Posted by: bmeverett | May 7, 2015

Friedman Watch 5-6-2015


It’s been a while since I’ve addressed one of Tom Friedman’s crazy green columns, but this week he’s offering us a doozy entitled “Germany, the Green Superpower” in the New York Times’ May 6 issue. Mr. Friedman is absolutely giddy over Germany’s green energy program and suggests that they deserve a Nobel Peace Prize for a “world-saving achievement”. Really? Well, let’s have a look.

Mr. Friedman notes approvingly that Germany has increased the share of renewables in its electric power generation from nearly zero to 30% (actually 26.2% in 2014 according to German government statistics). True enough, but what does that really mean for Germany? Mr. Friedman admits that this accomplishment was very expensive, costing billions of Euros. He claims, however, that the purpose was to “drive down the cost of solar and wind to make them mainstream, affordable options”. Mission accomplished, since “With price drops of more than 80 percent for solar, and 55 percent for wind, zero-carbon energy is now competitive with fossil fuels here.” True, but very misleading.

According to the Energy Information Administration, at the end of 2014, electricity prices in the US were 12.2¢ per kilowatt-hour (kWh) for residential consumers and 6.65¢/kWh for industrial consumers. According to Eurostat, comparable year-end 2014 prices in Germany were 33.8¢/kWh for residential consumers and 22.6¢/kWh for industrial consumers. (Please note that these numbers reflect the recent strengthening of the dollar to 0.88 Euros. Otherwise, this comparison would have been much worse for Germany.) In other words, Germans pay nearly three times as much for electricity as Americans do. Is this really an accomplishment?

A Mercedes S-Class sedan starts at around $94,000, while a Ford Taurus sells for around $30,000. Alas, most Americans can’t buy the S-class, but according to Mr. Friedman’s logic, we could make the S-Class affordable by imposing an $80,000 per vehicle tax on the Taurus. The $94,000 S-Class would now be a bargain compared to the $110,000 Taurus. Would Americans really be better off? Seriously?

Mr. Friedman would have a better argument if he could claim that the German economy could thrive even with these high electricity prices, but it hasn’t. US GDP growth has averaged 2.7% per year over the 2013-2014 period, and Americans have been complaining (justifiably in my view) that we are experiencing the weakest economic recovery in modern history. The German economy grew at an annual rate of only 1.3% over the same period – half the US rate. Is this really the pathway for Germany to become a superpower?

OK, so the German public has taken a hard hit from its renewables policy, but isn’t it worth it to take the lead in fighting global climate change? Not so fast. The German emphasis on renewable energy must also be seen in the context of their other major energy policy – the phase out of nuclear power. According to German government statistics, in 2014, Germany generated 160.6 billion kWh of electricity from renewables and 97.1 billion kWh from nuclear plants. According to Chancellor Merkel, the nuclear component is to be shut down by 2022. The nuclear phase-out is expensive. Most of the plants shut-down so far are less than 40 years old, and the remaining capacity is 30-35 years old. The US has reactors that have been operating well for nearly 50 years. In essence, Germany must replace fully depreciated, low-cost power plants with something new and expensive. To accomplish this goal, Germany must grow renewable power by 6% per year through 2022 just to hold the zero-carbon component of its energy mix (nuclear plus renewables) flat.

Mr. Friedman is also ignoring Germany’s dirty secret – its increased coal use. German coal use declined for many years, mainly from closing high-cost domestic mines. According to BP’s annual statistical review for 2014, Germany coal consumption declined from 163.5 million tonnes of oil equivalent (Mtoe) in 1965 to a low of 71.7 Mtoe in 2009. Coal use then began to grow, reaching 81.3 Mtoe in 2013 and is still rising. Several new coal-fired power plants are under construction in Germany today. Why would a country so committed to fighting climate change increase its use of the highest carbon fuel? Economics. The Germans have started to feel a real pinch from the high cost of renewables and need to do something about it. Coal may also be the only economical way of incorporating large amounts of intermittent and unpredictable renewable power into a modern electricity grid requiring precise voltage and frequency control.

The Climate Community generally approves of high electricity prices, regardless of their impact on economic competitiveness. After all, they argue, we must engineer drastic cuts in greenhouse gas emissions to save the world, but just how “world-saving” is the German experience? Germany has indeed reduced its carbon dioxide emissions from 930 million metric tonnes (mt) in 1997 (the year Kyoto was signed) to 842 million mt in 2013, a decline of about 9.5%. Over this same period, Germany’s population has actually fallen from 82.1 million to 80.8 million. As a result, per capita carbon dioxide emissions have decreased from 11.3 mt in 1977 to 10.4 mt. Not bad, and much lower than US per capita carbon dioxide emissions at 18.6 mt, but is Germany the model for a low carbon world? Hardly. Current global carbon dioxide emissions are about 35 billion mt per year. With the world’s population now at about 7.125 billion, per capita emissions on a global scale are just under 5 mt. China’s per capita emissions are only 7 mt and India’s only 1.5. If every person in the world had the carbon footprint of the average German, global greenhouse gas emissions would double. To achieve a 50% reduction in carbon dioxide emissions by 2050, when the world’s population is estimated to be 10.5 billion (UN projection, medium estimate), per capita emissions for the world as a whole would have to be less than 1.7 mt. In other words, Germany would still have to reduce its per capita emissions by over 80%. Many in the Climate Community are demanding even more drastic reductions. In other words, if the Climate Community’s catastrophic scenarios are correct, rather than India aspiring to look like Germany, Germany must aspire to look like India. I doubt the average German would find this prospect appealing.

Perhaps the most extraordinary assertion in Mr. Friedman’s piece is that forcing modest amounts of expensive renewables into your economy coupled with denuclearization somehow makes you a world power. Germany is currently choking on the costs of these policies and facing a stagnant economy. How exactly does this enhance their ability to lead the EU into building a military capable of confronting Russia and China?

Military capability requires two things: lots of money and political will. Germany has neither. The average American household spends about $5,000 per year on the US military. The average German household spends about $1,600. How exactly would the German green energy program, which suppresses GDP growth and reduces the discretionary income of German households, support higher military costs? Moreover, how does a “green” Germany convince its EU partners, who are in even worse economic shape to join them?

Mr. Friedman has a really strange answer to this question. He predict that Germany will become the first “green, solar-powered superpower” because “They have to.” Mr. Friedman is right to worry about American disengagement in Europe in the face of increasing Russian and Chinese military power. If the US does not reverse course, the likely outcome is an uncomfortable European accommodation with China and Russia, not a revival of German military might.

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Responses

  1. It makes the facts very convent when we leave out the fact that don’t jive with our thinking. So much for Tom Friedman’s column!


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