Overpaying for Green Power

Americans are adopting a failed type of clean energy subsidy—the feed-in tariff—just as Europeans are abandoning it.

“How can California encourage investors to generate renewable electricity? How about a guarantee that if they generate the power, they'll be paid at a good price?” suggests Ray Pingle of the Sierra Club. Fair enough. But the price proposed by the Sierra Club and some members of Congress is three to five times more than the current average price of electricity.

Green power advocates in the United States have started pushing for a European-style subsidy scheme in which homeowners or businesses that install solar panels or windmills can sell their excess power back to the grid at inflated prices. Utilities are required by the state to pay above-market rates for this environmentally-friendly power.

These so-called feed-in tariffs were first devised in Germany in the early 1990s and have been adopted by nearly 20 other countries since then as a way to boost the installation of renewable energy production. And if encouraging the installation of renewable energy capacity is the chief goal, feed-in tariffs do work. As the result of its feed-in tariff scheme, Germany has the world's second-largest installed wind capacity—behind the United States—and the largest installed solar photovoltaic capacity in the world.

However, a recent report by the independent German economics think tank, RWI, noted that the solar electricity feed-in tariff of 59 cents per kilowatt-hour in 2009 is more than eight times higher than the wholesale electricity price and more than four times the feed-in tariff paid for electricity produced by on-shore wind turbines.

And even with that dramatic subsidy, solar panels still provide very little of Germany's power. The report noted, “Installed capacity is not the same as production or contribution." In 2008, 6.3 percent of Germany’s electricity production was from wind, followed by 3.6 percent from biomass and 3.1 percent from water. Meanwhile, the report notes, "The amount of electricity produced through solar photovoltaics was a negligible 0.6 percent despite being the most subsidized renewable energy, with a net cost of about €8.4 billion (US $12.4 billion) for 2008.” German consumers foot that bill. In 2008, the price mark-up due to green energy subsidies amounted to 7.5 percent of average household electricity prices. Keep in mind that German residential electricity prices are already high at about 30 cents per kilowatt-hour. The average American pays about 12 cents per kilowatt-hour.

Last year Vermont adopted a feed-in tariff scheme, guaranteeing solar power 30 cents per kilowatt-hour for 20 years. The average price of electricity for residential users in Vermont is 15 cents per kilowatt hour. Legislators and utilities are anxious to keep this form of high cost renewable energy from significantly boosting the rates consumers pay, so they typically limit the amount of energy that can come from such projects. In Vermont, for example, no more than 50 megawatts of generation capacity can receive the feed-in tariff subsidies. Since total electric generation capacity in Vermont is currently 1,111 megawatts, this means that less than 5 percent of generation capacity will be eligible for feed-in tariffs.

The local municipal electric utility in Gainesville, Florida, adopted the first feed-in tariff scheme in the United States last year as well. Solar energy generators are guaranteed 32 cents per kilowatt-hour for the next 20 years. The current average cost of electricity in Florida is just over 12 cents per kilowatt-hour. But because the amount of energy that can come from subsidized solar power generators is capped, Gainesville consumers should see their electricity bills increase by less than 1 percent.

Advocates justify feed-in tariffs on two grounds. First, that they aim to cut greenhouse gas emissions. However, the RWI analysis found that the feed-in tariffs for solar electricity in Germany are equivalent to paying more than $1,000 per ton to reduce carbon dioxide emissions (the wind power subsidy from feed in tariffs was better at only $80 per ton). In late 2009, an emissions permit for a ton of carbon could be had for less than $20 on the European climate exchange. “Hence, the cost from emission reductions as determined by the market is about 53 times cheaper than employing [photovoltaics] and 4 times cheaper than using wind power,” notes the report. Clearly, feed-in tariffs are an absurdly expensive way to cut carbon dioxide emissions.

Advocates also claim that increasing the market for renewable sources of energy will eventually drive down their prices so that they become as cheap as fossil fuels. In Germany, feed-in tariffs are supposed to decline 5 percent per year as renewable energy technologies become more efficient and cheaper. This digression in subsidy rates is also a feature of various feed-in tariff schemes adopted or being considered in the United States. However, the RWI report found instead that feed-in tariffs create perverse incentives to lock into existing high cost technologies. And why not? Feed-in tariffs function like old-fashioned cost-plus utility rate settings since they guarantee cost recovery plus a set profit margin. So the incentive is to install the high cost equipment before the subsidy declines.

In October 2009, the New York Times Green, Inc. blog summarized a report by Deutsche Bank and the Earth Institute of Columbia University by concluding that countries that adopted feed in tariffs are “the safest harbors for investors looking to finance clean energy ventures.” After all, the feed-in tariffs are set based on recouping all costs plus a guaranteed profit margin.

However, a footnote buried deep in the report turned out to be prescient: “While the new German coalition is discussing accelerating the degression [sic] of feed-in tariffs, this is tied to declining cost for solar power. We believe that the investment climate in Germany remains strong.” What the footnote meant is that the new German government was perhaps going to cut back more dramatically than anticipated on money doled out to participants in the feed-in program.

Last week, the German environment minister made good on that threat, announcing that feed-in tariffs for residential installations would be cut 15 percent and payments for installations on farmland would drop by 25 percent. “We want to introduce the free market and not provide existence guarantees for participants. It'll be a boost for technology," said German environment Minister Norbert Roettgen. So much for the safe investment harbors that feed-in tariffs supposedly create. As one analyst told Reuters, the German solar market will likely shrink by at least 25 percent in volumes and 40 percent in revenue in 2010.

Other European countries are cutting their feed-in tariffs as well. For example, France announced it would cut its feed-in tariffs for rooftop solar photovoltaic systems by 24 percent, from 78 cents to 60 cents per kilowatt hour. By the way, the average price for electricity in France is 18 cents per kilowatt hour. To live by government subsidy is to die by the withdrawal of government subsidy.

