Renewable Energy in Germany

Germany is trying to transition to a more sustainable energy mix in the future. You might have read one of two stories about the effort, or even both depending on your personal filter bubble.

1. The switch away from nuclear power and fossil fuels is not going so well in Germany. The consumer prices are increasing massively. In July 2013 the inflation of electricity prices reached a whopping 11.9 %. In 2013 consumers have to pay more than €0.28 per kWh; ten years ago the price was around €0.17/kWh. Also, the contribution of lignite, black coal and natural gas to the energy mix has not changed much at all in the last ten years. Only the share of nuclear power has fallen significantly, so the CO2 production of power plants was not reduced all that much.
2. The energy transition in Germany is happening at a faster rate than expected. In 2011 renewable energy made up 20.5 % of electricity produced; and in 2012 it was up to 22 %. This development has caused the prices at the energy exchange to fall significantly. In the first 2013 the price per MWh fell by 20 % compared to 2012. It is expected to decline some more. Of course, some of this development was caused by falling coal prices, but for example on the  June 16th this year the average price at the exchange was minus €3.33 per MWh. It fell to minus €100 per MWh for an hour and trading had to be stopped, so it is safe to assume that the huge amount of electricity produced does play a significant role in the much lower prices.

It might come as a surprise, but both stories are correct. The prices at the energy exchange are falling fast, while consumers have to pay ever more for electricity. This is due to the way renewable energy is subsidised. The owner of a renewable energy plant is guarantied a certain price for twenty years after the plant goes on line. Also, the firm is guarantied that all energy it is able to produce will be fed into the power grid (or be paid even if that cannot be the case). Especially solar energy, which was not competitive at all in 2000, when the Erneuerbare-Energien-Gesetz (EEG renewable energy law) was introduced, profited from massive subsidies. In 2004, the guarantied price was at least 54 ct/kWh for installed power on top of buildings. eight years later the price has fallen to between 18.3 ct/kWh and 24.4 ct/kWh. The resulting difference between exchange and guarantied price has to be paid by the consumers and companies (not energy-intensive ones, though).  At the moment the so called EEG reallocation charge is at 5.28 ct/kWh or over 18 percent of the total electricity price. In 2003 it was only responsible for 2.4 percent of the consumer price.

The above graphic shows the composition of the electricity prices for consumers. Today, fees and taxes make up over 50 % of the total price. The increase compared to 2003 is primarily due to the EEG allocation fee. 

 

The increase from around 17.2 ct/kWh to 28.7 ct/kWh in 2013 has three main sources. 

1. Production costs, transport and especially profits have gone up due to higher resource prices, shutting down highly subsidised nuclear power plants, and to a smaller share CO2 trading.
2. The EEG allocation fee has increased significantly, since the prices are guaranteed for 20 years additional renewable energy power plants will keep pushing the fee up, while decreasing the exchange price.
3. The VAT (value added tax) was increased from 16 % to 19 %; of course when the price increases there is always an automatically higher absolute price for VAT to pay.

It is important to note that the EEG allocation fee is not a good indicator for the cost of the energy transition. Large parts of the the increase from 2012 to 2013 were due to underestimation of the expansion of the renewable energy sector, which caused the account responsible for the payments fall into negative territory which now has to be rebalanced. As mentioned, falling exchange prices due to the increased amount of electricity available cause the fee to increase since the difference to the guaranteed price becomes higher. Additionally, an ever larger share of industry does not have to pay the fee (28 % at the moment) which leads to a higher burden for everybody else. So it is a very distorted value, and should not be used as a "warning for other countries".

Productivity increases have pushed the price for the installation of renewable energy down, which in turn allowed the guaranteed prices to fall, therefore the future increases through the continuing expansion of the sector lead to smaller EEG allocation fee increases. The mistakes of the past (far too high subsidies for solar energy guaranteed for 20 years), will remain with the country for the whole decade though; and will make it all but impossible for the consumer prices to fall significantly.

