A new research report from international energy consultancy IHS “presents a path towards a rebalanced approach that could return the Energiewende to its original goal of providing a competitive transition to a low-carbon economy while generating substantial benefits to Germany’s gross domestic product (GDP), jobs, income, trade position and government revenues.”
According to IHS, “redeveloping the current Energiewende would reduce the cumulative cost of the power system by €125 billion from 2014-2040, mostly through a reduction in offshore wind deployment.” Rather than offshore wind, the approach advocated by IHS “would include an increased role for domestic natural gas—which produces half the carbon dioxide (CO2) emissions of coal—to mitigate increases in GHG emissions.”
IHS notes that “Germany’s supply chains and industry clusters are some of the most sophisticated in the world and connect energy-intensive and non-energy-intensive businesses alike. Policy that places Germany’s energy-intensive industry at a disadvantage to global peers will have broad implications across the entire domestic industrial landscape and Germany’s overall economy. An energy cost disadvantage impacts on direct and indirect jobs and cascades through the supply chain and the entire economy. Mitigating the disadvantage would trigger benefits not only for energy-intensive companies, but also for adjacent industries and eventually the entire economy.”
The report notes that the economic benefits of a lower-cost power system compared to the Energiewende’s current course would include:
- “Gross Domestic Product: A GDP increase of nearly €28 billion, or 0.9 percent, in 2020, and €85 billion, or 2.5 percent, by 2025. The impact on GDP is even larger in the longer term, reaching €138 billion, or 3.4 percent, by 2040.
- Employment: A net overall employment increase of 207,000, or 0.5 percent, in 2020, and 559,000, or 1.3 percent, by 2025. The economy would support nearly 1 million additional jobs by 2040. This overall 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 billion in additional annual revenues by 2030, rising to €68 billion by 2040 as a result of increases in overall economic activity and royalties from gas production.
- Manufacturing Exports: Net exports for the manufacturing sector will rise by €36 billion in 2030 and €63 billion by 2040—a 20 percent increase—as lower energy prices support German manufacturing’s competitiveness.”
IHS estimates 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. Germany’s resources could support domestic natural gas production through the 2030s that would be equivalent to more than 35 percent of current German gas consumption.
The study also examines the role of rebates (exemptions) for energy–intensive industry. It warns that without those rebates or exemptions, energy prices for industry would rise explosively: “maintaining the existing EEG rebates for energy-intensive customers is essential to recognizing the economic benefits of a more competitive Energiewende. 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 percent in 2014. German GDP would be nearly 5 percent lower by 2020, 1.1 million jobs—half of that in industry—would be lost, and real disposable income for residential customers would decrease by more than €500 per year.”
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