Heat pumps could bring the German economy to its knees.
Governments keep making the same mistake, of backing ‘winners’ long before they’ve proven themselves in the market
Emissions would come down. It would create a high skill, high wage economy. And it would reboot industry, accelerate productivity, and deliver a boost to growth. For years we have been told that moving to Net Zero would create hundreds of thousands of jobs, and billions of euros, dollars and pounds have been thrown at the companies promising to make that happen.
But hold on. Now it turns out that the green jobs are disappearing at an accelerating pace – and the investment in creating them will have been squandered.
There should be plenty of money to be made from heat pumps, especially in a country such as Germany where the Greens are part of the coalition government, and where a relatively new, well-insulated housing stock makes them more than a match for older gas or oil boilers. And yet, it has turned out to be far from easy. According to the German business paper Handelsblatt Stiebel Eltron, one of the country’s largest pump manufacturers has this week been forced to announce job losses. The reason? Sales have been weaker than it expected. Despite generous subsidies for homeowners, and €18.6 million from the state to support production, the pumps are falling flat, with only 90,000 sold in the first half of this year against an official target for 2024 of 500,000.
The trouble is, that is far from an isolated example. Shares in the German battery manufacturer Varta are down by over 80 per cent so far this year, and there are warnings that the company may not survive after making heavy losses on energy storage unit for hybrid sports cars.The Belgium chemical group Umicore announced a €1.6 billion hit last month as slowing sales of EVs hit its battery material business, and it decided to postpone plans for a battery recycling plant. Siemens Energy has announced big losses on its unit that makes the giant wind turbines that were to be built across the countryside and along every coastline. And of course, all the major European auto manufacturers have had to scale back their plans for electric vehicles as sales disappoint, and high-quality, cheap Chinese models take whatever few orders there are.
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The list goes on and on. The companies that poured billions into building the industrial infrastructure for the transition to Net Zero are running into trouble one by one.
It is not hard to work out what has gone so badly wrong. Governments have tried to pick winners, backing new technologies before they have proven themselves in the marketplace, and then doubling down on that up with quotas and subsidies even in the face of consumer indifference. Even worse, they have thrown their support behind the wrong businesses, rewarding companies that tick all the right climate change boxes, rather than waiting to see which ones can make the best product at the lowest possible cost. Industrial strategy, as so often in the past, has been a recipe for disaster.
Right, now we are seeing the entirely predictable consequences of that. Money is being wasted on an epic scale, right across the continent. No one should be in the least surprised if many of the green projects the British government has backed turn out to be hopelessly uneconomic as well, yet our energy secretary Ed Miliband, and the climate change fanatics who put constant pressure on the Government to reach Net Zero harder and faster, are intent on pouring even more money into what will inevitably be an even larger series of white elephants. In reality, the “well paid green jobs” are disappearing fast, replaced with poorly paid “green redundancies”. Governments will be left with a huge bill for a costly series of mistakes – and the unfortunate workers who thought they were being offered a lucrative career will have to find something else to do very quickly.
