Higher Electricity Costs Raise Alarm Across Europe

British government predictions of sharply increased electricity prices in the next decades are getting renewed attention these days, as the country's opposition leader Ed MIlliband promised to freeze rates if elected prime minister. A March report from the Department of Energy and Climate Change found that with current policies subsidizing green power, electricity costs will rise 33 percent by 2020 and 41 percent by 2030.

In Germany, according to reports issued this month by IHS Inc. in Denver, Colo., green energy developers received $19 billion in subsidies last year, six times the comparable figure for the UK. Germany has pushed low-carbon and renewable energy technology harder than any other European country, with impressive results: Last year it produced 22 percent of its energy from "green" sources, five times as much as twenty years before. But the costs of those green advances have proven to be unsustainably high, from a political point of view.

In Germany's feed-in tariff system, developers of green technologies are guaranteed specific rates of return well into the future, with the costs of those subsidies distributed among all ratepayers, nationwide. Those subsidies are putting a heavy burden on the country's less well-off ratepayers and threatening economic growth, at least as industry sees it. Figuring out how to redistribute those burdens without sacrificing the green policies themselves is a major element in negotiations to form a new government in Germany, which are expected to be protracted.

On Oct. 10, the chief executives of ten energy companies accounting for half of Europe's electricity production called for an end to subsidies for wind and solar power. They also called on Europe to develop a system to reward companies that maintain standby reserves, to compensate for power shortfalls when the wind doesn't blow or the sun doesn't shine. Industry leaders complain that the growing shares of wind and solar have undercut their revenues from baseload coal and nuclear while requiring them to maintain surplus capacity.

The companies are not going to see an end to green subsidies, but some kind of reform is plainly needed. Across Europe, the cost of electricity to homeowners has increased 17 percent in the last four years, and to industry, 21 percent. How to minimize those costs without giving up the objectives of reducing dependence on fossil fuels and cutting greenhouse gas emissions? it's rather like squaring the circle.

In England, the government's "contracts with difference"s program, which is roughly similar to Germany's feed-in tariff system, is not expected to take a hit. Instead, ironically, opposition critics are taking aim at programs encouraging better energy efficiency, according to the Financial Times.

 

 

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