Austerity pulling plug on Europe's green subsidies

Austerity pulling plug on Europe's green subsidies

ERIC REGULY | Columnist profile | E-mail

 

LONDON— From Wednesday's Globe and Mail

Published Wednesday, Jan. 26, 2011 7:15PM EST

 

Source: http://www.theglobeandmail.com/report-on-business/commentary/eric-r...

 

The Spanish and Germans are doing it. So are the French. The British might have to do it. Austerity-whacked Europe is rolling back subsidies for renewable energy as economic sanity makes a tentative comeback. Green energy is becoming unaffordable and may cost as many jobs as it creates. But the real victims are the investors who bought into the dream of endless, clean energy financed by the taxpayer. They forgot that governments often change their minds.

 

Spain is famous for its housing bubble, whose bursting drove the national unemployment rate to 20 per cent-plus. Less well known is the renewable energy bubble, inflated by a government bent on shaking down the taxpayer to subsidize clean energy – a social program disguised as a politically correct industrial program.

 

It worked. Sunny Spain became the world’s top solar power producer. Since 2002, about €23-billion has been invested in Spain’s photovoltaic (PV) industry, which sucked up €2.7-billion in subsidies in 2009 alone, or more than 40 per cent of the freebies doled out to the country’s entire renewables sector.

 

When the Spanish economy went into the toilet in 2008 and 2009, austerity measures were put into place. At first, it appeared the solar industry would be spared the worst of the cutbacks. That changed a bit, but only a bit, in November, when a royal decree reduced tariffs by up to 45 per cent on new PV plants; existing plants would remain untouched. Then – whammo! – a new royal decree landed with a thud just before Christmas. While it didn’t change the tariff, it retroactively limited the number of production hours that PV plants could qualify for the subsidies.

 

Spain’s solar industry lobby group, the Asociacion Empresarial Fotovoltaica, estimated that the second decree would effectively reduce tariffs received by PV plants by 30 per cent, forcing many of the PV companies to default on their debt. Infrastructure Investor magazine called the second decree “the Christmas Eve massacre.”

 

Other European countries are also taking a long, hard look at their renewable energy sector and wondering whether it’s affordable. In December, the French government unveiled a plan for a three-month moratorium on new solar projects that are eligible for subsidized tariffs. The goal was to prevent a speculative PV bubble while it mulls new regulations for renewable energy.

 

There is no doubt the replacement regime will be less generous. CRE, the independent regulator of the French energy and natural gas markets, recently estimated that taxes on electricity would have to almost triple to meet the rising costs of renewable energy. The question, of course, is whether rising energy taxes could kill more jobs than those created by renewable energy expansion.

 

Germany is scaling back subsidies, too, and revealed another reduction a few days ago to households that generate electricity with their own solar panels. In the United States, where the incentives generally come in the form of tax credits instead of subsidized tariffs, the appetite for long-term support seems to be waning, partly because of the natural gas glut. Ditto in Canada. In Ontario last year, the average price for power was 3.7 cents per kilowatt hour. The feed-in tariff for solar installations ranged from 44 cents to 80 cents, that is, up to 20 times the market rate. (Ontario revised that higher end of the range downward to 64.2 cents last summer.) Watch the next Ontario government drain the renewable energy slush fund.

 

Renewable energy is fraught with difficulties. In less-sunny climates, PV panels make little sense, though that hasn’t stopped Germany and Britain from installing them on rooftops everywhere. Wind power is becoming hugely popular in some parts of the world. But since the wind doesn’t always blow, backup power has to be installed. That means consumers have to pay for the capacity twice and the backup power is usually of the fossil-fuel variety. Denmark, which has a reputation as the cleanest of the clean countries, actually generates about half its electricity from coal, the grubbiest fuel. That proportion hasn’t varied in a decade in spite of the country’s relentless pursuit of wind power.

