Saturday, October 24, 2009

The Color of Money

I have no objection to "renewable energy," only to nonsense about green jobs, absurdly espensive (and lethal) subsidies, and false and impractical efficiency claims. So read this new study on the Economic impacts from the promotion of renewable energies: The German experience by the Rheinisch-Westfälisches Institut für Wirtschaftsforschung think tank (at 5-7):
An aggressive policy of generously subsidizing and effectively mandating "renewable" electricity generation in Germany has led to a doubling of the renewable contribution to electricity generation in recent years. . .

The total net cost of subsidizing electricity production by PV modules [photovoltaic solar cells] is estimated to reach 53.3 Bn € (US $73.2 Bn) for those modules installed between 2000 and 2010. While the promotion rules for wind power are more subtle than those for PV, we estimate that the wind power subsidies may total 20.5 Bn € (US $28.1 Bn) for wind converters installed between 2000 and 2010. . .

There are much cheaper ways to reduce carbon dioxide emissions than subsidizing renewable energies. CO2 abatement costs of PV are estimated to be as high as 716 € (US $1,050) per tonne, while those of wind power are estimated at 54 € (US $80) per tonne. By contrast, the current price of emissions certificates on the European emissions trading scheme is only 13.4 Euro per tonne. Hence, the cost from emission reductions as determined by the market is about 53 times cheaper than employing PV and 4 times cheaper than using wind power.

Moreover, the prevailing coexistence of the EEG and emissions trading under the European Trading Scheme (ETS) means that the increased use of renewable energy technologies generally attains no additional emission reductions beyond those achieved by ETS alone. In fact, since the establishment of the ETS in 2005, the EEG’s net climate effect has been equal to zero. . .

Renewable energies are thus among the most expensive GHG reduction measures. . .

Consumers ultimately bear the cost of renewable energy promotion. In 2008, the price mark-up due to the subsidization of green electricity was about 1.5 Cent per kWh (2.2 Cents US $), meaning the subsidy accounts for about 7.5% of average household electricity prices.

While employment projections in the renewable sector convey seemingly impressive prospects for gross job growth, they typically obscure the broader implications for economic welfare by omitting any accounting of off-setting impacts. These impacts include, but are not limited to, job losses from crowding out of cheaper forms of conventional energy generation, indirect impacts on upstream industries, additional job losses from the drain on economic activity precipitated by higher electricity prices, private consumers’ overall loss of purchasing power due to higher electricity prices, and diverting funds from other, possibly more beneficial investment.

Proponents of renewable energies often regard the requirement for more workers to produce a given amount of energy as a benefit, failing to recognize that this lowers the output potential of the economy and is hence counterproductive to net job creation. Significant research shows that initial employment benefits from renewable policies soon turn negative as additional costs are incurred. Trade and other assumptions in those studies claiming positive employment turn out to be unsupportable.

In the end, Germany’s PV promotion has become a subsidization regime that, on a per-worker basis, has reached a level that far exceeds average wages, with perworker subsidies as high as 175,000 € (US $ 240,000).

It is most likely that whatever jobs are created by renewable energy promotion would vanish as soon as government support is terminated, leaving only Germany’s export sector to benefit from the possible continuation of renewables support in other countries such as the US.
The truth is, the costs of green energy often outweigh its benefits. Despite what Congressman Waxman and Markey might say.

(via Power Line)

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