Europe's Renewable Energy Push Has Completely Backfired, And Electricity Bills Are Skyrocketing

Uk power electricity REUTERS/Suzanne PlunkettWind turbines are seen behind Hunterston B Nuclear Power Station in West Kilbride, Scotland May 15, 2013.

The Great American Shale Boom has helped U.S. homeowners and manufacturers alike lower their electricity bills.
Across the pond lies a parallel universe.

In the last four years, European electricity costs have spiked 17% for homeowners and 21% for industry, according to the
Institute of Electrical and Electronics Engineers.

The situation is most acute in the UK, where one in six households was spending more than 10% of its income to “maintain adequate warmth” in 2011, according government statistics cited by Reuters’ John Kemp.

What went wrong?

Reuters’ Karolin Schaps and Barbara Lewis write that much of the increase is related to the cost of complying with the continent’s ambitious carbon emissions targets. The European Union is supposed to cut emissions to 20% below 1990 levels.

That’s not coming cheap.

For instance, German utilities just increased

the surcharge levied on consumers to fund more renewables by 18% to 6.24 euro-cents per kilowatt-hour. German households now have the third-highest power bills in Europe.

European power suppliers are saying the drive to renewables has caused them to mothball 51 Gigawatts-worth of cheaper fossil fuel-based power sources, or the equivalent to the combined capacity of Belgium, the Czech Republic and Portugal, Bloomberg’s
Ewa Krukowska, Alessandro Vitelli & Tino Andresen reported.

Citi natgasCitiNatgas price differentials

Infrastructure improvements are also set to come with a $US1 trillion price tag through the end of the decade, Reuters says.

“The cost of funding government policies for renewable energy, social support and energy efficiency is increasing faster than any other part of an energy bill,” Paul Massara, chief executive of RWE npower told Reuters.

The chief of Italian oil giant Eni recently called the situation an emergency and warned Europe’s lack of competitiveness was costing investment in continental industry.

As a result, there’s talk of putting climate goals on hold to help bring costs down.

Bloomberg’s Stefan Nicola reports Angela Merkel plans to reduce renewable subsidies once she forms a coalition.

And Reuters’ columnist John Kemp says Labour Leader Ed Miliband recently “launched a metaphorical grenade” into the country’s clean energy consensus when he promised ratepayers’ bills would be frozen if his party comes to power in 2015.

“The squeeze in real incomes has made customers and voters much more sensitive to the impact of rising utility bills,” Kemp writes. “And bills have risen so much for so long that increases are starting to spark public resistance.”

Some countries have already turned back to coal, the price of which has fallen because of the continent’s struggling economy and the rise of natural gas in the U.S., which has boosted coal exports. European coal generation increased 6% in 2011 YOY and 2% in 2012 YOY.

CoalEIACoal use has unexpectedly jumped

Of course, that negates the whole point of the climate change policies.

So far, European countries have resisted ramping up their own shale extraction — fracking was just banned in France. Other countries are waiting to see how fracking fares in the UK, where as we recently reported drilling has commenced in a town one hour south of London.

And some, like the Poles, argue the higher costs are working as planned, since emissions are coming down. “Growth will return and the price will find its equilibrium again,” the FT reported a Polish government memo as saying. “No administrative meddling is needed or else we might create the impression that such measures are standard practice.”

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