The evidence from Europe is in: Feed-in tariffs don’t appreciably cut greenhouse gas emissions and are not very effective at accelerating energy innovation. The irony is that American states and municipalities appear to be adopting this failed renewable energy strategy just as the Europeans who invented it are scaling it back.

Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is available from Prometheus Books.

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  • Old Mexican||

    Meanwhile, the report notes, "The amount of electricity produced through solar photovoltaics was a negligible 0.6 percent despite being the most subsidized renewable energy, with a net cost of about €8.4 billion (US $12.4 billion) for 2008.”

    Hey, it keeps the solar panel manufacturers and installers happy . . . that's what counts, not what the greedy and stupid beer-guzzling folk think.

  • ||

    Maybe if we stopped subsidizing coal and oil and have a level playing field where renewable energy would have a fighting chance?

    Just get rid of all subsidies, except for those deemed necessary for national security purposes.

    Just a thought.

  • Old Mexican||

    Re: kyle,

    Maybe if we stopped subsidizing coal and oil and have a level playing field where renewable energy would have a fighting chance?

    Sure, but I don't believe renewables cannot compete because of the supposed subsidies on coal and oil, since renewables also obtain plenty of subsidies. The problem with renewables has to do with their terrible dispersion and not with lack of subsidies.

  • People Power Hour||

    I'd have to think that the various tax-breaks, subsidies, regulations & laws favoring them, etc., most assuredly favor oil & coal....

  • ||

    >I'd have to think that the various
    >tax-breaks, subsidies, regulations &
    >laws favoring them, etc., most
    >assuredly favor oil & coal

    You would have to think this if you had a particular political view that it was true. And even if you could do the math and perform an analysis, you could not be sure of the results, because the input assumptions would be nothing more than WAGs. This is a typical green red-herring - "external costs" that are highly skewed in the direction the analyst wants them to go. See, e.g., IPCC reports on "climate change"...

  • ||

    My BOTE calculations tell me that before including atmospheric externalities of the fossil energy, fossils and renewable energies receive about the same amount of subsidies and market protections per useful energy sent to market.

    The difference is the two orders of magnitude in generation creates a 'quantity has a quality all its own' situation. I.e. the fossil fuel lobby is absurdly powerful.

    And then there IS the issue of the externalities.

  • ||

    The government wants to pay me to waste resources? Who could have guessed?

  • jester||

    It really is a win-win for Greens. It installs more renewable and by jacking up the price it invites less consumption. It is a clever way to tax without calling it a tax.

    Once you accept AGW paradigm, it's really the only socially responsible thing to do. Just like being charged more for trash collection after your community decides on mandatory recycling. I think in some earlier post this week on two new Green books, one of the authors pretty much said economics don't matter.

    Once it's put into moral terms, the other aspects don't matter. Like whaling. Whaling is no longer about protecting certain whale species from extinction (a wise proposition if whales are valued as a future resource), it is that killing any kind of whale no matter how abundant is wrong.

  • Tman||

    Maybe if we stopped subsidizing coal and oil and have a level playing field where renewable energy would have a fighting chance?

    Renewable energy (aside from Hydro) would not exist in this country without subsidies. I'm all for getting rid of subsidies for energy across the board, but there is no need to "wonder" what would happen. It couldn't compete at todays rates even if the wind blew at its highest strength all day long. Which it doesn't.

  • Chad||

    Of course, neither would coal or nuclear, both of which are the recipients of massive subsidies. What's left at that point?

  • Tman||

    Coal and Nuclear, minus subsidies would perform just fine, primarily because they are a constant source.

    Unless you have something that says otherwise? I'm all ears.

    Again, I agree we should dump the subsidies, but I haven't read anything that shows that Wind or Solar would be a viable investment in the energy sector in terms of reliable output and profitability.

  • Chad||

    I just posted them below. The externalities related to coal are enormous. The lowest estimate I have ever seen was $.04/kwh, and most are above ten cents. This alone makes coal more expensive than wind.

    Your argument that renewables can't supply baseload is just wrong. First, we already have almost entirely baseload, so we don't need any more for the indefinite future. There is no technical change or need for significant storage until you hit twenty percent or more renewables (just ask Denmark). In any case, we already have a fair amount of storage, mostly pumped storage, and these can be expanded. The Great Lakes in particular offer many opportunities to set up pumped storage facilities...ones that happen to be located between our best wind resources and our biggest loads, if you are paying attention.

  • Tman||

    Your argument that renewables can't supply baseload is just wrong.

    Tell that to Scotland.
    http://news.scotsman.com/lates.....4442417.jp

    Coal back-up for wind power 'will cost £100bn'

    By Jenny Haworth
    Environment Correspondent
    A LEADING power company has claimed wind energy is so unreliable that even if 13,000 turbines are built to meet EU renewable energy targets, they could be relied on to provide only 7 per cent of the country's peak winter electricity demand.
    E.On has argued that, during the coldest days of winter, so little wind blows that 92 per cent of installed wind capacity would have to be backed up by traditional power stations.

    It argues this would require new coal-fired power stations to be built so they could be used in an emergency when little wind blows.

    This, E.On suggests, will mean that, to meet renewable targets of 20 per cent of energy being provided from renewables by 2020, the UK's installed power base will need to rise from 76 gigawatts today to more than 100GW.

    The company estimates this could cost £100 billion.

    Or England-

    http://www.telegraph.co.uk/ear.....-snap.html


    Wind energy supply dips during cold snap
    Britain's wind farms have stopped working during the cold snap due to lack of wind, it has emerged, as scientists claimed half the world's energy could soon be from renewables.


    By Louise Gray, Environment Correspondent
    Published: 6:39PM GMT 09 Jan 2009

    The Met Office said there has been an unusually long period of high pressure across the UK for the last couple of weeks, causing the cold snap and very little wind.

