Biking & Energy Strategy in Germany

Monthly Column
I’m in Berlin.  It came together.  After four months of negotiations with my ex-wife, I organized my life to spend the summer in Berlin.  The birds have just started singing at 3:38am.  I was here last year, but this time I get to explore the city as well as have some time to reflect and think.
Biking,

I’m biking. Okay, this is distinctly not Lafayette, and really not California, but, I’m getting around everywhere, by bike, and hundreds of thousands of others do here too.  In fact, sometimes on the bike lanes, at rush hour, it’s a little bit like the Indy 500 from Breaking Away, that great movie from 1979.  Anyway, the summer weather is just perfect for biking, day or night.  Yesterday I visited a friend who lives on Arsch der Welt, a sweet German term for the end of the world, or in Lichterfelde, which is about 20km away (12 miles).  The ride took almost an hour.  Had I taken public transportation, it would have been an hour trip, door to door, too.  Berlin’s flat and perfect for cycling.  There are bike paths on about 1/2 of the main streets, plenty enough to get everywhere using bike paths 90% of the time.

It feels so good to move and get to places without using a car.  But that’s not just a practical thing, it’s cultural.  My 15-year-old daughter refuses to ride a bike around Lafayette or Walnut Creek.  But she did say she would use a  bike here in Berlin when she arrives. I asked her why she would use a bike here and not at home, and she gave me one of those blank looks, before saying, “because everyone does Dad!”  And I thought… that’s it!  Our surroundings dictate our behavior, don’t they?  And it’s not just 15-year-old girls.  Isn’t it all of us?

I live less than a mile from my office in Lafayette, but I only ride my bike to work a handful of times each month.  But here in Berlin, I think nothing of riding five miles wherever I’m going.  What gives? I think this cultural expectations thing is a big deal.

German Strategy
So here’s another thing I’m thinking about.  Why the heck did the German politicians decide to close  their nuclear plants in the next decade?  Are they nuts?  Germany has few natural resources other than coal.  More than 20% of their energy consumption comes from nuclear power.  Is it safety or is it public opinion?  I don’t know, but I’m going to try and  get a better sense of this in the next weeks.  Here’s my guess:  While this decision to get out of nuclear power seems like an overreaction to the disaster in Japan, I don’t think that this is actually a political decision.  I’m suspecting it is actually an economic bet.  It’s going to take 10 years to close those plants, maybe longer.  I think that Germany is betting that they can develop alternative energy technologies in the next 10 years which will, by 2021, be competitive alternatives to other current sources of nonrenewable energy, possibly even competitive with nuclear.  Now that’s a bet that’s highly dependent on rising energy prices, but perhaps it’s a bet worth making.

If Germany removes the nuclear option, then this guarantees, much like a “federal subsidy,” that there will be industrial and consumer demand for renewable energy sources, which guarantee a much bigger revenue acceleration than might otherwise be the case.  I’m willing to wager that by placing this bet, the Germans think that they can develop first-mover advantages in renewable energy technologies.
I was here from 1990 to 1997.  I saw Germany swallow East Germany whole.  For more than a decade, it seemed a terrible decision.  But that strategy has proven itself in the last five years.  Germany had the foresight, and the dedication to a long-term strategy, to invest trillions into former East Germany.  Might not developing renewable energy be another long-term strategy of merit? Might we not have something to learn in this regard?  And if that’s the case, how can we provide our Washington politicians with political cover to make long-term decisions which won’t cost them their reelection campaigns?  That’s something else to ponder isn’t it?  If you have any thoughts, please drop me a line.

Barnes Capital LLC is a Registered Investment Advisor located in downtown Lafayette in the Bay Area.  We manage trusts and retirement income portfolios. Financial planning is an integral part of our process. We protect client capital using municipal bonds, high-quality dividend-increasing companies and precious metals, which have protected wealth in every epoch spanning five millennia of bankruptcies, inflation and other forms of attrition. Call 925-284-3503 and visit www.barnescapital.com.

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