – or merely create a burdensome bureaucracy" (go ahead, read the whole article yourself – it's in English).

The following passage is also completely without context:

If there is too much power coming from the grid, wind turbines have to be shut down. Nevertheless, consumers are still paying for the "phantom electricity" the turbines are theoretically generating. Occasionally, Germany has to pay fees to dump already subsidized green energy, creating what experts refer to as "negative electricity prices."

I have not been able to find any figures for 2012 (which I take to indicate that the problem has not gotten worse), but in 2011 0.86% of wind power was curtailed (the "phantom electricity" described above; see page 59 of this cumbersome PDF if you speak German). Here, the most logical option is local power storage where a wind farm is connected to the grid – and at grid nodes. Again, Spiegel does not mention this option. Instead, we read that renewables are making pumped-storage facilities unprofitable:

In 2009, for example, the turbines in Niederwartha were in operation for 2,784 hours. Last year, Vattenfall ran the facility for only 277 hours.

This is indeed a problem, but only a transitional one. As I recently explained, pumped storage is profitable only when there is a large difference between baseload and peak power prices, whereas renewables are currently flattening those curves. But as the share of renewables increases, solar will tend to make peak power less expensive than baseload, and pumped storage will play an increasingly important role as the amount of "excess" green power builds up. The problem is therefore temporary, though serious for now. One solution is a capacity market (and yes, you guessed it, Spiegel doesn't like the idea).

Nowhere does the Spiegel article point out that the flattening of power price curves and lower wholesale prices are making Germany pretty attractive for industry internationally, especially given the country's continuing high levels of grid reliability. Instead, we read:

… energy-hungry plants like the ArcelorMittal steel mill in Hamburg are sometimes asked to shut down production to protect the grid…

Perhaps Spiegel is talking about new incentives for industry to shift loads, as described in a study published by Agora Energiewende. If so, the magazine is complaining about a solution as though it were a problem.

The steel firm itself has openly expressed its concern about "a considerable disadvantage in Germany due to the additional burdens imposed by the German Renewable Energy Act (EEG)." It is worth noting, however, that the firm is exempt from the renewables surcharge for the EEG (see this list). It's a case of preventive complaining.

The only solution mentioned in the Spiegel article is the one recently proposed by the antitrust commission: a switch to US-style portfolio standards, which require utilities to provide a certain share of renewable electricity – though the Swedish model is cleverly referenced so as to avoid the impression of proposing yet another thing from the US. But I will have to come back to that discussion later.

The big problem overlooked

Ironically, though Spiegel hardly leaves a problem out, it overlooks the elephant in the room: solar feed-in tariffs from around 2008 to 2012. In those years, feed-in tariffs were still relatively high, and quite a lot was built. Because these payments are guaranteed for 20 years, they will not disappear until 2028-2032, at which time they will be replaced by something much cheaper.

There is no going back on these payments, though Environmental Minister Altmaier made such a proposal this year. Retroactive cuts would be disastrous for Germany in attracting investors. Germany currently pays some €20 billion a year for renewable power. That figure cannot move very much for the next 15 years.

 - Starting at a baseline in 2000, the cost of heating oil (red line) and natural gas (orange line) have risen significantly, as has the price of electricity (brownish line). In contrast, the cost of onshore wind power has remained stable, whereas PV now only costs around a third as much.
Starting at a baseline in 2000, the cost of heating oil (red line) and natural gas (orange line) have risen significantly, as has the price of electricity (brownish line). In contrast, the cost of onshore wind power has remained stable, whereas PV now only costs around a third as much.
MP Oliver Krischer

Is that too much? The Iraq war alone cost US taxpayers more than $2 trillion (not billion!) according to a recent estimate. For its investments, Germany went from around 6% renewable power in 2000 to just under 23% last year, putting it ahead of the trajectory for its target of at least (!) 80% renewable electricity by 2050, which would require an increase of nearly 1.5 percentage points per annum starting in 2012.

This Spiegel article says German power rates are headed to 40 cents per kilowatt-hour, but who is to say that power costs will not increase to 40 cents if we stick with fossil fuels – the only other option since Germany plans to phase out its nuclear plants by 2022?

