Germany’s Expensive Gamble on Renewable Energy

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from The Wall Street Journal,

Companies Worry Cost of Plan to Trim Nuclear, Fossil Fuels Will Undermine Competitiveness.

In a sandy marsh on the outskirts of this medieval hamlet, Germany’s next autobahn will soon take shape.

The Stromautobahn, as locals call it, won’t carry Audis and BMW’s BMW.XE -0.94% , but high-voltage electricity over hundreds of miles of aluminum and steel cables stretching from the North Sea to Germany’s industrial corridor in the south.

The project is the linchpin of Germany’s Energiewende, or energy revolution, a mammoth, trillion-euro plan to wean the country off nuclear and fossil fuels by midcentury and the top domestic priority of Chancellor Angela Merkel.

But many companies, economists and even Germany’s neighbors worry that the enormous cost to replace a currently working system will undermine the country’s industrial base and weigh on the entire European economy. Germany’s second-quarter GDP decline of 0.6%, reported earlier this month, put a damper on overall euro-zone growth, leaving it flat for the quarter.

Average electricity prices for companies have jumped 60% over the past five years because of costs passed along as part of government subsidies of renewable energy producers. Prices are now more than double those in the U.S.

“German industry is going to gradually lose its competitiveness if this course isn’t reversed soon,” said Kurt Bock, chief executive of BASF SE, BAS.XE -0.29% the world’s largest chemical maker.

The European Union has set a series of binding renewable energy targets for all of its members. The goals, in which about 35% of Europe’s electricity is projected to come from renewable sources by 2020, are considered ambitious by international standards. But Germany’s “lonely revolution,” as some call it, goes much further. By 2025, Germany aims to produce 40%-45% of its electricity from renewable sources, rising to at least 80% by 2050. Most countries in the EU are holding to the lower target for now and are continuing to use nuclear energy.

Ms. Merkel, who ordered Germany’s accelerated exit from nuclear power after the Fukushima disaster in 2011, has declared the Energiewende both a major contribution in the battle against global warming and a historic step toward ending the world’s reliance on nuclear power.

“No country of Germany’s scale has pursued such a radical shift in its energy supply,” Ms. Merkel said in a speech earlier this year. “I’m convinced that if any country can successfully implement the Energiewende, it’s Germany.”

One government estimate projects the Energiewende by 2040 to cost up to €1 trillion, or about $1.4 trillion, or almost half Germany’s GDP and nearly as much as the country spent on the reunification of East and West Germany.

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