Prices for consumers in Germany are high compared to other countries, this is due to Germany being one of the first countries to attempt a large scale energy transition. The share of renewable energy is now over 20 % and is still increasing, but additional capacity is costing significantly less than ten years ago. Eight nuclear power plants have been shut down and everybody that believed that this would lead to medium term shortages in supply has been proven wrong, completely and utterly wrong. Germany is a net exporter of electricity. Any country which now chooses to go a similar path will not face the same costs as Germany has and will be for some time. The transition does not come free, but the know-how gained in Germany will push down costs for every other country choosing a similar path.

GDP rose 0.7% in Q2 beating expectations

German GDP rose price, seasonally and calendar adjusted 0.7 percent in the second quarter of 2013 according to Destatis, higher than the expected 0.6 percent. Drivers were household and public consumption expenditure and to some extend exports. Price adjusted GDP is up 0.9 % compared to last year. The long winter played a role as it delayed building investment.

France also beat expectations and grew by 0.5 percent in the second quarter. Good news.

Not much more to add before the detailed report is out on the 23rd.

Strange Inflation Scare

The inflation rate in Germany was at 1.9 % in July, according to destatis, the primary reason seems to be bad weather which has caused less overall harvest, which in turn has driven up the prices for food by 5.7 %. So, nothing to worry about? Wrong! One, Germans are always worried, we are somewhat famous for that, and two the media just discovered that the interest rate of savings accounts is below inflation; and therefore old people and kids are actually losing money. They have just found the real interest rate, I guess, since savings accounts have actually never been a good investment. In fact "savers" have been most likely losing money since 2003, if they chose this non-form of investment. Even in the most favorable of circumstances savings account interest barely reaches the inflation rate.

But, why should that stop the media from reporting that the "Normalbürger" normal citizen is losing money; and thereby somehow paying for the South? Zeit thinks the development is "dramatic" and the inflation rate is at the ECB target "significant". "It is the threshold at which the ECB sees price stability ENDANGERED". According to n-tv there is "talk about creeping confiscation", by the evil weather god, I guess. Spiegel's heading is:

Inflation in Germany: the prices for groceries are increasing massively.

Yeah, they do mention the weather (the others do, too), as a possible cause somewhere in the middle of the article, but since nobody actually seems to read more than the title and the first few sentences, they made their forum users, who typically aren't the smartest on a good day, go ballistic.

1.9 % inflation driven primarily by food and energy. Come on! There are reasons why core inflation does not include these, the ECB is neither a weather god nor does it own a power plant able to produce an infinite amount of electricity. But, inflation panic sells better than sex in Germany: more clicks, more likes, more moneyz!

Update: "prices in supermarkets are exploding" acoording to Bild. There is "INFLATION-DANGER" they say, I is sooo scared. Luckily, there seems to be - on any given topic - at least one sane newspaper left in Germany: TAZ actually explains the causes calmly.

Excellent Article About German Leadership in the EU

Spiegel International has an excellent article about the euro area crisis by Jügen Habermas, not much to add:

Merkel's European Failure: Germany Dozes on a Volcano

Angela Merkel's government is forcing Southern Europe to undertake profound reforms while at the same time denying its own responsibility for the consequences of its crisis policies. Germany is risking a historic failure with its shortsighted wrangling.

Over 9 Percent of Germans Working Have Side Job

More and more Germans are working side jobs in addition to their normal job. According to Freie Presse,  a total of 2.66 million workers, whose primary job is subject to social insurance contributions, now are also working so called mini-job (€400 -  €450). The share of workers who in addition to a normal job work a side job more than doubled from 4.3 percent in 2003 to 9.1 percent at the end of 2012.