Overall, the whole focus in the Spiegel article is wrong; as I have pointed out, a higher surcharge does not need to lead to higher retail rates; Austria's largest utility reduced its retail rates voluntarily by 10% on September 1 as a result of lower wholesale prices – and Germany and Austria are on the same wholesale power market. If German power producers also passed on lower wholesale rates to customers, retail rates could go down in 2014 even as the renewables surcharge increase (because of the flattening of peak power prices and the resulting lower wholesale prices; see above).

There's a lot more nitpicking to be done about the article, but I'll stop here. We all enjoy good cooking, but there's only so much you can eat. The Spiegel article itself ends by making fun of Environmental Minister Altmaier for the following energy-saving tip: "When I cook, I try to keep the lid on the pot." If only Der Spiegel’s aim was not to make its readers blow theirs. (Craig Morris)

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5 Comments on "The whole story: a luxury item in contemporary journalism "

  1. Craig Morris - 20.01.2014, 16:39 Uhr (Report comment)

    Rice, you are talking about particular prices, whereas I am talking about power bills. Energy prices are lower in the states, but you consume (partly because you waste) so much more than Germans do that in the end you spend the same amount per month.

  2. Rice - 20.01.2014, 16:32 Uhr (Report comment)

    hi, greetings from Houston, i've been reading some of your posts this morning and i've seen this passage a few times: "it fails to mention that Americans already pay that much".. and while American states back east (like New Hampshire) and states out west (like Hawaii) offer retail electric service for over $0.10/kWh in most states electric rates are less than that and costs are dropping as utilities switch to cheap natural gas.
    we have a very decentralized power grid in North America so i don't think it's a fair comparison to germany. texas, for example, essentially operates as a "power island" and wholesale electric rates here are below $0.05/kWh. again, cheap natural gas has driven the forward power curve lower. but wind energy provides almost 10% of our electric production in texas. the federal production tax credit expired at the end of 2013, so now wind must compete directly with other wholesale resources, and in fact it is!
    if onshore wind can compete with $4/MMBtu natural gas in a deregulated wholesale power market, i don't buy the argument that onshore wind needs feed-in tariffs, tax credits, preferential grid treatment, or subsidies in any form. yes i understand the difficulty in siting, permitting, engineering, financing, and building wind farms and transmission infrastructure in densely populated northern europe. in the US we call it "NIMBYism" and it will hold up many projects here, like Cape Wind for example. so if germany needs to build wind resources offshore to avoid legal problems, then yes i understand the argument. otherwise i don't buy it.. what am i missing? solar is a different topic.

  3. heinbloed - 27.09.2013, 11:49 Uhr (Report comment)

    Dutch drivers refuelling in Germany, smoking-out the exchequer in Den Haag:
    Petrol, diesel, cigarettes, arms and nuclear fuel rods are all cheaper in Germany
    Whilest most energy imported to Germany is fossile-based (black coal,gas and oil)
    and comes via Rotterdam in the Netherlands to Germany the German pumps sell it back to the Dutch consumers. The poor Germans would starve if they had to pay Dutch-like energy taxes ..... :)

  4. Todd Millions - 17.09.2013, 23:12 Uhr (Report comment)

    Mr. MorrisYou mentioned a whilre back how difficult it is too keep abreast of renewable develpoments,and the time required for digestion and presentation.I appreciate your exellent efforts in this.Tireing as it is to deal with flacks and provocetures-there is no choice.Worse than the"Excess of zeal",is the appearence of it-The pyhcopath's rachet.

  5. Greg - 16.09.2013, 22:46 Uhr (Report comment)

    Coal and gas spot price change ~300% from 2000-2009. Base electricity price increase, before tax, ~5c. Presumably due to fuel prices, and poor market competition. 2009 - 2013 EEG increases from ~1c to ~5c. Why so much noise about the EEG, and nothing about the 5c/kwh fossil tax? Smells political to me.
    See chart: http://commons.wikimedia.org/wiki/File:Strompreis_PrivatHH_2012.PNG

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