As the Obama administration recently announced a sweeping new rule for coal-fired power plants, my mind immediately turned to our friends in Western Europe.
I served as U.S. ambassador to Germany from 2001-05 and had a front-row seat for the beginnings of a similar transition away from fossil fuels that most Germans now regret.
When its legislature passed a renewable-energy law in 2000, Germany gave solar and wind producers 20 years of fixed high prices and preferred access to the country’s electricity grid. This scheme of government intrusion, subsidies and market manipulation set the stage for even worse government decision making regarding energy policy.
Following Japan’s Fukushima nuclear disaster in 2011, German lawmakers opted for an even more dramatic change in policy. Riding the fashionable green wave of the moment, the main political parties in Germany reached a hasty decision to phase out all 17 of the country’s nuclear power plants. German leaders vowed to eliminate clean nuclear power while simultaneously aiming to reduce carbon emissions by 80-95 percent by 2050.
These overly ambitious and seemingly contradictory targets are to be achieved by an extravagant government plan to encourage the development of renewable energy production methods. Under this plan – called “Energiewende,” or “energy transition” – renewables, mostly solar and wind, would supply 80 percent of Germany’s electricity and 60 percent of the country’s total energy requirements.
If those goals look impossible, that’s because they are. Germany’s ongoing subsidization of alternative energy industries means Germans pay energy prices at least two to four times higher than the global average.
Regular middle-class households bear by far the greatest share of this onerous cost burden, since industries themselves are heavily subsidized.
Earlier this year, the German government revealed that 6.9 million families are in energy poverty, which is defined as spending at least 10 percent of household income on energy expenses. Today, German citizens complain loudly about these extra costs, costs that Americans and most EU nations do not yet face.