Should We Double Down on Clean Energy?

Examining Europe's results

In his State of the Union address, President Obama promised to "double down on a clean energy industry that's never been more promising." This was made all the more clear last week when the President proposed to increase Department of Energy’s renewable energy budget by $522 million – a 29 percent increase. His administration lost the same amount in taxpayer money ($527 million) by betting on Solyndra so before it doubles down, maybe it should note how Spain and Germany are hedging their green energy bets.

Spain was one of the first nations to embrace subsidized green energy, but with unemployment now at nearly 23 percent, Spain recently halted all new subsidies to renewable energy. In 2009, economists from King Juan Carlos University in Spain found every green job created in Spain cost nearly $750,000, including a staggering $1.3 million for every job created in the wind industry. And for every green job created in the country, the private sector could have created at least 2.2 jobs using the same resources.

These policies did little to make renewable energy more efficient. But instead of passing the high costs on to consumers, Spanish utilities have been required to eat the losses, racking up $32 billion in state-backed debt by the end of 2011. If companies actually charged what it costs to deliver green energy, Spanish citizens would be paying roughly $4 to $5 billion more in energy bills each year.

Even as President Obama vowed he “would not walk away from the promise of clean energy” or “cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here,” German officials were debating whether to cap, reduce, or scrap the country’s subsidies to solar.
   
Germany is home to nearly half of the world’s solar panels, which is to produce 7 percent of its energy needs – if the sun was always shining. But the sun does not always shine, so they actually only produce 3 percent of the country’s energy (solar accounts one-tenth of one percent of America’s energy). In recent weeks, Germany’s solar panels have produced almost no electricity, due to overcast skies and winter’s short days.

This inconsistent energy source has cost Germans more than $130 billion in subsidies to date, including more than $10 billion last year.  Unlike Spain, higher costs are passed on to the consumer, and Germans, who already pay the second highest electricity bills in the E.U., can expect to pay more than $250 in higher bills this year.

One thing that Germany, Spain, and U.S. have in common is their tendency to promote one type of energy and lambast others. Last year, following the panic from the nuclear power plant disaster in Japan, German officials voted to phase out all of the country’s nuclear power plants – even though Germany’s vast solar energy systems produce less electricity than two of the country’s remaining nine nuclear plants (8 plants were forced to close in 2011). Siemens recently estimated that the exit from nuclear power could cost German families more than $2 trillion by 2030, roughly two-thirds of the country’s GDP.

Here in the U.S., government officials are quick to deride energy sources that have fallen out of favor (oil, coal, nuclear) and promote less reliable, trendy sources of energy. In 2007, President George W. Bush said, "It’s in our vital interest to diversify America’s energy supply, and the way forward is through technology. We must continue changing the way America generates electric power by even greater use of clean-coal technology; solar and wind energy; and clean, safe nuclear power."

The Obama administration has followed up by pouring billions of dollars into renewable energy sources.
A U.S. Energy Information Administration report found, “The value of direct federal financial interventions and subsidies in energy markets doubled between 2007 and 2010, growing from $17.9 billion to $37.2 billion.” In 2011 alone, $12.2 billion in loan guarantees were doled out to green energy companies, the same program that gave Solyndra $535 million. President Obama just called for an “all-of-the-above strategy that develops every available source of American energy.”

The best thing President Obama and Congress could do for the nation’s energy future would be to remove the subsidies and corporate welfare programs that prop up Solyndras and benefit everyone from green energy startups to oil companies.  It can be done. Even the long-protected ethanol tax credit was finally allowed to expire at the end of 2011, after 30 years of fleecing taxpayers.

Instead of wasting billions of taxpayer dollars on inefficient energy programs, the best long-term policy is to level the playing field and let consumer demand determine the winners.

Adam Peshek is Research Associate





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