The Ministry of Labor conveniently neglected to investigate reasons for this development, and could therefore speculate that one possible reason for the strong increase might be "Konsumlust" ("wish to consume",  German "Lust" is not the English "lust"). Spiegel assumes that this might have been a slip, but I disagree. The government changed the Poverty and Prosperity report, in order to get rid of inconvenient facts like "private wealth is spread very unequally"; in 2003 the poorer half of the German population had 3 % of all wealth, much more than in 2008; the share of wealth actually dropped 2/3 to 1% for the less wealthy half. The government thinks that the structural reforms should have a positive impact therefore data which suggest otherwise cannot be relevant. It is building its on Potemkin wonderland, where everything is fine and dandy and the poor are living in late Roman decadence (yeah I know it's a while back, but our Foreign Minister said what was and still actually is on the governments mind).

Of course, reforms, that force people to accept low paying side jobs in order to make ends meet, should not be considered a success; and could be used by the opposition in the election campaign. Well, sadly the formerly social party SPD and the Greens are responsible for these reforms to increase poverty in addition to making the German society less equal. Merkel has nothing to fear, but our euro zone friends should. These countries have to engage in similar, but much harsher reforms, which even if they should, some day, probably in the next decade, turn out to be growth friendly, will have created a society in which the working poor have the great opportunity to become even poorer, while working twice as hard.

Deutsche Bahn Experiencing Problems with Signalling Control

Deutsche Bahn (DB), the German, state owned railway provider is experiencing massive problems due to a lack of train dispatchers. The high number of people calling in sick forced Deutsche Bahn to reduce the amount of trains stopping in Mainz. What began with less trains at night in Mainz, the capital of Rhineland-Palatinate, has now also affected railway traffic during the day, which also now is beginning to hit at least one more state.

According to DB, all of the Rhine-Main arrea and southern parts of Hessonia are affected. But, it is possible that the situation could worsen all over Germany, since train dispatchers are in short supply. DB is now planning to train 600 new employees for the job. The company believes that it will be able to solve the issues next month, in part by trying to call  back workers currently on vacation.

If one thinks that this is a story of the state being less efficient that private corporation, one is dead wrong. The Company is still completely state owned, but it was planned to privatise it in 2008, which had to be called off due to the financial crisis. The firm is acting like a private company, and the current CEO Grube was, before joining DB responsible for Daimler in Northeast Asia (China, Korea) and development. There has been a strong push towards higher efficiency through reducing the number of workers especially in DB Netz, which is responsible for the infrastructure and therefore signalling control.

In fact, even though DB is not privatised, yet, one can already see that the critics, who feared, worse service, a lack in infrastructure investment especially in smaller train stations, and reduced number of trains stopping in smaller towns, were right. The public sector still has to finance large parts of the railway infrastructure projects, which was also an expected result of the attempted privatisation. Most critics called for keeping the infrastructure public, to not only prevent these issues, but also make a functional market possible, where smaller railway companies would not have to pay fees to the current monopolist, for using railways paid for with public funds.

US Online Services Are No Option - When Looking for Privacy

Via Fefe. I have written about the economic impact of the NSA revelations. I concluded that new US services are no option, when looking for privacy, therefore new US tech firms were at a significant disadvantage (NATO countries as a whole should be off the table) compared to ones from neutral states. Lavabit, the e-mail service that Snowden used, had to shut down, because the owner obviously did not want to be part of what he calls crimes against the American people:

I have been forced to make a difficult decision: to become complicit in crimes against the American people or walk away from nearly ten years of hard work by shutting down Lavabit. After significant soul searching, I have decided to suspend operations. I wish that I could legally share with you the events that led to my decision. I cannot.

So everybody who thinks that using DuckDuckGo and other new seemingly private US services will keep the US government out of his/her search history/e-mail account/cloud service is wrong. Swiss services are the best option until those are available one can basically just use Google and Facebook (looking for trustworthy search engines while being logged into my google account probably wasn't the smartest thing to do...). Ixquick and start page (same Nehterlands based company) seem to be both located in the US partly, therefore probably also no real option. Metager2 is German, but I don't see that that is any better for any foreigner (oh and it is slow).

