European energy policy ruins competitiveness without any significant climate benefits

Both the EU and Germany has lost competitiveness to the US and China partly due to the energy policy, as shown in Figure 1

.Germany shows well what has taken place. While the expansion of renewable energy capacity has been large, as shown in Figure 2, the actual production of power stagnates. The result of high investments in capacity without noticeable increase in production of energy is found in some of the highest electricity prices in the world. Worse, they are rising even though we ignore the war in Ukraine and 2022 at large.

Households and regular industrial customers have faced a tripling of the electricity prices, see Figures 3 and 4. The large industry has faced a doubling, see Figure 5. Power intensive industry are not included since they have their own agreements on corporate level, but BASF is leaving Europe due to the need for predictable energy at competitive prices. 16% of German industry is planning to move and another 30% are making similar assessments including those that make wind turbines!

The figures, however, do not show the increased volatility and Dunkelflaute that drive prices upwards. The reasons are that 1) dispatchable energy sources must be paid to stay ready in case the weather becomes unfavorable with the result that the cost per kWh rises, 2) low prices below the cost level of the renewable industry due to overproduction trigger subsidies, and 3) the volatility of the renewable energy brought into the market, as exemplified by Figure 6, gives a financial risk that has a cost.

The German Dunkelflauten in December 2022 lasted for about 16 days, see Figure 6. With an hourly shortfall of about 30 GW between demand and supply from the renewable energy sources in Germany, the total shortfall for the period was about 12 TWh. If the largest grid battery in the world of 3000 MWh (Moss Landing Energy Storage Facility in California) was to handle this Dunkelflaute, roughly 3800 such facilities would be required. Assuming that the global Lithium-ion battery converges towards 100 USD/kWh the costs would be 1200 bn USD to handle the Dunkelflaute in Figure 6, and with a stipulated life-span of 10 years, the annual cost would be about 120 bn dollar plus the cost of electricity for recharging. This is the same as 4 Barakah nuclear power plant of 5600 MW and 45 TWh in annual production every year (16 APR1400 and 180 TWh/year) ! Hydrogen is equally futile.

Then, we must not forget that the whole point with this energy policy is to cut emissions, but as we see from Figure 7 the results are meagre. Emissions have also increased the last years as gas power has been replaced by coal power to reduce the dependency of gas important to secure the energy supply. In fact, the German Bundesnetzagentur vetoed the closure of a coal power plant to maintain system stability.

The costs have been huge. Just the subsidies and taxes on top of the subsidies in the period of 2002 – 2022 are alone 490 bn euro nominally, as shown in Figure 8. The reason they were so low in 2022 is probably that they wholesale prices were so high.

Europe and Germany have therefore in the grand scale achieved little in terms of greenhouse gas emission reductions while very large sums of money have been expended. The German Federal Auditors Office described the situation in 2021 as a threat to German industry and population. They were right.

Other countries must learn from this failed energy transition to avoid ruining their industry and adding huge costs to their population while achieving so little reductions in greenhouse gas emissions.