Green Dream? or Are We Sleepwalking to the Edge of an Economic Abyss?

Article excerpt

Byline: by Tom Miers

THE economic powerhouse of Europe is having a power failure. As energy prices go through the roof in Germany and power plants are mothballed, the continent's biggest economy risks seizure just as it is needed to drag the Eurozone out of recession. The cause? A reckless pursuit of a green energy dream that is heaping costs and uncertainty on German businesses and households.

Last year, the surcharge paid to subsidise renewable energy was increased by half, adding an extra [pounds sterling]200 to family bills. At the same time, eight nuclear reactors have been shut down and the rest are to be phased out over the next decade.

Electricity prices in Germany are now nearly double those in Britain and France. But the big switch has not just resulted in higher bills. The fall in nuclear capacity caused power shortages last year, and experts expect an even worse situation this winter if cold weather conditions prevail.

This is no cause for schadenfreude.

For in Britain we are in danger of making the same errors of judgment. And Scotland is leading the way in imposing unrealistic and costly 'green' policies on business and consumers just as the economy is at its most vulnerable.

Sensitive So, as government ministers put the final touches to their new Energy Bill, let's hope they, and their counterparts at Holyrood, consider events across the North Sea.

The current row over energy prices shows how sensitive the issue has become for David Cameron's coalition. The disruption in Germany is a severe warning.

According to energy regulator Ofgem, we're not building enough new power stations to meet demand. By 2015, there is a 50-50 chance of power cuts if there is a severe winter.

The Government faces a dilemma. Expand gas-fired plants to bridge the gap or, as the Lib Dems and the SNP urge, boost renewables further.

Yet at the heart of the debate is a sleight of hand being played on the British public.

Green enthusiasts pretend it is a cost free option: we can save the planet and create jobs at the same time.

But the lesson from Germany is that there is a significant price tag attached. When the energy companies announced price rises this month, politicians led the call for further market regulation. But a glance at the figures tells us most of the price hike can be laid firmly at the door of Parliament.

As British Gas pointed out, of their [pounds sterling]80 rise in bills, [pounds sterling]30 was caused by government subsidies for the renewables sector, [pounds sterling]25 by additional investment needed to connect the wind farms, and [pounds sterling]25 by higher global fuel prices.

But in Scotland, home to a third of the UK's renewable energy investment, green energy is hailed as an economic panacea.

Alex Salmond puts it thus: 'As the world moves shakily into the economic recovery phase, I see investment in the green economy as a key to that general world recovery... I see the current economic difficulties as a spur to getting this green economic revolution right.' And David Cameron says 'renewable energy is not just good for our environment, but good for business too', while Ed Davey, his Liberal Democrat Energy Secretary, describes climate change policies as 'good for growth'.

Yet a moment's thought should cast doubt upon these claims.

The suggestion that moving from one form of electricity production to another creates wealth is, to say the least, implausible. And if, as is the case with renewable generation, the new plant is less efficient than the old, then there is obviously a financial cost to society, in the form of higher bills. …