Energy Policy Exacerbates Structural Imbalances

BMI View: The transition towards renewable resources will continue to exert a sizeable economic cost on Germany despite recent energy reforms. Attempts to shield industry from these costs will delay the process of economic rebalancing towards a more consumption-based growth model, although German industrial competitiveness will ultimately suffer from higher energy costs.

Recent reform of Germany's renewable energy law amounts to no real change in policy trajectory by the grand-coalition government. Our Power & Renewables team believes that despite government attempts to limit the cost of energy policy, the adoption of renewable energy sources will continue, albeit at a slightly slower pace than originally planned, and a return to nuclear energy will remain off the table under the current administration. The result will be high energy costs for at least the next decade, as renewable energy plant operators continue to receive guaranteed payments for electricity generation.

How the government decides to share these high costs has major implications for the shape and pace of German growth. At the same time, since these costs will remain high for well over the next decade, the net impact will be negative for German industrial competitiveness regardless of who ultimately picks up the bill.

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Germany - Are You In Favour Of Energiewende?

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Related sectors of this article: Economy, Economic Activity
Geography: Germany, Germany

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