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December 30th, 2019 | 05:45 CET

E.ON, EnBW or RWE - who is restructuring Germany after Merkel?

  • Central planned economy
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The planned economy is de facto the opposite of the market economy. In a market economy, the free market decides what is produced and offered in what quantity and type of products and services. In a planned economy, the state determines what is to be implemented - or rather: implemented - in what periods and how. The disadvantage of a planned economy is that plans are often implemented inadequately and with delays. In the past, communist governments have worked with the system of the planned economy, but due to the lack of success the states have failed economically. Under German Chancellor Angela Merkel, patterns of planned economy are increasingly becoming apparent and economic challenges are growing exponentially. At the turn of the year, the problems in the energy sector, among others, increase intensify.

time to read: 3 minutes | Author: Mario Hose
ISIN: DE000ENAG999 , DE0007037129 , DE0005220008

Table of contents:

    New year, higher costs

    The German state levies, taxes and levies in connection with the centrally controlled energy policy and these currently account for 53.8% of total costs. In detail, in addition to the electricity tax, the concession fees are levied on the municipalities. In addition, there are the levies resulting from the Combined Heat and Power Generation Act (KWKG) and the Renewable Energy Sources Act (EEG), the §19-NEV levy, the §18-AbLaV levy, the offshore grid levy and value-added tax.

    In addition, the fees for the use of the electricity grids are also added at 23.5%. The supplier is left with 22.8% for the actual electricity - a planned economy redistribution monster has emerged as it is unique in the world and can hardly be explained. In 2020, electricity price increases of over 5% on average are expected, but there are also suppliers in Germany who have announced increases of over 18%.

    Populism or surprising environmental awareness?

    Chancellor Angela Merkel in October 2010 decided to extend the operating life of Germany's nuclear power plants, thus overturning the red-green government's already agreed phase-out until 2021. The runtime extension of the nuclear power plants allowed E.ON, EnBW and RWE to generate CO2-neutral nuclear energy until after 2030. About half a year later, on 15 March 2011, the Chancellor overturned this decision and imposed a moratorium, which led to the Atomic Energy Act and sealed the shutdown of all German nuclear power plants by 2022.

    The sudden and serious change of heart came after a nuclear accident in Japan, 9,000 kilometers away. With this decision against nuclear power, Germany was then in the worldwide focus of public interest. In the meantime, the nuclear power plants in Japan are running again, only the German government stuck to its decision. Currently, there are about 450 nuclear power plants in operation, 54 new ones are being built and 120 are planned. More and more countries, such as Bangladesh, Turkey and the United Arab Emirates, are using modern nuclear energy to protect the climate and the environment. E.ON, EnBW and RWE must watch.

    Electricity costs become a locational disadvantage

    The free planning of the energy industry was massively restricted by the Atomic Energy Act of August 2011. The business organization of the companies was strongly changed by the shortening of the operating time - with dramatic consequences for customers and investors. Private households in Germany will pay around EUR 0.305 per kilowatt hour for electricity in 2019, the highest prices in the world. In 2000, the cost per kilowatt hour was still EUR 0.14.

    For German SMEs, energy supply will increasingly become a locational disadvantage in international competition. In view of the fact that the Federal Government wants to see seven million electric cars on German roads by the year 2030, it remains open where the additional supply of clean and CO2-neutral energy will come from. Perhaps atomic electricity from France will close the gap? Nuclear power plants are the world's second largest source of low-CO2 electricity supply after hydropower plants. It has the potential to reliably meet the growing demand for electricity at competitive prices while being environmentally friendly.

    Who will restructure Germany after Merkel?

    About 40% of the electricity in Germany consists of renewable energies, i.e. solar, water and wind. Until the end of the year, another 13% will come from CO2-neutral nuclear power plants and the rest from gas, lignite and hard coal power plants. How Germany intends to meet its ambitious goals of reducing CO2 emissions by 55% by 2030 compared to 1990 levels will probably remain a secret of the Chancellery's planned economy.

    In June 2019, Germany was already on the verge of a collapse of the electricity grid three times, a blackout that would have had serious consequences. ATMs and cash registers could no longer settle accounts, mobile phone networks may collapse, traffic lights may fail and animals in fattening farms might have to die because they could not be fed by hand. Chancellor Merkel will not run again in 2021. It remains exciting to see who will be prepared to take up the difficult legacy and, more importantly, to manage it successfully. Sooner or later, unrealistic wishful thinking may drive Germany to ruin - just like the GDR.

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    Der Autor

    Mario Hose

    Born and raised in Hannover, Lower Saxony follows social and economic developments around the globe. As a passionate entrepreneur and columnist he explains and compares the most diverse business models as well as markets for interested stock traders.

    About the author