    Since Boxing Day much of the country has suffered sub-zero conditions with frozen rivers and lakes and even the sea in the south of England, at Sandbanks in Dorset. In the last few days temperatures in southern England plunged as low as 17.6F (-8C). However the weather is expected to warm up over the weekend, with wind speeds also picking up.

    But sources in the energy industry say that the lack of wind has caused the country's wind farms to grind to a halt when more electricity than ever is needed for heating, forcing the grid to rely on back up from fossil fuels or other renewable energy sources.

    In the long term, experts fear that the intermittent nature of wind will force the UK to rely on insecure energy supplies, for example gas from Russia, and are calling for a greater energy mix including controversial nuclear and coal-fired power stations.

    Both articles debunk your argument that it needs to reach "20%" to become a baseload problem.

    And you said that "the externalities related to coal are enormous" and they say it totals at the most ten cents/kwh. But you are forgetting that Wind is TEN TIMES more expensive in terms of total cost than fossil fuels. Ten cents/kwh will not hit that threshold.

    Try again.

  • Tman||

    Here's another study from Germany repeating what was posted above.

    http://www.clepair.net/windsecret.html


    Summary:
    Wind generated electricity requires back up capacity of conventional power stations. This capacity is required to deliver electricity to consumers when wind supply is falling short. To have the non-wind power stations ramp up or down to compensate for the stochastic wind variations causes extra efficiency loss for such power stations. How much efficiency is lost in this way and how much extra fuel is required for this extra balancing of supply and demand is unknown. In this article we attempt to make an educated guess.
    The extra fuel required for the efficiency loss must be added to the fuel required building and installing the wind turbines and the additions to the power cable network. While these extra requirements may be too small to notice when the installed wind power is a small fraction of the total capacity, matters change when wind capacity becomes significant. Based on the German situation with 23 GW installed wind power we show that it becomes doubtful whether wind energy results in any fuel saving and CO2 emission reduction. What remains are the extra investments in wind energy.
    Conclusions:

    1. It is necessary to establish on the basis of data, rather than model predictions, the level of extra fuel use caused by decreased efficiency of fossil back-up for wind power, before countries translate large investment plans in wind energy into reality.
    2. Wind energy easily costs more than it yields, not only in monetary terms, but also in non-sustainable energy use and thus it will easily increase rather than decrease CO2 emission.
    3. Electricity companies must urgently provide the real data on extra fuel required to back up for wind.
  • Chad||

    What Denmark *does* vs what some self-interested company claims. Not much of a debate there, now is there?

    E.On is the second-biggest emitter in Europe. Why would you trust their opinion on anything that would clearly disadvantage them vs the competition?

    Btw, Denmark pulls this off by doing exactly what one would expect: they use hydro to store the extra energy, and to tap it when the wind doesn't blow.

    Where the heck are you getting the "ten times" figure? That isn't even remotely in the ballpark. Wind costs are typical 4-8 cents per kwh, coal's nominal cost is 2-3 cents. Natural gas lies in between. If wind costs 20-30 cents per kwh, as you claim, please explain why my power company sells it to me for twelve cents, including distribution? Surely not the 1.6c/kwh subsidy.

  • ||

    "Wind costs are typical 4-8 cents per kwh,"
    Cite please.

  • ||

    So, tiring of Chad's whining when he has to cite a source, I did some checking.
    The answer (no surprise) is that Chad seeming pulled those numbers out of his butt.
    Here's, oh, 25 pages explaining that you're not going to get a number without a whole lot of details:
    http://www.mnforsustain.org/wi.....ricity.htm
    The best I found was a comparison, in, of all places, the NYT:
    http://www.nytimes.com/2009/03.....renew.html
    "experts not aligned with either camp estimate that wind power is currently more than 50 percent more expensive than power generated by a traditional coal plant."
    Can we agree that Chad's butt is not a reliable source of data?

  • Chad||

    http://www.nrel.gov/docs/fy05osti/37657.pdf

    Please quit bothering me with requests to do Google101 for you.

  • ||

    Sorry you actually have to back up silly claims with data; what is it you studied? Basket weaving?
    And that site is, interestingly, from 2005, is published by a government agency with, shall we say, "interest" in the numbers, and quotes costs where others fear to tread.
    Yes, I saw it, and figured it was entirely too facile with numbers.
    I'd guess Chad's butt was the source....

  • ||

    The desperation of those willing to make any excuse or overlook any amount of data in defense of a near-mythological belief that free-markets and free-market practitioners can do no wrong is perhaps the best illustration of the veracity of data uncovered by social psychologists researching authoritarianism/political conservatism. That their findings are extremely disconcerting given their ability to delude themselves into believing whatever they are told that promises to maintain their belief that the status quo is superior and that any significant changes in the way we do business must inherently be wrong-headed.
    Elsewhere on this website their is a half-hearted attempt to trash the research without appearing to hold such a bias. Nevertheless, it explains so much about the craziness we see issuing out of some conservative corners.

  • Colonel_Angus||

    From Chav's gay .gov website pdf pamphlet:

    "Wind energy requires a production tax credit (PTC) to achieve these economics. True, but every energy source
    receives significant federal subsidies; it is disingenuous to expect wind
    energy to compete in the marketplace without the incentives enjoyed
    by established technologies."

    Is it also disingenuous to expect wind to compete in a marketplace without any subsidies?

    "Wind energy is unpredictable and must be “backed up” by conventional generation. No power plant is 100% reliable. During a power plant outage—whether a conventional plant or a wind
    plant—backup is provided by the entire interconnected utility system."

    Traditional generating stations have a much more predictable reliability. If wind requires up to about 90% backup capacity from some other source, how exactly is it economical to maintain TWICE the necessary capacity (wind and coal) and have one of them sitting around idle at all times?