Since there are no real options available, most people will stick with the big and comfortable ones. People in the US choosing VK over Facebook and therefore the FSB (which is probably desperately trying to close dat 1984 gap) over the NSA would be awesome, though. But back to the Lavabit owner, who concluded:

This experience has taught me one very important lesson: without congressional action or a strong judicial precedent, I would _strongly_ recommend against anyone trusting their private data to a company with physical ties to the United States.

The Conservative Disinformation Campaign Begins

It took a while but now the conservative newspapers in Germany think the moment has come to start the inevitable disinformation campaign on the eavesdropping of the NSA. On the one hand, Bild thinks scare tactics are the way to go and wrote about Terror 3.0, or al Qiada as a franchise, which isn't even worthwhile to write about. FAZ, on the other hand, just, well, lies doesn't understand the story.

The "magnitude is is staggering", [Peer Steinbrück SPD] wrote in an op-ed. "Half a billion German meta-data were vacuumed"[..]. Staggering is in this context probably only the extent of the fallacy wich the chancellor candidate of the SPD fell for. Because the data, which this was about, had nothing to with German telephones or computers.

Well, really? He goes no to write that Steinbrück claimed that Merkel broke her oath"on the basis of unverified statistical information and allegations of a former secret service employee". This is how deceit in the modern media functions. This is about Boundless Informant. The Guardian has a info graphic, which the NSA (not Snowden) put into a presentation, which clearly shows that Germany is the most spied on country in Europe. The graphic shows according to the NSA (via the Guardian):

"The tool allows users to select a country on a map and view the metadata volume and select details about the collections against that country."

So we know for a fact, that the spying on German citizens is massive, we are talking China levels here.So what makes the FAZ pretend otherwise? They mixed up the whole story. There was a claim a few days ago (Spiegel wrote about it and I picked it up) that the BND (Federal Intelligence Service) was the source of the the vast amounts of meta-data, the NSA collects on Germans. This and only this seems to be not the case. I wrote:

Update: According to Zeit the BND supposedly removes German phone numbers and e-mails with the German top-level domain.  If that is true, the intelligence service "only" gives away personal data of Germans with a .net, .com, .org or any other TLD that isn't .de; additionally "only" Germans, who live abroad, are affected by the BND giving the NSA their IP addresses.

So, it might be true that the source of the data on Germans is not the BND, but this does not change the fact that the NSA does collect an enormous amount. In fact, if the Zeit information is correct, then in the BND worldview, then Peter Carstens, who wrote the FAZ article, is not German. For FAZ chose .net instead of .de. So, he is actually one of many Germans which could be sold out by the  intelligence service, if what we know about the filters is correct. But the BND not only possibly - for all we know - selling out FAZ.net reporters, like Mr. Carstens, but also every other German would have been quite the icing on the cake.

The NSA operates the - strangely named - Dagger complex (let's not talk about Ramstein) within Germany, but on US soil (yeah German laws don't matter at all in some parts of Germany), probably not as a vacation destination for stressed out operators. So, it is fully capable of collecting the relevant data all on their own.

The reporter seems quite triumphant that the SPD also sold out to the US, but actually, we know that every single government (thank God for Süeddeutsche) since the 50ies has done so. So, the BND working together with the NSA in Bad Aibling (small town- former NSA facility), on orders of the SPD government in 2002 does not come as a surprise.

It is not only one reporter. The whole newspaper does not understand the story. First they report that, NSA data helped finding German terrorists and now their story is that there was no data. Daniel Deckers, who wrote  the comment above, also wrote an article TEN DAYS AGO, in which the German Minister of the Interior clearly admitted that the NSA has access to some German meta-data. 

 "The authorities have to know about those who, from Berlin, communicates with those phone numbers (sic!) [from other African, Asian like Somalia, Pakistan countries] ."

