High Power Prices Plague Europe

In a lot of ways, the United States can learn much from Europe. Let’s hope energy policy is not on the syllabus.

Recent weeks have seen a rash of reports chronicling rising power prices in Europe. In Germany, electricity costs are expected to rise by 70% by the year 2025. The cause? According to a recent report by the Karlsruhe Institute of Technology (KIT), “the costs are due to the green energy transition and the planned phase out of nuclear power.”

The total electricity bill for German households will be nearly $27 billion before the decade is over, according to a study by McKinsey. It doesn’t have to be that way, of course. French households pay about 40% less for electricity than Germany.

Residential costs, though, may be just the tip of the iceberg in Germany. On May 8th, Germany’s third largest aluminum producer, Voerde Aluminium, filed for bankruptcy citing higher costs of production including electricity. Consider that industrial energy users in Germany pay about 15¢ per kWh, the highest rate in Europe. French companies pay a little more than half that.

“Production of metals, particularly aluminum, is at risk in Germany due to high electricity prices that are no longer internationally competitive,” said Ulrich Grillo, president of the WVM, Germany’s trade body for the metal industry.

Bernd Bechtold, President of the Baden-Wuerttemberg Chamber of Commerce and Industry put it more simply, “If electricity prices are rising so dramatically, we have concerns about the competitiveness of German companies.”

Prices are rising in the UK continue to rise, as well. A recent study found that the cost of household energy in the UK has risen an astonishing seven times faster than household income since 2004. The cost of energy is now the top worry of British households, with 90% of respondents citing energy prices as their first concern. 32% of the British says that with an average residential power bill of $160 a month, energy has become unaffordable.

Hurting consumers and driving away jobs. Those certainly aren’t the outcomes we want from American energy policy. That’s why we should think twice when energy advocates point eastward with “success stories” that Americans should emulate. Sometimes what seems like a guiding light is really a warning signal. Let’s hope we are wise enough to know the difference.