In Germany, Chancellor Angela Merkel faces an election in September and hopes to win points with voters by putting a stop to rising electricity bills. The independent steps have been welcomed by German consumer groups, but have been slammed by businesses as German and Spanish politicians move to finance cuts for consumers by passing on the costs to companies.
Germany subsidizes producers of renewable energy such as solar and wind power in part by imposing a surcharge on household electricity bills. As the industry has grown, demand for the subsidy increased, driving the surcharge higher. In January, the surcharge, which amounts to about 14% of electricity prices, nearly doubled to 5.28 euro cents per kilowatt hour. Large energy-intensive industries are exempted.
So while Siemens might get a break, Rolf in Dusseldorf gets to pay full freight. And the same thing is happening in Spain:
The Spanish parliament took a similar step on Thursday, passing a law that aims to curb rising household electricity costs by cutting aid to the renewable-energy industry.Up to this point, such subsidies have largely escaped notice in most countries, but as energy costs continue to bite hard, people are getting wise to it, as Walter Russell Mead notes:
Renewable-energy producers "are going to receive less revenue, but these measures are better for consumers" said Energy Minister José Manuel Soria.
Among the changes in the Spanish system, the new law indexes certain subsidies and compensation to an inflation estimate that strips out the effects of energy, food commodities, and tax changes.
Until now, producers have been compensated using a full inflation estimate. The government said the law will cut the costs of the country's electrical system by €600 million to €800 million a year.
What both countries are experiencing is the pain of trying to subsidize an industry that’s not ready for prime time. If renewable energy eventually becomes viable, it won’t need subsidies; capital owners who can make money off of it will ensure it’s put to use. But until then, these attempts to prop up struggling industries are foolish and painful to consumers.And they will continue, of course.