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The Energiewende was founded in 2007-2008 on the basis that energy costs were high and
were going to continue to rise forever, and it now needs to adjust to a more competitive
world, in which other countries, particularly the United States, have much lower energy
costs, which is attracting investment from Germany to the United States in a very significant
way, and the coasts of the Energiewende themselves have reached a limit that, the Economics Minister
of Germany recently said is unsustainable. So Germany needs to move from a high cost
Energiewende to, what we call in our new study, a more competitive Energiewende, which really
means reform of the Energiewende.
We’ve spent the last nine months working on our study on the Energiewende and on what
it means for the German economy, and how to move towards a more competitive Energiewende.
Certainly there are three major things that really stand out. One, is slowing down the
immature and new technologies in renewables to keep it within a reasonable cost frame,
because as it is now Germany is committed to a 185 billion euro bill just for what has
already been installed for renewables, and so not continuing to move at the very rapid
rate in having costs go up. Secondly, is in fact Germany has substaintial natural gas
resources. It used to produce twenty percent of its gas; it is now down to ten percent,
and it has what seems to be significant shale gas potential, and so it should look with
a very balanced, pragmatic, non-emotional way at developing that and look at models
around the world and see how it has been developed elsewhere. Thirdly, we see that these rebates,
that the large industrial consumers receive, so called rebates, now a subject of debate
in Brussels, have been important and that while if they were not there German industry
would be at a much more competitive disadvantage and the impact of that would be measured in
a really big loss in terms of GDP and could be looking at a million job loss in terms
of employment as a result of that. So Germany faces some big, tough questions in terms of
reforming its Energiewende, but I think there has been an evolution over the last six months
among the political leadership to see that the need is there. And when you have the Economics
Minister, the leader of the SDP, saying that if Germany does not reform its Energiewende
it faces a dramatic deindustrialization, that’s a very important message and that says that
change will come.
One of the really big, unexpected things that happened in the world economy in the last
half decade is this development of shale gas and tide oil in the United States, and the
numbers are quite extraordinary. Forty-four percent of U.S. natural gas now is shale gas.
The U.S. has now overtaken Russia as the world’s largest gas producer, and one of the consequences
is that the United States is not only attracting a lot of industry, both energy intensive and
also other companies that supply or for whom these are customers, but also that the United
States is moving to become an LNG exporter, something that would have been thought inconceivable
half a decade ago, and by 2020-2022 the United States will likely rank with Qatar and Australia
as one of the world’s three largest LNG exporters. So the role of the United States
in the world energy market, in the global energy system, is really going through a very
profound change.
The initial concern when the Ukraine crisis erupted is what would it mean for gas supplies,
because people remember what happened in 2006, when there was an interruption of Russia gas
through Ukraine, and again in 2009. So far, there has not been an interruption of the
gas supplies, but what it has done is focus attention on what is the flexibility of the
gas system in Europe, what is the ability to move gas around and respond to crisis,
and Europe has done a lot after 2006-2009 to be prepared for that, and I think what
it has also done is focus attention on that recurrent and very important question of energy
security now and in the future.