  • Tman||

    What Denmark *does* vs what some self-interested company claims. Not much of a debate there, now is there?

    Yes Chad, we know how much you hate the "evil corporations". Get over it. Numbers are numbers.

    You use Denmark as an example, but fail to realize Denmark is a horrible example of the problem when compared to the US or any other country that can't rely so easily on hydro backup. Not to mention the fact that Denmark is neither isolated nor unified electrically - East Denmark and West Denmark are unconnected and each is part of a major grid system. In 2005 about 11.6 billion kWh was exported and 12.9 billion kWh imported - from Germany, Norway and Sweden. The main import is from Sweden and the main export is to Germany.

    Oh, and Denmark STILL produces over half its electricity from fossil fuels.

    http://www.ens.dk/graphics/UK_.....007/energy statistics 2007 uk.pdf

  • Chad||

    If we need more storage, build it. For example, there is a proposal out there concerning the pumped storage we already have near Niagara which notes that it could be expanded to twenty GW in size without having an appreciable effect on the level of either lake (less than an inch). There are a number of other places in the Great Lakes region which are suitable for more of the ~1GW facilities which we already have. How many GW do we need, exactly?

    There are no technical showstoppers, only political ones. Imagine some evil country blew up all our coal reserves tomorrow. What would we do?
    What is stopping us from doing that now? Only ourselves.

  • ||

    Chad|1.26.10 @ 7:56PM|#
    "There are no technical showstoppers, only political ones."
    And that little matter of costs...

    "Imagine some evil country blew up all our coal reserves tomorrow. What would we do?"
    Stop reading comic books?
    Uh, Chad, coal is pretty dispersed.

  • ||

    Chad: Currently there is about 750 GW of coal and gas baseload capacity in the US -- there are no current storage technologies that could enable the substitution of renewable energy supplies for an appreciable portion of that capacity.

  • Kroneborge||

    I believe besides hydro storage, compressed air could also work.

    http://www.scientificamerican......grand-plan

    Finally let's not forget about geothermal. Very competitivly priced, and can operate 24/7

  • ||

    The Great Lakes in particular offer many opportunities to set up pumped storage facilities...

    Yeah -- good luck with that. As far as I know, the only pumped storage plant in the Great Lakes is south of Ludington, MI. It's an enormous facility on prime freshwater dune property (prime for both recreation and ecological preservation). It has also been controversial over the years because of fish killed by the pumps.

    The chances of acquiring a site and getting permission to build another such installation are effectively zero. In fact, one large piece of lakefront dune property that had been owned by Consumers Energy (presumably with the idea that it might become another plant) was donated and converted into a nature preserve a couple of years ago (the Arcadia Dunes / C.S. Mott Nature Preserve).

  • ||

    Chad: Just FYI -- Denmark has the highest cost electricity per kwh in Europe at 38 cents. US averages 12 cents. So add 10 cents for fossil fuel externalities and you still get 22 cents.

  • Solanum||

    Denmark has the highest cost electricity per kwh in Europe at 38 cents.

    Chad probably considers that a feature, not a bug. If we all lived in matchbox city apartments, drove Priuses, and restricted our meat intake to chewing on bison jerky once a year, then high energy prices wouldn't be a problem.

  • jester||

    Reminds me of a work colleague who said she got into a co-op in Manhattan for under $200k. I asked her how much sq. ft. and she said about 300.

    I explained that it wasn't a co-op she had bought into, it was a 'coop'.

    But hey maybe the Yogi Kudu can point the way.

  • Chad||

    If I were paying Denmark electric prices, I would be about $100 a month. If you would be out more, that just means you are being wasteful.

  • Chad||

    I would think that would only be relevant if the cause if their high power costs was the fact that they use more renewables, which it isn't (or at least not much of it is). It looks like the majority of their "costs" are taxes, actually.

    http://www.finfacts.ie/ireland.....6575.shtml

    It's odd that despite high taxes and high energy costs, their economy is doomed beyond all comprehension, as the right-wing around here insists it must.

  • ||

    Chad: The U.S. electricity cost figures to which I've been linking from the EIA include taxes too.

    Who said Denmark is "doomed"? FYI per capita income (PPP) is $36,000 per year compared to US per capita at $46,000 per year. Just saying.

  • Old Mexican||

    And don't forget the higher cost of living in Denmark compared to the US - Purchasing Power is higher in the US than in Denmark. Just sayin'.

  • ||

    They have a higher cost of living because energy is mroe expensive.

    Energy drives everything in the economy. Raising energy prices pretty much directly translates into higher cost of living, and thus lower living standards.

    Advocating paying more for energy because it'll change our lifestyles is approximately equivalent to hailing the virtues of poverty.

    Environmentalists are just the new monks, that's all.

  • Colonel_Angus||

    Would you just give up on this fucking shit? Subsidies are not the same thing as externalities. Furthermore, your claims of externalities are impossible to objectively quantify.

  • ||

    It's Chad. He's been an idiot on this website since roughly its inception. He is routinely embarrassed through the citation of factual data and statistics, but he just gives up for the day and comes back with more of his inanity when the next article is published.

    However, the most hilarious aspect of 'green power' is the fact that it's the greenies who are mostly stopping it. They scream that they want renewable energy, yet they don't want it built anywhere. We can't put a solar array in the desert in California because it could harm the precious desert turtles and snakes. We can't put wind farms in the bay because it would ruin the rich eco-hypocrites' nice view. Solar and wind need VAST areas of real estate along with massive, unsightly distribution lines (either on the ground or under the ground, meaning ground has to be excavated). They need constant maintenance. Wind power generation thins from front-to-back on a wind farm. There are so many practical problems with using wind and solar for energy generation, which is why they don't compete on the free market.

