Green Gamble

German Businesses Not So Energetic About Clean Power Costs

renewable energy ap
A wind turbine stands next to conventional electricity. A DIHK survey showed German business supports sustainable energy, but thinks heavy use of it at home makes it less competitive.
  • Why it matters

    Why it matters

    Although the German government’s transition to clean energy is under way, the massive project is turning out to be much more costly and difficult than expected.

  • Facts

    Facts

    • Electricity rates continue to increase with industrial firms now paying about 2 percent more for energy than in 2013 and more than most of their European rivals.
    • More than one in three industrial enterprises in Baden-Württemberg and Bavaria experienced an electrical power outage in the last year.
    • Almost a quarter of the industrial companies surveyed are considering either limiting domestic production or shifting some of it abroad.
  • Audio

    Audio

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Germany is an experimental laboratory for the creation of an energy system free of nuclear power and low in carbon-dioxide emissions.

It’s a development that is good for the climate, but challenging to the national economy, as a growing number of companies report the transition to cleaner power is having a negative effect on their bottom line.

Companies see more risks than opportunities in the move toward greener energy, according to the Energy-Transition Barometer 2014, a report presented Thursday by the Association of German Chambers of Commerce and Industry or DIHK. Around 2,200 German firms participated in the survey.

“The energy transition is and remains a risk, especially for German industry,” said Eric Schweitzer, DIHK president.

Electricity costs have risen once again with an industrial firm now paying about 2 percent more than in 2013, driven almost exclusively by taxes and fees, Mr. Schweitzer said, while at the same time “many operational measures in the areas of procurement, efficiency and self-generation have been pushed to the maximum.”

As a consequence, more than a third of the companies polled reported negative effects on their competitiveness, though admittedly, not all of these costs can be blamed on the energy transition efforts. Still, energy costs have not risen as sharply in other countries and, in the case of the United States, prices are declining thanks to a boom in shale gas extraction.

“The price structure in international competition continues to be disadvantageous for German industry,” said the Cologne Institute for Economic Research. Within Europe, only industries in Malta, Cyprus or Italy pay more for electricity, while in Germany, energy-intensive consumers pay 15 percent more than the European average.

“Germany is under pressure as a location where industry is thriving,” said Mr. Schweitzer. For that reason, almost a quarter of the industrial companies surveyed are considering either limiting domestic production or shifting some of it abroad. He said that 4 percent of firms have already taken such measures, double the 2012 figure.

“The energy transition is and remains a risk, especially for industry.”

Eric Schweitzer, DIHK president

There are also worries about the secure provision of energy. More than one in three industrial enterprises in the rich southern German states of Baden-Württemberg and Bavaria experienced an electrical power outage over the past 12 months, according to the DIHK survey.

In Germany, overall, one fifth of companies reported problems with their energy supplies. In particular, there has been a marked increase in service interruptions lasting less than three minutes, which are not included in the official figures.

“Official statistics lull us into a false sense of security,” said Mr. Schweitzer. Many firms are undertaking measures to protect themselves against blackouts, he said, by installing emergency backup generators. Investments in onsite energy generation can relieve some of that pressure, but at the cost of financial investments in other areas.

“We must move forward more quickly in upgrading the national grid,” the DIHK said. “We cannot afford to engage in discussions about whether this makes sense. The demand for more secure energy will only rise in coming years as more nuclear power plants are deactivated.

Companies are disillusioned. Until now, there were hopes that energy transition would create new commercial opportunities for many businesses, but the sum total “remains sobering,” the DIHK said.

The majority of German companies do not see energy transition providing any new business opportunities in the coming years. One exception is the construction industry, which expects a rise in orders as more companies invest in energy efficiency by improving and renovating buildings and apartments.

Yet the companies are not rejecting the energy transition, the DIHK said. For a growing number of firms, it is important not only that electricity is dependable and available at reasonable rates, but that it comes from renewable sources.

“Many are deeply concerned about climate protection,” said Achim Dercks, the deputy chief executive officer of DIHK.

Almost one in five companies buys green energy, but that decision is dependent on the individual business sector. The readiness to pay extra is highest in the service sector and lowest in industry, which is not surprising, considering that energy requirements are highest there.

This article was translated by George Frederick Takis. Jeff Borden also contributed to this article. To reach the author: kersting@handelsblatt.com

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