The economic consequence of making a product that costs more to produce than its market value is universally accepted, except for “green energy” products. The success or failure of renewable energy companies is determined by their success at lobbying government and campaign donations. It is a working business model, but it is best to have an exit plan.
Like all European Union members, Spain is mandated to produce 20 percent of its energy from “green” sources (Montana has a 15 percent mandate, thanks to Sen. Jon Tester). The good news is that Spain generated 23 percent of its electricity from wind and solar in 2010.
Spain can actually generate half of its peak energy needs with wind and solar. The bad news is that this capacity bankrupted Spain. Spain needs only 44 gigawatts of power but theoretically can produce 99 gigawatts.
Why not export the excess and make a profit? The “capacity” to produce 99 gigawatts does not mean it will be produced when needed. Wind produces 40 percent of the time, often at night when there is no market. Solar is non-existent at night and disrupted by passing clouds.
It is tough to sell a product when you cannot promise delivery. Spain subsidizes solar at 444 Euros per megawatt while coal- or gas-fired generation sells for 39 Euros per megawatt. Without a gun to their head, who would buy the surplus electricity?
Greece, Portugal, Ireland and Italy joined Spain in the “Green Race” and face national bankruptcy because of it. The nations own the utilities and cannot recoup the costs from their citizens. Industries lost export markets because they were made noncompetitive and main street businesses closed when discretionary income was sucked up by skyrocketing home utility bills.
The Socialist Republic of Spain is fighting back. Within one month of taking office, Spain’s prime minister, Mariano Rajoy, announced that renewable projects not in the pipeline would not receive subsidies and people would no longer be forced to buy their products. The next day the cost of Spanish-produced solar systems dropped 30 percent.
Greece garners more headlines for its economic implosion, but it is remarkably similar to Spain. Greece also has 24 percent unemployment and also cannot export products with a high cost energy component.
Portugal was a socialist mess before it drank the “green Kool-Aid” expecting economic development from subsidizing randomly produced, very expensive electricity, but it is a bigger mess now.
Christian Krajer, chief executive officer of the European Wind Energy Association, warned PM Mariano that if new contracts were not let and the subsidies maintained, many “green collar” jobs would be lost. Mariano responded that every green collar job cost many other jobs and Spain’s 24 percent unemployment was in no small degree attributable to above-market energy costs. Krajer warned that its factories would move to more “reliable” nations. Mariano wished them well.
Spain’s renewable manufacturers are finding new homes with governments willing to pay to attract “investment.” T-Solar is moving to Peru. Gamesa is opening a factory in India. Iberdola is ingrained in the United States. It gets virtually everything it asks of the Bonneville Power Administration.
Recently Iberdola won a mandate that customers in the transmission organization serving various northern tier states will build $26 billion in transmission lines tying wind farms to the larger grid. No such transmission lines are planned in Montana, but the cost will show up in Montana utility bills.
Professor Gabriel Calzada of the University of Madrid said, “The feed-in tariff would make companies go bankrupt eventually. So government guarantees to give the money back eventually … when they are not in office anymore. The whole pyramid collapsed. BP is laying off 40,000 people in their renewable factories. “What do we do with all this industry we created with subsidies that is now collapsing? We cannot pump enough money.”
The president of the Renewable Industry wrote that the “only way” is finding other countries that will give taxpayer money away to our industry, to take it, and continue maintaining these jobs.
During the last Montana Senate debate, after reaffirming support for “green energy” subsidies, Sen. Tester said that Greece and Spain were “canaries in the coal mine.” U.S. Rep. Denny Rehberg concurred on both points.
Andrew Walden, writing for American Thinker, says the “other country” is the United States. Even though the Waxman-Markey Cap and Trade Bill seems dead and Europe’s southern periphery is bankrupt, the wind subsidy proposals being floated in Congress suggest our political leaders have yet to understand that “green power” means generating electricity by burning dollars.
Brad Molnar is the senior member of the Montana Public Service Commission. He serves on the International Energy Committee on the National Association of Regulatory Utility Commissioners.