    Unless we are able to commit a whole state to solar generation (and look how well that worked for secure nuclear waste disposal) or wind, which still wouldn't be massive enough or stable enough to substantially feed our grid, the best we can hope for is private solar. But as the article points out we need to get rid of the idiotic inflated-cost buybacks of surplus energy.

  • ||

    "Conservatism is not the doctrine of the intellectual elite or of the more intelligent segments of the population, but the reverse. By every measure available to us, conservative beliefs are found most frequently among the uninformed, the poorly educated, and the less intelligent" (p. 38). McClosky, H., Conservatism and Personality. American Political Science Review, 52, 27-45.

  • Nancy||

    Right on! And what's more, those dumb conservatives have no concept of context; they just blab out the result of random synapse firings.

  • ||

    kyle: Couldn't agree more. For example, see my June 20009 article "It's Alive!" on the resurgence of alternative energy subsidies where I wrote:

    Instead of creating artificial alternative energy markets that depend on government support and the high price of oil, policy makers should be focusing on removing barriers to the creation of revolutionary new technologies. In their 2008 book Earth: The Sequel, the environmentalists Miriam Horn and Fred Krupp write: “Mandates presume that the government already knows the best way to proceed on energy. But the government doesn’t know any better than anyone else. The best thing to do is to level the playing field…and then let the market sort things out.”

    While Horn and Krupp were specifically addressing the problem of climate change, the point applies to all sorts of energy innovation. During the last half-century, both federal and state governments have intervened repeatedly in energy markets and tried many times to steer the evolution of technologies via research and development subsidies. Far more often than not, this activity has turned out to be a colossal waste of taxpayer dollars,...

  • Tman||

    Mr. Bailey,

    Do you believe that there would even be a viable market at all for Wind or Solar energy on a large scale (not talking rooftop waterheaters or whatever but actual electricity for the masses) if there was a "level playing field"?

    I don't see how these numbers add up. Every country that has installed wind or solar has had to also construct additional nuclear or fossil fuel electricity backup sources for when the wind doesn't blow or the sun doesn't shine.

    Do you have some statistics/math/examples that would prove that it could compete on a level playing field?

  • Tman||

    (reads June 2009 Bailey Article....remains puzzled..repeats question)

    Mr. Bailey,

    Do you have some statistics/math/examples that would prove that it could compete on a level playing field?

  • ||

    Tman: For those worried about man-made global warming, the way to "level the playing field" in this case is to put a price on carbon dioxide emissions that account for the externalities of burning coal. Once that is done, no subsidies should be given to any form of energy supply -- let the cheapest ones win.

    You may also want to take a look at my Energy Futures article, also from June, 2009. I compared the current capital costs of coal, gas, solar, wind, biomass, and nuclear power equivalent to a 1,000 megawatt generation facility operating 90 percent time. You will find that solar capital costs are easily $18 billion for 1,000 megawatts while coal capital costs with carbon capture and sequestration are estimated to be $5 billion.

    I also supply numbers of the amount of subsidies that each technology has enjoyed since 1960.

    Chad: You may want to look too.

  • Chad||

    Ron, in order to "level the playing field", you would need taxes on CO2, SOx, NOX, PM2.5, PM10, radioactives, ozone, PAHs, VOCs, dioxins, heavy metals, water pollution, noise, stench, dust, visual blight, harm to the wildlife, and leaving scars on across our beautiful landscapes that our great-great-(skip a million greats)-great grandchildren will still be looking at. And even then, you still wind up with the problem of declaring your "level playing field" after giving some teams a huge head start.

    At some point, trying to get the "market" to correctly solve the problem becomes absurd, and other ways of approaching the problem should be integrated with market-based approaches.

    I like to think that the market is pretty good at sorting apples, but is only so good at choosing between apples and oranges...and piss poor at choosing between apples, cell phones, pristine mountaintops, a vacation, and love. The market is a highly appropriate tool, for example, for choosing between competing solar technologies. It starts straining when comparing solar to wind, and by the time it tries to compare solar to coal, the mounting differences in externalities and long-term impacts render the market's decision meaningless.

  • ||

    Chad: To get the government to "solve the problem" has proven even more absurd just as my column proves.

  • Chad||

    Given that we have two absurd systems, the best solution is to pick the best parts of each as a check against the other, rather than choosing one system that you know will fail and just going with it.

    And of course, government would be a lot less absurd if a substantial fraction of our voters and politicians didn't live by a "government is always bad, therefore disrupt everything it tries to do (except line my pocketbook)" philosophy.

  • ||

    Chad|1.26.10 @ 8:39PM|#
    "Given that we have two absurd systems, the best solution is to pick the best parts of each as a check against the other, rather than choosing one system..."
    Oh, yes! Let the one with the guns and the one without guns 'compete'!

    "....that you know will fail and just going with it"
    Begging the question.
    Boy, you've got a million of them, don't you?

  • ||

    I like to think that the market is pretty good at sorting apples, but is only so good at choosing between apples and oranges

    Are you serious? Do you really believe that the market allocates resources more badly than central government planning. So I guess it's in a market economy, not a centrally planned one like the old Soviet Union, that you find huge piles of apples in the grocery store that virtually have to be given away before they rot, while oranges disappear off the shelves the few times a month they are actually available?

    Do you even think about the implications of your metaphor before you utter it, or is it just such a useful cliche that thought is unnecessary?

  • Chad||

    Given that the "market" here in the US spend the last thirty years pouring our capital (and lots of borrowed capital) into McMansions, SUVs, and cheap crap from China, how can YOU be serious in claiming that the market is at all decent at allocating resources?

    Again, you fall back to whining about communism, your traditional red-herring which no serious person advocates. There is a million miles between that and where we are, and it is full of rich, happy countries that are doing better than we are.

