Germany, once a powerhouse in Europe based on manufacturing technology, has recently fallen to the status of 'the sick man of Europe' due to its inability to bear high energy expenses. The United States, aiming for supremacy in artificial intelligence (AI), has declared an energy emergency and is fervently working to secure energy. With the advancement of advanced technology, energy has become a crucial determinant of national fortunes. This article explores the current and future energy policies of South Korea through the cases of Germany and the United States.[Editor’s Note]
Volkswagen, which means 'people's car' in German, has closed 3 out of 10 factories in Germany since last year, resulting in a reduction of tens of thousands of jobs and a restructuring plan that included a 10% pay cut for employees. The world's largest chemical corporation, BASF, also announced in 2023 that it would reduce 2,600 jobs, including the partial closure of its Ludwigshafen plant in Germany.
Germany's automotive parts manufacturer Continental also declared last year that it would cut 7,150 jobs, and earlier this year, it announced an additional plan to reduce 3,000 jobs in the automotive research and development sector by 2026. Bosch, known for automotive parts and power tools, plans to cut 5,500 jobs worldwide, including 3,800 at its business sites in Germany by 2032. Miele, a German home appliance company with a 125-year history famous for its 'never-fail washing machine,' also revealed plans to transfer some of its operations from Germany to Poland.
German corporations are closing factories, reducing workforce, and relocating production bases to neighboring countries, embarking on a 'de-Germany' initiative. This is a consequence of the skyrocketing energy expenses caused by the economic downturn following the COVID-19 pandemic and the outbreak of the Russia-Ukraine war. According to a 2023 survey by the Federation of German Industries, 59% of German corporations cited 'energy security and costs' as the reasons for relocating production bases abroad.
The surge in energy expenses in Germany is largely self-inflicted. Just before the Russia-Ukraine war, Germany imported most of its energy from Russia, with 55.2% of its natural gas, 56.6% of its coal, and 33.2% of its oil coming from there. However, following the war, Europe has supported Ukraine by imposing sanctions against Russia, and in retaliation, Russia has controlled the supply of natural gas and crude oil heading to Europe.
Germany, which has pursued a phase-out of nuclear energy over the past decade, lost significant electricity production capacity after the halt of Russian energy supply, leading to soaring electricity prices. According to the London Stock Exchange Group, in 2023, the average wholesale electricity price in Germany rose to twice the levels recorded between 2019 and 2021. During last winter, electricity prices even soared to ten times the usual rates.
The impact on Germany's industrial sector has also been severe. As the supply of Russian natural gas was halted, the chemical sector, which relied on it as a primary raw material, suffered the most direct hit. According to the German Chemical Industry Association, one in ten chemical corporations in Germany plans to permanently cease production due to the repercussions of the Russia-Ukraine war.
Additionally, with electricity prices soaring, Germany's key industries, including steel, plastics, batteries, and automobiles, which typically have high electricity consumption, have also started to reduce production. At the same time, the expensive electricity costs have been directly reflected in manufacturing expenses, further worsening export competitiveness.
In this series of events, Germany's unique bureaucracy has also contributed to exacerbating the energy crisis. For instance, GEA, a German food processing company, installed solar power generation facilities in its factory to achieve energy self-sufficiency and applied for power supply approval, but it did not receive approval for more than a year.
Recently, Germany's industrial sector has recorded production levels lower than those of ten years ago. According to the Federal Statistical Office of Germany, the industrial production level, with 2021 as the baseline (100), peaked at 116.3 in November 2017 but temporarily dropped to 77.1 in April 2020 when the COVID-19 pandemic began. However, even after the pandemic, production levels have largely remained below 100, falling to 88.3 by the end of last year.
Last year, Germany's gross domestic product (GDP) was 4.3053 trillion euros (approximately 6,713 trillion won), marking a 0.2% decrease compared to the previous year. This follows a 0.3% decrease recorded in 2023, marking two consecutive years of contraction. Ruth Brandt, the president of the Federal Statistical Office of Germany, noted that 'periodic and structural pressures such as intensified competition in export industries, high energy expenses, elevated interest rates, and uncertain economic outlooks are impeding Germany's economic development.'