Last week’s results from the German utility Eon offered a stark reminder of the costs of the changes taking place in the energy market. Eon posted a loss of €16bn as a result of the transformation of the German energy market (known as the Energiewende) over the last decade.
But we are not at the end of the story. To pursue its chosen policy objectives, Germany needs to expand the scope of the system it has created. Companies and investors across Europe who assume that the status quo will persist should take a careful look at Eon’s experience and be prepared for radical change.
The company’s problems stem from two specific policy decisions made in Berlin — the determination to press ahead with the transition to a low carbon economy in a way that gives priority to technologies such as wind and solar power, and Chancellor Angela Merkel’s edict issued after the Fukushima accident in 2011 to accelerate the closure of Germany’s nuclear power stations. Read more