  • stuartl||

    Jeez, Seamus. When you bought that big house and car for your oversized family, and bought cheap stuff from China to help save for their college education, you were being greedy and misallocating resources. Just because buying the house helped pay for the builder's and laborer's families, and the car salesman's kids college education, somehow you think that this is a good allocation of resources? The government, run by brilliant minds like Chad, would do a much better job.

    Due to your bourgeois attitudes, you will live in a shack and tend crops for a living, just like all the other happy people.

  • ||

    You people have no idea what how extreme you've become after having 50 years of "capitalism = purity and goodness, socialism = evil and decay" stuffed down your throats since birth. You are now imbuing a series of mathematical formulas and circumstances with qualities belonging to a sentient, all-knowing, all powerful provider-spirit who will always look out for us if we simply let it do whatever it wishes.
    When we put that alongside your conviction that it's /government/ that is responsible for sending your jobs overseas, slashing workers benefits, increasing fees and penalties for every conceivable transaction while shrinking the middle class down to numbers Pinochet would be comfortable with while paying themselves bonuses in the hundreds of millions of dollars...and yet YOU STILL see them as the "good guys"!!.... it sure looks to the rest of the world like many of you have been conned so completely by Cold War rhetoric and a ruthless business/political elite, that you now think up is down and what helps you hurts America too much to be tolerated...or some damn thing you's had best come to grips with before your entire GDP is looted and your left with the biggest banana republic in the world. Because that's precisely where this "let the free markets solve everything!" - nonsense is taking you.

  • Chad||

    And yes, Ron, $18 billion/GW sounds about right for 2009 installs. Of course, solar panel prices have plummeted since then, more than 20%. That $18 billion will be less than $10 billion (inflation adjusted) within five years.

    Anyone who thinks they know what carbon sequestration is going to cost is just blowing smoke, as no one has done it yet at any relevant scale. It will surely lower the efficiency of the plant by at least a quarter, meaning it will have to be a third bigger, driving up capital costs by the same margin even BEFORE any of the magical carbon capture equipment is installed. And of course, CCS only internalizes some of the costs, even if it works.

  • ||

    Chad|1.26.10 @ 8:34PM|#
    "And yes, Ron, $18 billion/GW sounds about right for 2009 installs. Of course, solar panel prices have plummeted since then, more than 20%."
    Cite, please. And, no, I'm not expected to find the cherry-picked data you claim. *You* made the claim; let's see the cite.

  • Chad||

    http://pubs.acs.org/isubscribe.....5bus1.html

    It's behind a pay-wall, but here it the relevant excerpt.

    "Module producers in China with low costs and high capacities, including Suntech Power, Trina Solar, and Yingli Green Energy, will have an edge as prices drop, Reis says. “The Darwinian process is under way right now—higher cost regions may not have module facilities in the future,” he warns. Some vendors are already producing solar modules at a price below $2.00 per watt, Reis adds, down from $4.00 per watt in early 2008."

    Note that this is from a chemical industry trade mag, which is all about making $$$ off this phenomenon, and therefore cares keenly about prices.

  • Tman||

    Thanks Ron, I appreciate the info and I look forward to finding out from your article how the numbers behind the subsidies breaks down.

    However I am not particularly worried about global warming, but I am worried about air pollution. I would agree that externalities should be factored in cost wise for noxious gasses from fossil fuels but I don't consider CO2 to be among them. Since I actually exhale CO2 I think it's pretty stupid to say that it's a "pollutant", therefore it shouldn't be included in the externalities issue.

    I am interested in the breakdown of the numbers though so thanks for that.

  • ||

    The fact that you *exhale* CO2 means that it IS a pollutant. Because your body is trying to get rid of it.

    Pollutants are also not intrinsic; they are contextually defined. e.g. noise and light pollution are defined by us in terms of extremes in quality and quantity, even though we also need sounds and light to survive.

  • Tman||

    Ron, thanks again for the Energy Futures piece, it's helpful to see the cost analysis broken down as you did.

    If you go by that list Nuclear is more expensive to construct than fossils but clearly the best option for pollution free energy production that is indefinitely abundant, low in cost to operate (again, post production), and capable of providing a baseline uninterrupted power source 24 hrs a day.

    Thats a doozy of an investment though and as you wrote no one has even thought about building a new plant in a long time.

    The externalities of coal and gas definitely are a factor that seems to make them even with gas and even wind in terms of price per kWh if you adjust for carbon neutral requirements. I wonder how much less that cost adjustment would be if you excluded CO2 from the list of externalities. Unfortunately for wind, you have the intermittency issues that negate it's full potential. Perhaps one day our storage capacity will solve that problem but until then clearly it will raise energy costs.

    If you strip these sources of their individual subsidies the market would resolve both the externalities issues for carbon and eventually the storage problem for solar and wind.

    What will promise to NOT produce a winner will be government intervention within the market. It will just continue to piss away tax money on "incentives" that unreasonably distort the advantages and disadvantages of each source while never failing to raise the real costs of electricity.

  • Chad||

    Here is one link to the externalities of coal. It comes from a pro-nuclear site, but is consistent with what one can find elsewhere. Note that Ecu are Euro-cents.

    "The European Union has calculated externality costs for complete energy chains (mining, transportation, operation and disposal of waste). For equivalent amounts of energy generation, the International Atomic Energy Agency (IAEA) summarizes the EU calculations, the coal and oil plants assessed, owing to their large emissions and huge fuel and transport requirements, have the highest externality costs as well as equivalent lives lost. The external costs are some ten times higher than for a nuclear power plant and can be a significant fraction of generation costs. [IAEA (1997), p. 44.] Thus coal externalities, properly accounted, cost 15 Ecu per kWh; oil, 12; gas, 0.6; nuclear"

    http://www.nci.org/conf/rhodes/

    Coal-related pollution kills thousands of Americans each year and does more than a $100 billion dollars in damage to our health. Heap on top of that the AGW-related costs (which are on the same magnitude) and the multitude of externalities related to mining, and the day these are all accounted for, coal plants would be out of business in five minutes. They are only competitive now because of their free permits to dump their garbage into other peoples' backyards.

