present energy policy of rapid renewables deployment under the
Energiewende has resulted in higher energy costs that will
place Germany in a less competitive position in the world
economy, says a new study by IHS, A More Competitive
Energiewende: Securing Germany's Global Competitiveness in a
New Energy World.
examines German competitiveness in a world of changed shale gas
development. The study considers alternative paths to
transitioning to a lower-carbon energy policy, the role for natural gas in
achieve these objectives and quantifies the effects on German
global competitiveness. The study concludes that greenhouse gas
emissions (GHG) have increased.
The study says
that a rebalanced approach could return the Energiewende to its
original goal of providing a competitive transition to a low-carbon economy while generating
substantial benefits to Germanys gross domestic product
(GDP), jobs, income, trade position and government
The IHS study
compares the effects of remaining on the present course of the
Energiewende with an alternative, lower-cost power system
focused on mature renewables (such as onshore wind and solar)
and a greater role for domestically-produced natural gas.
benefits of a lower-cost power system compared to the
Energiewendes would include:
domestic product: A GDP increase of nearly 28 B,
or 0.9%, in 2020, and 85 B, or 2.5%, by 2025. The impact
on GDP is even larger in the longer term, reaching 138 B,
or 3.4%, by 2040.
Employment: A net total employment increase of
207,000, or 0.5%, in 2020, and 559,000, or 1.3%, by 2025. The
economy would support nearly 1 million additional jobs by 2040.
The total job creation would more than offset the slower pace
of employment growth in the green industries.
Disposable income: Average disposable income
increases by 123 per person in 2020 and by 847 per
person in 2040 as the economic benefits resulting from moving
towards a more competitive Energiewende extend to virtually all
the citizens of Germany.
Government revenues: Nearly 40 B in
additional annual revenues by 2030, rising to 68 B by
2040 resulting from increasing economic activity and royalties
from gas production.
Manufacturing exports: Net exports for the
manufacturing sector will rise by 36 B in 2030 and
63 B by 2040a 20% increase as lower energy
prices support German manufacturings competitiveness.
Germanys current path of increasingly high-cost
energy will make the country less competitive in the world
economy, penalize Germany in terms of jobs and industrial
investment, and impose a significant cost on the overall
economy and household income, said IHS vice chairman and
Pulitzer Prize-winning author, Daniel Yergin. But there
is an alternative path that can get the Energiewende back on
the course originally intended, which will allow Germany to
retain much of the decarbonization benefit created by adding
renewables while reducing overall costs.
The study notes
that, while Germany has experienced increasingly high energy
costs due to the rapid pace of renewables deployment, its GHG
emissions have risen. The higher GHG
emissions are the result from a greater reliance on coal-fired
power, the phasing out of nuclear power and slow progress on
energy efficiency. The power-sector emissions are moving out of
line with economy-wide carbon dioxide (CO2) CO2 reduction
At the same
time, electricity prices, which were already higher by
international standards and have been increasing at a greater
rate than in competing markets, are responsible for 52 B
in net export losses over the past five years. The higher
energy costs will make Germanys highly integrated
industrial sector less competitive, with negative impacts on
the wider economy.
Germanys supply chains and industry clusters are
some of the most sophisticated in the world and connect
energy-intensive and non-energy-intensive businesses
alike, said Ralf Wiegert, director, IHS Economics.
To argue that that industrial policy should focus on the
greener, less energy-intensive industries and
accept or even welcome the exit of energy-intensive industries
from Germany, misses the point. Policy that places
Germanys energy-intensive industry at a disadvantage to
global peers will have broad implications across the entire
domestic industrial landscape and Germanys overall
The study notes
that North America has become a much more competitive location
for manufacturing and exporting due to two
factorsGermanys high electricity prices and the US
shale gas revolution has reduced natural gas prices to
one-third the level of Germany.
competitive Energiewende would reduce the cumulative cost of
the power system by 125 B from 2014-2040, mostly through
a reduction in offshore wind deployment. It would include an
increased role for domestic natural gas, which produces half
the CO2 emissions of coal, to mitigate increases in GHG
emissions. The benefits of reduced capital spending would be
partially offset by increased spending on fuel and
would remain at levels near that of the present policy framework, with a net
increase of around 10% from 2014 to 2040. Without an increased
role for domestic natural gas, GHG emissions from a lower-cost power
system would be nearly 20% higher, the study says.
local gas supply in Germany and elsewhere in the EU would boost
energy security and reduce European gas prices by as much as
20%, the study says. Lower priced gas would make lower-carbon,
gas-fired power generation more economic than coal.
that more than 20 billion cubic meters (Bcm) per year of shale
gas production is possible in Germany by 2030, with production
peaking at more than 25 Bcm by mid-decade. Germanys
resources could support domestic natural gas production through
the 2030s that would be equivalent to more than 35% of current
German gas consumption.
Total shale gas
production in the 28 EU countries could exceed 70 Bcm in 2030
and rise to nearly 90 Bcm in 2040, a similar level to Norwegian
pipeline exports to the EU and more than two-thirds of Russian
exports to the EU last year, the study finds.
development would also be a key contributor to the increased
economic benefits identified in the study, accounting for about
77% of the increase in GDP in 2020 and nearly 44% of the GDP
increase in 2040.
The study also
examines the role of rebates from the Erneuerbare Energien
Gesetz (EEG) the Renewable Energy Act surcharge
that have partially shielded energy-intensive German industry
from the rising cost of renewables support. The study finds
that maintaining the existing EEG rebates for energy-intensive
customers is essential to recognizing the economic benefits of
a more competitive Energiewende.
The study finds
that if the rebates were phased out, the impact would be
immediate and significant. Customers that benefit from the
maximum EEG rebates could see electricity prices jump by more
than 65% in 2014. German GDP would decrease by 5% by 2020, 1.1
million jobshalf of that in industry would be lost,
and real disposable income for residential customers would
decrease by more than 500 per year.
Germanys politically supervised shift in direction from
nuclear and fossil fuels to renewable sources of energy. This
idea of a changing power path helps explain the literal
translation: "energy turn." This transition is directed at
increasing security and ensuring that Germany creates a greater
share of its own power in the future.
About The Report
was supported by the Verband der Chemischen Industrie (VCI).
Additional support came from Bundesverband der Deutschen
Industrie (BDI), Wirtschaftsverband Erdöl- und
Erdgasgewinnung, BASF, Bayer, BP, Central European Petroleum, Dow, Evonik,
ExxonMobil, Linde, Total, Vestolit, and Wacker. IHS is
exclusively responsible for all analysis and content.