Friday, January 18, 2013

Do We Need Subsidies for Solar and Wind Power?

Well, "we" don't need the subsidies, only the solar and wind companies need the subsidies. 
However, let's face it, these industries are pretty much mature and there is really no reason to continue subsidizing them. Spain and Germany are a perfect example of where this road leads to: very expensive energy, loads of debt and then a very difficult uphill battle to remove the subsidies once these industries get used to them. 
Besides, "renewable" installations for the most part are NOT replacing conventional energy installations or preventing additional investments in conventional energy (because "renewable" energy is not constant or reliable). So at the end of the day, "renewable" energy installations are just surplus capacity that makes life more difficult for conventional generating plants (that have to adjust their output to the variability of "renewable" energy).

Let's analyze the German example. First, yes, it is true that a substantial share of this country's electricity is produced with renewables: biomass, hydro, wind and sun. Solar photo-voltaic panels, however, represent only close to 3% of the total and they have been receiving most of the subsidies for renewable energy.

For anyone interested in the facts, we would kindly recommend the main story in Der Spiegel English Edition of October 10, 2012. The story is titled: German Energy Plan Plagued by Lack of Progress.

A few excerpts below:
"With the new rates, German citizens will be paying a total of more than €20 billion ($25.7 billion) next year to promote renewable energy. This is more than €175 for an average three-person household, a 50 percent increase over current figures."
And by the way, even before these price increases, Germans were already paying +37% more per kWh than the average in Europe (as a comparison, the French pay 23% less).
"The rising cost of electricity is also a burden on businesses. According to Oettinger, energy costs now represent the biggest liability for Germany as a place to do business, especially in light of the marked increase in the number of blackouts and voltage fluctuations in the grid."
"As long as there isn't enough storage capacity, virtually every solar plant and every wind turbine has to be backed up by a conventional power plant. Without this double structure, the power supply would collapse."
And finally: 
"At the same time, however, the boom in subsidized renewable energy is ensuring that conventional power plants are no longer profitable. Since the law requires that preference be given to green energy, if it's available, gas-, oil- and coal-fired power plants frequently have to be shut down to avoid overloading the grid. This reduces their revenues while increasing costs because powering plants up and down consumes a lot of fuel and inflicts additional wear and tear on the equipment."

So in summary, no, we shouldn't subsidize "renewable" energy. Being fair, we shouldn't be subsidizing any other energy source, either.

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