 

The austerity programs have piled on additional difficulties in the form of subsidy reductions. No government would announce “temporary” subsidies, for fear of scaring off investment in renewable energy. Still, that’s exactly what the subsidies are turning out to be. Investors everywhere are going to get slaughtered as debt-swamped governments trim or eliminate the freebies. The ailing share prices of renewable energy companies such as Spain’s Iberdrola Renovables gives you an idea of the (waning) investor sentiment.

 

The renewable energy bubble was inflated by government subsidies. Those same governments are now deflating them. Turns out the subsidies were too good to be true.

 

 

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Comment by Dan McKay on January 27, 2011 at 11:14am
The investors are us. It's our money supporting this industry. Money, some in the big vacuum called the federal government, are realizing isn't there. Some even realize government shouldn't be involved with industry, or is it too late. Iberdrola has Maine's government and GE CEO has the president wrapped around his finger. Wall Street and the love of money brings about betting on America' downfall.
Comment by alice mckay barnett on January 27, 2011 at 11:06am
all I read in the paper is the big investments the wind industry is making.
Comment by Dan McKay on January 27, 2011 at 5:53am

With the thought in mind that no wind developer would pursue projects without huge taxpayer subsidies, consider Rep. Fred Upton's comments as posted below. He is chairman of the U.S. House Committee on Energy and Commerce :

“Innovation is not measured in federal dollars spent or government mandates imposed.  Energy independence is not achieved through government dependence.  Congress spent tens of billions of dollars on the federal government’s favored energy sources in the stimulus, yet America remains dependent on hostile foreign nations to power our lives.  We know the answer is not to hyper-subsidize preferred industries or force consumers and job creators to purchase energy they cannot afford.  That is not how the free market works.

 

Comment by freemont tibbetts on January 27, 2011 at 5:18am
I sure hope,  All the people in our  GREAT  STATE  OF MAINE  that is in small gov. and big gov. that is dealing with Industrial Wind Power, read the the  GOOD  OLD  FASHION  COMMON  SENSE  in this article, before they VOTE to  DESTROY  any more  MOUNTAINS of MAINE.                                                     Freemont Tibbetts  37, Bruce Tibbetts Dr.  Dixfield Maine.

 

Maine as Third World Country:

CMP Transmission Rate Skyrockets 19.6% Due to Wind Power

 

Click here to read how the Maine ratepayer has been sold down the river by the Angus King cabal.

Maine Center For Public Interest Reporting – Three Part Series: A CRITICAL LOOK AT MAINE’S WIND ACT

******** IF LINKS BELOW DON'T WORK, GOOGLE THEM*********

(excerpts) From Part 1 – On Maine’s Wind Law “Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine if the law’s goals were met." . – Maine Center for Public Interest Reporting, August 2010 https://www.pinetreewatchdog.org/wind-power-bandwagon-hits-bumps-in-the-road-3/From Part 2 – On Wind and Oil Yet using wind energy doesn’t lower dependence on imported foreign oil. That’s because the majority of imported oil in Maine is used for heating and transportation. And switching our dependence from foreign oil to Maine-produced electricity isn’t likely to happen very soon, says Bartlett. “Right now, people can’t switch to electric cars and heating – if they did, we’d be in trouble.” So was one of the fundamental premises of the task force false, or at least misleading?" https://www.pinetreewatchdog.org/wind-swept-task-force-set-the-rules/From Part 3 – On Wind-Required New Transmission Lines Finally, the building of enormous, high-voltage transmission lines that the regional electricity system operator says are required to move substantial amounts of wind power to markets south of Maine was never even discussed by the task force – an omission that Mills said will come to haunt the state.“If you try to put 2,500 or 3,000 megawatts in northern or eastern Maine – oh, my god, try to build the transmission!” said Mills. “It’s not just the towers, it’s the lines – that’s when I begin to think that the goal is a little farfetched.” https://www.pinetreewatchdog.org/flaws-in-bill-like-skating-with-dull-skates/

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Hannah Pingree on the Maine expedited wind law

Hannah Pingree - Director of Maine's Office of Innovation and the Future

"Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine."

https://pinetreewatch.org/wind-power-bandwagon-hits-bumps-in-the-road-3/

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