High energy costs are a threat to Germany

IHS Inc. has commented on Germany’s competitive position in and the impacts high energy costs may have on it;

‘Energy prices are a key component of Germany’s competitiveness. Rising electricity prices in Germany, and strikingly lower energy prices in North America, are making German products less competitive and forcing firms to relocate to other countries, a problem known as investment leakage. In a highly integrated and specialised economy such as Germany’s, investment leakage leads to the disruption of supply chains and the movement of companies out of Germany. Owing to the nature of Germany’s economy, high energy costs flow from energy intensive industries, mostly at the beginning of industrial value chains, to other parts of the manufacturing sector, dominated by the German Mittlestand, and to the broader economy.’

The situation

Germany has been a world leader for many years in solar energy. The country’s goal has been to deliver competitively prices energy to residents and industry while at the same time lowering its emissions. 52% of German GDP depends on exports and in some way all of the country’s high value exports depend on energy, energy that is getting more expensive and making the country’s exports more expensive and less competitive.

IHS research

According to research, high energy prices may cost the German economy 40 000 jobs in the chemicals sector by 2030. Machinery and motor vehicle manufacturing would lose 85 000 and 87 jobs respectively if energy prices rose.

During 2012, Germany’s energy policy costs totaled 14 billion euros in 2012 compared to 6.2 billion in the US. France and the UK absorbed energy policy costs of approximately 2 billion each last year. US costs are not direct costs paid by industry, but opportunity costs in the form of foregone income for tax breaks of one time payments. Germany’s costs will rise as with electricity prices. This year, IHS estimates that direct net costs will rise to more than 19 billion euros. 

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/16102013/energy_prices_to_impact_germany756/