The sun sets on a shady policy

Michael J Economides
Thursday, March 1, 2012

It was supposed to be the renewable ‘green jobs success story’ to be emulated by the United States. President Barack Obama pilloried skeptical Americans with it on several occasions way before he took office. Obama may be the loudest but he is not the only megaphone social engineer politician. Bill Clinton had an analogous sound bite, talking about ethanol as a substitute for motor gasoline: ‘Why can’t we be like Brazil?’ Bad choice, since Brazil budgets $30 billion for oil and gas and $1 billion for sugar-cane ethanol. The US already uses more ethanol than Brazil.

In late January the Spanish ‘success story’ went belly up as the country cut its subsidies for national renewable energy power plants – indefinitely.

Much like in Germany and the UK, where governments are in the process of slashing solar subsidies (Germany phasing them out by 2017, the UK wanting to cut them by half), economic reality is setting in. The simple truth is, when it comes to energy, Obama has a poor track record in picking winners. Simply it is the president’s ‘Solyndra syndrome’. In his recent State of the Union address, Obama called for a strategy to develop energy that’s ‘cleaner, cheaper and full of new jobs’. He is unabashedly doubling down a failed path, one that has been discredited internationally. The future of energy is not solar and wind. For at least another century it is still oil, gas and coal.

For several years Obama hailed Spain’s ten-year lead in wind and solar projects without admitting how it was achieved and, more importantly, how it would need to be maintained (pretty much permanently) through massive injections of public cash. Equally, when a report in early 2010 revealed that the creation of every green job in Spain came at the expense of 2.2 real jobs elsewhere, the Obama administration just wasn’t listening. What should have sounded the loudest alarm was the analogy the report drew between the kind of green jobs Spanish bureaucrats were creating and those being created via federal stimulus injection into Green Energy USA. Even when Spanish unemployment hit just under 23% – the highest for almost two decades – the president was still loathe to dismiss his favored ‘Spanish renewables experience’.

Now, in a desperate bid not to go the way of Greece and, increasingly, Italy, Spain has turned off the spigot of renewable energy subsidy (running at around $31 billion). It is doing so as part of a broader cost-cutting exercise in a bid to rein in its burgeoning budget deficit. Plans for all new wind, solar, co-generation and waste incineration projects have been scrapped. According to the Renewable Energy Producers Association, Spain’s renewable energy industry supports 110,000 jobs. The future for those jobs looks to be in jeopardy.

The simple fact is that the Spanish government is struggling to convince the nation’s investors it will be able to meet its target of cutting 4.4% of its 8% GDP deficit by the end of 2012. A tough call when almost a quarter of the country’s workforce is unemployed.

For the US the warning signs on green energy have been there for a year or so. The allocation of many billions of dollars of stimulus cash (the Keynesian ‘solution’) in the US has so far produced not just the Solyndra scandal, but has seed-funded a growing list of failing ‘green’ companies, with the added ‘bonus’ of an embarrassing dearth of promised green jobs. Yet another example is the recent collapse of the highly subsidized Vinod Khosla advanced biofuels project. Khosla, labelled as a venture capitalist, became a failed venture socialist.

And now the impact of the shale gas revolution threatens to make renewable energy subsidies an even less economically viable proposition among the Western economies. In Spain, the longest running proponent of the renewable energy subsidy system, debts simply climbed inexorably as the crack between revenue from state-controlled prices and the cost of delivering power became a chasm. Let’s face it, if stronger Western European economies like Germany and the UK just can’t make the renewable energy subsidy infrastructure pay, who can? No wonder President Obama’s State of the Union address touted the shale gas miracle – a political volte face if ever there was one – at the expense of his green energy renewable naiveté. Neither are we likely to hear anything more of Spain as a greenprint for a US energy ‘success story’. OE

Michael J Economides is a professor at the Cullen College of Engineering, University of Houston, and editor-in-chief of the Energy Tribune, where Peter Glover is its Europe editor. The views expressed in this column do not necessarily reflect OE’s position. 

Categories: North America Renewables

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