Germany's Coming Green Energy "Economic Miracle"

I’m old enough to remember the German post-World War II “economic miracle.” (Their term was “Wirtschaftswunder.”). After more than ten years of government direction of the economy under the Nazis, followed by the devastation of the war, Germany after 1945, under economics minister Ludwig Erhard, adopted the model of low taxes and light regulation. The economy boomed for decades on end.

But Germany then gradually turned away from Erhard’s prescriptions. Today Germany is twenty or so years into the most aggressive green energy “transition” of any country with a large economy, with the government firmly in charge of picking the winners and losers in the energy sector. At this writing, Germany’s consumer electricity rates are in the range of triple the U.S. average. My January 3, 2023 post quoted a German energy market guru named Mirko Scholssarczyk forecasting yet further big increases:

“40 cents per kilowatt-hour [is] likely to be the new normal in 2023 and 2024, and . . . prices could even rise to 50 cents per kilowatt-hour after that.”

That would put German consumer electricity rates at about 4 to 5 times the U.S. average — assuming that the U.S. does not go down the same path and drive rates up the way Germany has.

Is anybody over there in Germany learning anything? Don’t count on it. A March 10 post at the site No Tricks Zone has the title “As German Economy Reels, Chancellor Promises Going Green Will Lead To ‘Economic Miracle.’” Yes, it will be a new “economic miracle” — but this time not led by free market entrepreneurialism, but rather by a government-directed and taxpayer-subsidized energy transition. Or at least that’s what German Chancellor Olaf Scholz claims to believe. NTZ links to a German-language site called Pleiteticker.de, and provides translations of the key passages:

“Chancellor Olaf Scholz is now promising a new economic miracle through investment in climate protection, regardless of the miserable economic situation in which the Federal Republic finds itself,” reports Germany’s new, critical online news site, Pleiteticker.de. . . . “Because of the high investments in climate protection, Germany will be able to achieve growth rates for some time, as last seen in the 1950s and 1960s,” said the Chancellor.

In Scholz’s vision, economic growth results from “investments,” so if the government just provides enough billions in compelled “investments” the economy is sure to boom — even if the “investments” are in things that would immediately go bust in an uncompelled and unsubsidized environment, such as wind and solar electricity generation or electric heat pumps for home heating. Basically, Scholz has the same economic vision as our President Biden.

NTZ quotes Pleiteticker’s reaction:

“Real wages most recently fell by 3.7 percent in 2022 compared with the same quarter of the previous year. At the same time, consumer prices rose by 8.6 percent, while food and energy prices increased by around 20 percent. Economists expect German GDP to fall in the first quarter of 2023, which would be the second time in a row – a recession. Major German companies, most recently BASF, are leaving the country.”

Next up in Germany’s energy transition is the full electrification of home heating, to be brought about by compelling everybody to replace gas furnaces with electric heat pumps. On February 28, NTZ reported that Germany Economics Minister Robert Habeck had introduced legislation to ban new gas furnaces beginning in 2024, with existing gas furnaces likely to be allowed only a 30 year life, after which they would be required to be replaced. On March 11, NTZ, citing another German-language source called Blackout News, reports that the government intends to seek fines of 50,000 euros for anyone who doesn’t comply with the requirement to switch to electric heat:

All gas and oil heating systems will need to be replaced after 30 years of operation, with no possibility to repair and keep them going. . . . “Those who fail to comply with the replacement obligation are to pay a fine of up to 50,000 euros,” reports Blackout News here. “Plans to ban gas and oil heating systems from 2024 have taken many Germans by surprise. If a heating system has to be replaced in the coming year – whether due to a defect in the old gas or oil heating system or due to a new building – a climate-friendly alternative must be installed. . . . The measures are intended to serve as a deterrent and ensure that defective systems are actually replaced with more climate-friendly options.”

Has anybody in Germany finally had enough? From NTZ’s March 11 post:

The plans drafted by Habeck and the German government, however, have run up against fierce opposition since they become known. Opposition parties have sharply criticized the plans, and others within the government view the proposed measures as a problem.

Meanwhile, in Britain’s Daily Mail on March 7, there is a big article about the experiences of UK consumers with heat pumps for home heating. The headline is “How heat pumps leave some homes so cold people are ripping them out.” The article notes that the UK has a program offering homeowners a subsidy of up to £ 6000 if they install a heat pump. Unfortunately, when the temperature drops below about 30F, the heat pumps don’t work very well. Excerpt from the Daily Mail article:

Homeowners who have bought homes with heat pumps already installed - or purchased new builds where pumps were part of the package - have told us about a litany of problems associated with the technology. . . . Some have got so fed up with them they have had them removed — or installed additional heating systems to step in when the pumps don't generate enough heat.

Heat pumps that run on electricity at 5 times U.S. prices, and then don’t keep you warm on the coldest days of the winter. That’s the green idea of an “economic miracle.”