Of course, the claim that it is only Germans who talk with people from Mali, Somalia and Pakistan is obviously nonsense (look at the boundless informant map). The whole point of the, let's call it, NATO spy network was that each country would uphold the liberties of their citizens, while they spied on the citizens of their friends. So nobody has a right to privacy anymore, but at the same time the governments can pretend to not be responsible.They are gutting the constitutions of all countries, and the FAZ has nothing better to do than to jump on what is nothing more than a misunderstanding; and now they pretend as if nothing ever happened. This is disgraceful.

Merkel's "Government Program" for the Next Four Years

Next month there will be elections in Germany, and every party has a program, which nobody will read, and no one in the party will care about after the elections anyways. So, up until now I had not checked the CDU government program (German pdf) for the next four years out. But, Wolfgang Münchau did take a look; and finds it that is  "shocking, because it shows no ambition". He concludes that this "program is not suitable for governing." So, I also had to take a look. It is actually, well, worse than Münchau says.

The program basically only consists of wants. The CDU wants: competitive corporate taxes, sustainable growth, research and development, a curious country, a good climate in firms, a stable currency, an independent ECB, full employment, prosperity for everybody and the euro in its current form(no euro bonds or other means of debt sharing). So, how do they want to achieve prosperity for everybody for example (page 17)?

Prosperity for all through opportunity for success and promotion for everybody

This is neither a sentence (ok it's behind a colon) nor does it make any sense, whatsoever. But fear not the next paragraph has "detail". They call this a "opportunity-society":

In a fast changing world we need a curious and imaginative Germany for a opportunity-society. Unlike red-green [SPD and the Green party], we believe in new technology and want to keep researching [in those fields]. We believe humans are capable to use the chances of new technology; and are able to handle risks responsibly. We are open for new [products], not fundamentally opposed.

This could be about genetically modified crops, if it is not, it a blatant lie about the opposition. Also,  they could have just written "me want research, it good, it produce prosperity", and that would have made more sense. The primary method of reaching the wants seems to be starring at stuff. Another example? Good climate in firms: good! How do they want to improve it? Page 23 has the answer:

Overall, we are convinced that the responsibility for a good climate between employers and employees rests primarily on the social partners [employer and unions] and in the firm.

 Good climate. yes. Doing something: no, that is not the CDU's task. In fact, they only seem to care about lower public debt, unnamed structural reforms in other countries, and R&D. On the latter they actually seem to have a plan involving corporate taxes, but they keep any specifics their secret. In fact, almost all numbers seem to be confidential. The program mentions 25 billion for infrastructure and 500 million for teachers, but there is nothing on the time frame. So, these numbers are utterly worthless.

Münchau is right this program is not suitable for governing a country. What makes it even worse is the total lack of understanding of the economy. Let's look at the "full employment" want, and pretend that starring  at unemployment will be all that is needed. So it is 2016, the CDU has looked at unemployment ("diligence, new ideas and technical progress" will achieve full employment [page 7]) for two and a half years and it has gone down to 4 percent and is close to zero in the R&D relevant fields (this last part is already true in some parts of Bavaria). Significant wage increases start to show and prices are going up. Monetary policy is not available, since it is not the ECB's job to only watch out for Germany (euro are inflation below 2 percent). What now? Higher taxes on higher income could help, or the state could reduce R&D subsidies, or much more immigration (which is mentioned elsewhere, another one of those problems they plan to gaze at) is needed, or more likely. they will blame the ECB; and do nothing.

Should we reach full employment, fiscal policy (strong tightening) will probably have to substitute monetary policy. They say they are able to achieve it then they should give at least some thought to where they want to tighten once they have reached their goal (yes they talk about sound finances all the time, but that wont be enough).

If one asks any random kid, what it would do if he/she were chancellor the second answer behind free candy, will most definitely be: "I would make sure everybody has a well-paying job." Then "taxes should not go up"; and "I want everybody to be happy." This is exactly what the CDU program is. It is the wants of a small kid. There is no substance, and "actions" (starring at stuff) have no (or only positive) consequences in a CDU world. On matters European, unspecified structural reforms will make the boo-boo go away; and then each country can be export world champion, and we can all live happily ever after.

