Germany, Spain Set To Pull The Plug On Green Energy
14
February, 2013
Over
ten years ago, when Europe was a bright and shining example of
experimental monetarist "brilliance", and when the money
was flowing, the continent decided to do
the ethical thing and
actively promote the pursuit and development of renewable energy
through countless government subsidies. As a result, Germany and
Spain became the undisputed leaders in the race for a green future,
and both created similar laws to encourage the development of
renewable energy. There were two problems: i) green energy, while
noble in theory, is about the worst idea possible when it comes to
profitability and capital self-sustainability and constantly needs
governmental subsidies, and ii) it was the end consumers who would
pay for the government's generosity, in the form of a surcharge on
electric bills. In Germany, for example, as the industry grew (in
size, and thus in losses) demand for the subsidy increased, driving
the surcharge higher. In January, the surcharge, which amounts to
about 14% of electricity prices, nearly doubled to 5.28 euro cents
per kilowatt hour.
And,
as the WSJ
so deftly explains,
"that
means ordinary consumers shoulder the lion's share of the costs for
what the German government calls its "energy revolution."
And here is where a third problem comes into play, because while
German and Spanish consumers were happy to pay a surcharge in the
golden days of a Dr. Jekyll Europe when everything was great, soon
Europe become a doomed Mr. Hyde-ian Frankenstein monster, with
imploding economies, 60%+ youth unemployment and resurgent neo-nazi
powers. In short: the German and Spanish consumers have had it with
funding an infinite money drain (even bigger than Greece), when cash
flow is scarce and getting worse, and have just said "Basta"
and "Nein",
respectively.
Which
means it is now a political issue in Spain, where the scandal ridden
Rajoy has never been more unpopular, and certainly in Germany where
Merkel faces an election in September and can't allow the public
opinion to shift against her. As a result "with Spain in the
grips of recession, the government wants to lower consumers' light
bills. In Germany, Chancellor Angela Merkel faces an election in
September and hopes to win points with voters by putting a stop to
rising electricity bills." Specifically, "Ms.
Merkel's government on Thursday proposed putting a cap on the
green-energy surcharge until the end of 2014 and then restricting any
rise in the surcharge after that to no more than 2.5% a year.
The government also plans to tighten exemptions, which would force
more companies to pay, and achieve a cut in green subsidies of €1.8
billion ($2.42 billion). The plan is a quick fix pending
comprehensive reform after the election, government officials said."
The Spanish parliament took a similar step on Thursday, passing a law that aims to curb rising household electricity costs by cutting aid to the renewable-energy industry.
Renewable-energy producers "are going to receive less revenue, but these measures are better for consumers" said Energy Minister José Manuel Soria.
Among the changes in the Spanish system, the new law indexes certain subsidies and compensation to an inflation estimate that strips out the effects of energy, food commodities, and tax changes.
Naturally
the response from the subsidized industries has been swift and
damning:
Renewable-energy companies said that the government was backing away from previous promises that it would ensure them a reasonable return on their investments.
"Spain's government is trying to smash the renewable-energy sector through legislative modifications," said José Miguel Villarig, chairman of the country´s Association of Renewable-Energy Producers.
Actually
all the Spanish government is thing to do is stay in power, and in
order to do so, it must stop demanding that its people pay for the
development of financial black hole industries.
The
immediate result of these steps will be a widespread collapse in the
alternative energy space in Europe, which is barely sustainable on an
"as is" basis (see Solyndra) with ongoing government
funding, and will melt as fast as a snowball in the Iceland thermal
when the money is even modestly cut off.
Because
like all truly money losing government ventures, one can't mothball a
project that by definition has to lose money in hope one day it will
be a new money-winning paradigm, especially since the imminent
deleveraging wave which will hit the world once Chinese inflation
wakes from its slumber, will mean conventional energy costs will once
again have no choice but to drop (see: "On
This Day In History.... Gas Prices Have Never Been Higher").
Yet
all this means is that the government will merely have to find other,
more creative ways to lose money now that the alternative energy fad
is virtually dead.
Luckily, spending money with absolutely nothing to
show for it is one thing that every government in the current
insolvent global regime, has a peculiar knack for. It also means that
thousands of former government workers with no real marketable skills
are about to hit the streets demanding more handouts from the nanny
state, and lead to yet another wave of European civil unrest just as
the 'other people's money' is about to run out.
No comments:
Post a Comment
Note: only a member of this blog may post a comment.