Germany’s economy holds a critical significance in the European Union, especially in regards to the ongoing debt crisis. Its industrialized economy has held steady despite a slump in the global economy. It might be surprising to hear that Germany, one of the most industrialized countries in the world, is undertaking an energy revolution that will dramatically transform its economy’s energy sector. The newly re-engineered economy will no longer receive its energy from nuclear powered stations as all nuclear power plants in Germany are being closed down. Renewable energy sources, including wind and solar power, will instead fill Germany’s energy gap. Will this move jeopardize Germany’s economy and how does this energy revolution affect Germany’s relationship with other countries?
Currently, renewable energy sources provide about one-fourth of Germany’s electricity supply but the goal is to raise this number to 80 percent by 2050. This dramatic energy revolution will undoubtedly affect Germany’s economy. First of all, there is major discussion about who ends up paying the costs of this reworked energy system. Electricity bills for ordinary households have already increased significantly by nearly 50 percent since the changeover to a green economy. Therefore, many have argued that German consumers will end up paying the majority of the costs associated with the green revolution. German economists have said that about 50 percent of the investment in solar panels and wind turbines comes from consumer households through taxes or higher energy bills. This will limit the ability of consumers to purchase other goods and services in Germany. However, the extent of this effect on consumer spending is yet to be quantified.
Not surprisingly, the German economy will have to absorb the costs of using renewable energy instead of cheaper alternatives. There is a major debate over which large industry should pay more of the bill for the green energy switchover. Large German companies that compete international are exempt from paying the higher costs for electricity. The reason for this decision is that international companies will be less competitive overseas if they are required to pay higher costs for energy. More than 2,000 companies in Germany are exempt from the burden of the green revolution. Arguments over whether this is fair for consumers will heighten as 2013 is an election year for Germany.
Despite Germany’s heavy investment in green energy, China has retained its lead at the top of the 2013 Renewable Energy Country Attractiveness Index published by Ernst & Young. Chinese companies are making large outbound investments in renewable energy projects abroad, especially in Latin America and Australia. Germany’s changeover to green energy provides Chinese companies with new investment opportunities. These renewable energy opportunities can strengthen Germany’s relations with China. However, at the same time it can foster competition between Chinese and German energy companies. Whatever the case may be, significant international business activity across the clean energy sector will continue to grow in the year ahead.