    This largely leaves nuclear vs natural gas vs renewables, which is a pretty fair fight.

  • Tman||

    See above comments.

  • Old Mexican||

    Re: Chad,

    Among sources for electric power generation, coal is the worst environmental offender. Recent studies at the Harvard School of Public Health indicate that particulates from coal burning are responsible for about 15,000 premature deaths annually in the U.S. alone. [Wilson and Spengler (1996), p. 212.]

    Cause of death: Coal emission inhalation.

    Yeah, sure.

  • Chad||

    Just keep ignoring the science, OM.

    Do you like being responsible for murdering 15000 Americans every year? As long as you dishonestly defending coal, that's what you are.

  • Marc||

    Is that 15000 Americans gross or net?

  • Colonel_Angus||

    As I have said before, this is impossible to objectively quantify, even for the best Harvard career academics.

    It's more likely that 15,000 (unlikely this high) Americans die predictably early because they have some genetic complications that make them more susceptible to illness from both natural and anthropogenic factors which may include the combustion of fossil fuels.

  • ||

    That would be my June, 2009 article.... (and I even previewed).

  • ||

    The scheme was first devised in Germany

    Godwin'd in the original post.

    Impressive.

  • ||

    1990s != 1930s

  • ||

    see my June 20009 article

  • ||

    *shakes fist at squirrels*

  • ||

    My electric bill constinues to climb in the dead of winter, even though we have gas heat and water and do no more laundry (electric dryer) than any other time of the year. In fact, we probably do less than in the sweaty summer. Add to that, almost every light in the house is using a CFL.

    I'm sure the green energy I see enumerated on my bill has nothing to do with the spiralling cost, now at $157 (!).

  • Chad||

    My electric bill is highest in the winter, presumably because of the fans in my central heating unit. I rarely use AC in the summer, so they have little effect then.

  • ||

    The fan run for both the AC and the gas furnace. It's the AC compressor that eats up the most elecricity.

    Our AC runs fairly often in the summer, even though we set the thermostat at 76 degrees.

  • Old Mexican||

    Re: Chad,

    The higher cost of energy in the winter could be also because you and your family tend to turn on lights for longer because of the gloomier and shorter days than during summer.

  • Chad||

    Possible, but our lights are very efficient, and the price swings I noticed change with the temperature in a quite obvious manner, not smoothly lighting would imply. Also, I didn't have such jumps in my old apartment, which didn't have central air.

  • Gregg||

    I have no problem getting an equal rate for the electricity my solar panels feed into the grid BUT seriously, stop the bullshit with the hundreds of billions of dollars per years of tax credits and other corporate welfare to oil, coal and nuclear companies.

    And you can't talk up nuclear power unless you are going to count the costs of corp welfare (trillion since the early 70s), the trillion$ for Yucca Mountain hidden in USDOE's budget [another absorption of liability for the energy companies by the federal govt and the taxpayers] and costs of at least one major accident during the lifetime of the 100 or so new nuke plants we will need to fill the energy demand gap. You start calculating the REAL costs of nuke power - solar and wind suddenly get very competitive.

    You don't need hidden tax scams like this if we had a true competitive energy market - and as long as corporate welfare goes unabated, you will never have a open energy market.

  • Steve Chaos||

    Except there's a problem in your math - your so-called "hidden costs" for Yucca Mountain were paid IN ADVANCE by electric utilities, and thus, ratepayers, by a 1 mil/kwHe fee imposed on all nuclear electricity produced in the U.S. Of course, had you done even the most cursory amount of research, you'd know that over $30 billion has been collected thus so far, and - wouldn't you know it - the DoE has failed in its contractual obligations to provide said repository, and hence has been losing lawsuits hand over fist.

    Of course, when someone claims solar is economically competitive with, well, anything, it's good sign that they haven't done the scarcest of research.

  • strat||

    It's fair to say that many utilities have often not acted in good faith when it comes to grid interties for any kind of small generators, even when it has been mandated by statute. I'd settle for them actually allowing interconnects like the law requires and paying the same wholesale rates as anyone else.

    I was working on some research last year regarding data center energy management. One of the most interesting realizations I came to was that "smart metering" colloquially meant different things in the EU vs the US.

    In the EU, it means optimizing the grids to support decentralized (think village or clusters of homes/buildings) generation of energy.

    In the US it pretty much means demand-based pricing without much in the way of audit for the customers on the pricing inputs and the ability to forcibly shed customer load during peak demand.

    I think elective load shedding is a wonderful thing, and many many commercial enterprises do it, often via radio triggers during periods of peak demand, in exchange for lower prices. I fear that in the residential case it will be the electric equivalent of Internet service providers throttling connections without disclosing their policies upfront.

    Real competition would be a good thing, but the grid has a long way to go before it takes the path of the US phone system. Right now, we're sort of just about at the equivalent of the AT&T divestiture and not quite to the Modified Final Judgement yet.

  • cbmclean||

    kilowatt-hour
    kilowatt-hour
    kilowatt-hour

    When I rule the world I would do one of two things:

    I would mandate that we start talking about units of energy in joules

    or

    I would mandate that we start talking about units of distance in (kilometer per hour)-hours.

  • Zonpower!!!!||

    Make all Americans rich, including the poor!

    The Zon have spoken!

  • Zonpower!!!!||

    Make all Americans rich, including the poor!

    The Zon have spoken!

  • Ratko||

    Our progressives have always been a little slow, possibly even mildly retarded. They usually get their way after their way has been proven to be unworkable elsewhere.

