Europe Nixes Solar Power Subsidies

The Washington Post is reporting today that many European countries are dramatically cutting solar subsidies to the solar power generation industry. Why? Because governments are going broke. As the Post explains: 

Across Europe, governments are slashing public spending to cut their deficits, and green-energy subsidies are a target, too, even as solar power accelerates in the United States, helped by sympathetic federal policies and an increase in subsidies that came as part of the federal stimulus program.

German policymakers indicated last week that they planned to cut once-generous subsidies as much as 29 percent by the end of the month, on top of a 15 percent cut in January, although some details were still being negotiated after protests from the solar industry. Britain and Italy have made similar moves, and in January, Spain abandoned its subsidies altogether, prompting outrage from the solar industry. …

"Everybody knows we can't go the way we've been going," said Miranda Schreurs, the director of the Environmental Policy Research Center at the Free University of Berlin and a government adviser. "It'll break the bank."

The Post notes that solar photovoltaic installations generate just a bit over 3 percent of Germany's electricity. How much do German consumers pay for the privilege of using electricity generated by subsidized solar power? 

The subsidies for renewable energy cost German consumers about $14 a month for a family of four. Companies that generate renewable energy get a guaranteed above-market rate for 20 years.

Just for comparison, the average price that a consumer pays for a kilowatt-hour of electricity in Germany is 36 cents. The Energy Information Administration reports that the average price in the U.S. is 9.8 cents per kilowatt-hour.

Of course, proponents of solar power claim that the subsidies produce lots of "green" jobs. The problem is that most studies say that the subsidized creation of green jobs results in the destruction of even more jobs in the rest of the economy. I cited a couple of studies in my February 2011 column, The Unseen Consequences of Green Jobs. One by a Stanford Unversity researcher concluded: 

"Electricity generation across all sources creates far fewer jobs than other activities in the economy; the estimates in the figure suggest that they range between 17-67 percent of the average job-creation in the economy," reports Huntington. "These net job losses mean that subsidies to either green or conventional sources will detract rather than expand the economy's job base, because they will shift investments from other sectors that will create more employment."

Another way to look at it is that in the worst cases, investing in solar power destroys seven jobs, wind eight jobs, biomass eight jobs, coal six jobs, and natural gas eight jobs, each compared to the 10 jobs generally created per million dollars of investment. All subsidies to the electric power sector divert money that would otherwise be invested in higher value wealth and job-creating activities.

Huntington concludes, "Policymakers and government agencies should look askance at the claimed additional job benefits from green energy." Gulen agrees, "Adding 'net' jobs cannot be defended as another benefit of investing in these [green] technologies."

For more background on just how economically delusional subsidizing green power as a way to create jobs is, take a look at a plethora of Reason articles on the topic.