As the Obama administration announced a sweeping new rule for coal-fired power plants on Monday, my mind immediately turned to our friends in Western Europe.
I served as U.S. ambassador to Germany from 2001 to 2005 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 to 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 ten 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.
Sigma Gabriel, Germany’s Vice Chancellor and Economic Minister, recently told a meeting of the country’s leading solar technology manufacturers that the energy transition policy was “on the edge of failure.” He and others have expanded on that startling public admission by explaining that massive government subsidies are unsustainable.
Meanwhile, technological innovation has been slowed and even obstructed as companies become accustomed to government subsidies. Even the extravagant goal of reducing carbon emissions has been reversed, with emissions steadily going up since the policy’s beginning. Germany now imports energy from nuclear plants across the border in France.
Ironically, the savior of Germany’s energy picture – and President Obama should take note – is coal.
While government subsidies finance inefficient technologies and government obsesses about emissions goals, Germany has ramped up its coal use to 45 percent of total electricity generation, the highest level since 2007.
To compete in today’s global marketplace, any country – be it the United States or Germany –needs a sound energy policy, grounded on proven science and tested by the open market.
Misguided executive branch overreach and regulatory attacks on energy industries are hardly the way to achieve this policy.
Under this administration’s policies, American energy producers are suffering from vertigo as confusing regulatory intrusion throws our healthy market-based energy industries into a spin.
Without a course correction, President Obama’s war on coal will produce the same results as Germany’s war on fossil fuels: higher prices and the real potential for electricity supply disruptions.
President Obama often has seen elements of European socialism as something he would like to impose on Americans. This is one time when he should learn from European mistakes. The president should avoid duplicating the situation in Germany by simply letting proven energy providers do their jobs and produce energy.