The whole program is an absolutely horrible read, lacking any substance. Of course, the last CDU program was pro nuclear power; and Merkel had no problem to get rid of this former core of conservative policy in an instant. The election is about people, not topics; and Merkel will almost certainly lead her party to victory, which could be part of the reason for this non-program. Also, to be fair their program seems to have more substance than that of the 30%-unemployment-hell-yeah, the science-sucks and also the slave-labor-is-awesome parties.

Next, I will torture myself by reading the SPD program.

Economic Impact of NSA revelations Part 2

 In part 1 I wrote, that I expect Microsoft to suffer a slow hit, on both their operating system and  voice over IP business, because of the revelations, but suggested that Google and Facebook are not in danger of suffering immediately, unless there is a significant change in user sentiment, which I do not see, yet. There is one industry though that is bound to experience less revenue pretty much immediately: US cloud computing

US firms are the dominant force in providing cloud services world wide. The corporation between the companies and the NSA threatens their business model, which is based on three pillars:

• Price
• Availability and speed
• Trust and security

They pretty much have through their corporation with the US government demolished what is likely the most important of the pillars, and damaged it for all similar services, no matter where they are located, because of the danger that the data are intercepted, if no adequate encryption (backdoors might be in any US based solutions) is used. Also in addition to the NSA effort, the British GCHQ stated that it wants both to dominate the Internet, and to help UK economic interest, which puts any data at risk that moves through the country, so basically everything that is sent outside of Europe (and much of the data sent within the continent), will likely be intercepted.

German managers, IT and security professionals see the US (26 %) now closely behind China (28 %) [makes me wonder if the study only allowed to choose one country] as "a high risk place for industrial espionage", according to FT. The German Chambers of Commerce and Industry expert Treier expects that the focus will move "more to European [cloud] service providers" and that companies will be in general more careful when choosing cloud or other IT services. ITIF (pdf) expects a 10 to 20 per cent drop (up to $35 billion in revenue until 2016) in foreign markets for US firms. In fact 10 per cent of non US Cloud Service alliance members have according to a study already cancelled projects with US service providers. 56 % said they would be less likely to choose an US services. The VDMA (one of the largest industry associations in Europe) is worried that the espionage is "also purposefully" targeting the South and West of Germany to conduct industrial espionage. So, it seems quite clear that the industry will significantly reduce their exposure to US cloud and therefore intelligence services.

Private Internet users in Germany are also starting to become suspicious. 19 per cent want to forgo cloud services, according to BITKOM (Federal Association for Information Technology, Telecommunications and New Media). But the organisation says that, "it does not seem likely that the behavior of people online will change". I agree with that assumption for the most part at least at the moment. The study also shows a significant decrease in trust towards states and companies, when it comes to data security. So I reckon that, if one picks a new service it will less likely be one located in the US or Britain. A much better choice is clearly Switzerland, due to its neutrality, which makes the country less likely to sell out legitimate users. There is one exception though: online office solutions like google docs might put sensitive material at risk, so there might be a drop in user numbers in that field. Something one does not have to fear when it comes to things like music online, for it is unlikely that the NSA cares if one likes Hans Zimmer or Two Steps from Hell better. So private customers will likely be more careful what data they store online and possibly look towards services in safer countries. 

German firms trust the US about as much as China, when it comes to industrial espionage and will therefore move away from US cloud services towards either internal solutions (presumably not the best option) or European (not Airstrip One) providers. It seems unlikely that private customers will also reduce the use of US cloud service to the same extend, since the data they store is typically not sensitive. Switzerland could profit strongly from their neutrality, which could in fact turn the small country into the next Silicon Valley, because any service they provide is from now on inherently better than anything any NATO country based firm has to offer (French and German governments are very much participating in the effort to dominate the Internet).