  • Chad||

    Btw, here is an article that you liberatarians might like: It seems that the AGW problem is being tackled one your favorite ways - via Coase's theory.

    http://www.nytimes.com/2010/01.....ts.html?hp

    Any guesses as to what 6500000000^2/2 is? That's how many lawsuits it would take to sort this out. Sure sounds cheaper than cap-and-trade, eh?

    Good luck to Kivalina! Bring those bastards to their knees, and make them beg for a price on carbon.

  • Colonel_Angus||

    I hope they fucking drown. Choosing to live on a beachfront, and on narrow peninsulas is naturally a huge risk. What do you get for relying on variable glaciers to control erosion?

  • suckitupcrybaby||

    Solar independance is unrealistic. Nuclear, natural gas and coal are the way to go. We are independant, but the far leaft and the greeens won't allow us to tap into these sources.
    www.suckitupcrybaby.com

  • ||

    Mr. Bailey,

    While I agree with the thrust of your article, I believe that you are being sloppy in your use of terms in comparing one cost to another. If product A costs $10 and product B costs $12, B's cost is 120% of A's, but B's cost is only 20% MORE than A's. When you say "the price proposed by the Sierra Club ... is three to five times more than the current average price of electricity," don't you really mean "three to five times the current average"? Later in the piece, you talk about a price "more than eight times higher"; again I think you mean simply "more than eight times [the other price]".

    Especially given the emotional reactions that many have to this issue, I think it is imperative to be very careful to word one's claims correctly.

  • ||

    JdeL: Thanks very much for your comment. The 3 to 5 number reflects the feed in tariff payments in the U.S. versus, as you correctly note, the current average cost to residential consumers which includes taxes and transmission charges. The 8X number cited in the RWI report compares the feed-in tariff payment versus the wholesale cost of electricity at the plant gate in Germany. If you exclude taxes and transmission charges, the U.S. costs would be much closer to the 8X cost figure cited by RWI. As you say, I should have been a bit clearer.

  • ||

    Sure, sure. But make sure you also write the article about how fossil fuel companies receive more than twice the subsidies as renewable energy companies and home installation. And that's including the subsidies of corn ethanol in with the renewable amount even though its been established that corn ethanol is not renewable and should be counted if anywhere with the fossil fuel/non-renewable category.

    http://www.renewableenergyworl.....renewables

  • ||

    Ron, You cited the German Enviro Minister, but you left off the rest of what he said, which is that solar will be at price parity with coal-fired electricity by 2013 in Germany. The fact that Spain and Germany are paring back their subsidies is evidence that the price of solar has dropped so dramatically as a result of the increased scale of production which has fed the manufacturing experience curve. Solar PV has dropped in price 3X every single decade since 1958, and the exponential pace of price reduction is accelerating like everything else in the semiconductor and optoelectronic industries.

    The current positions held by everyone on these energy-related issues will begin to be moot by 2013 when solar is at parity with coal. And by 2020, solar will be 1/3 the price of coal. By 2030, solar will be 1/10 the price of coal.
    Q.E.D.

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  • JC||

    The FIT is merely a subsidy method, and has proven to be the most efficient one available. (For further study, I recommend "Policy Brief on FITs", John Farrell, Jan 2008, and Lawrence Berkely Lab "Renewables Portfolio Standards in the US" 4/2008). There is no reason FIT's need to be restricted to renewables - regardless of technology, it is a highly effective way to fairly distribute subsidies since it is transparent and strictly a performance-based incentive - unlike capacity incentives which can result in inefficiencies.

    The fact that Germany is accelerating the degression rate is a sign of the FIT's success, not failure. FIT policy is designed as a bridge, and is expected to have a short and finite life, expiring upon reaching the goal of market parity. The goals associated with FIT policy are about cost reduction, not about installed capacity - it is expected that the free market will take over and supply capacity when costs are reduced through the FIT policy, which is rapidly occuring.

  • solarglobalgreen||

    Can you imagine how much less renewable energy they would use if there were not an initial subsidy?

    "And if encouraging the installation of renewable energy capacity is the chief goal, feed-in tariffs do work. As the result of its feed-in tariff scheme, Germany has the world's second-largest installed wind capacity—behind the United States—and the largest installed solar photovoltaic capacity in the world."

    That's a pretty big caveat.

    This is the way it is supposed to work. Intial subsidies and then back
    off once there is a market.

  • fireofenergy||

    German solar automation may have been the objective. Greed has kicked in. First solar may loose because of the lowering of FITS.
    However, there has, indeed, been much improvement on automation! The authur's point is valid for high FITS. One that pays only marginally above normal cents/kWh will not affect the ratepayer much (unless that person complains about a few dollars per month). Obviously this type of FIT is no good (yet) as solar automation has not yet advanced to a point to generate kWh's for such a low price.

    Good thing for Germany's FIT, otherwise, the tech needed to build the robots would be even farther behind schedule!

    Therefore, large and competing corporations need an very large but marginal FIT as a GUARANTEE to motivate them to create robotic PV factories! Only a very large scale "sell" could ever make that happen! What about the install? Eventually, its price would also come down as more and more installers compete. And since the FIT (that I imagine) is first based on robotic automation, the price per kWh would be low enough to scare off any shady (quite literally) installs...

  • abercrombie milano||

    My only point is that if you take the Bible straight, as I'm sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won't get the full deal by just doing regular skill english reading for those books. In other words, there's more to the books of the Bible than most will ever grasp. I'm not concerned that Mr. Crumb will go to hell or anything crazy like that! It's just that he, like many types of religionists, seems to take it literally, take it straight...the Bible's books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on...the Bible's books were written by people with very different mindsets...in order to really get the Books of the Bible, you have to cultivate such a mindset, it's literally a labyrinth, that's no joke.

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