Renewable Energy without Subsidies

(Last Updated On: September 16, 2013)

Energy in house MC900185674Science Fact:

Let’s hear it for renewable energy! What, an extra jolt of coffee in the morning to supercharge your day? No, more like — what do we do when the OIL runs out? You know: solar, wind, biogas (think ponds of stinky algae).

I can hear your yawn from here. That’s not going to happen this year, not in ten years, maybe not in a hundred years, you say. And we can’t build public policy on the shifting sands of ever-changing assessments, all of them by folks who have an ax to grind.

There were a couple of provocative news stories recently that suggested opposite conclusions about renewable energy.

Consider this one: Germany Could Face Electricity Customer Revolt, a US-centric summary of a lengthy study by Der Spiegel.  The story basically says that because of heavy government subsidies to renewable energy projects, the price of electricity to consumers is shooting through the roof; electricity is becoming costly for every German, but becoming a particular burden on the poor. While waiting for a more intelligent plan to emerge from the government, the Environment Minister offers citizens his own money-saving tip: “When I cook, I try to keep the lid on the pot.”

But just when we’re about to throw up our hands and say, you can’t fix one thing without ruining something else, there comes this headline: Renewable Energy to Be Price Competitive in Western U.S. by 2025. In other words, renewable energy without subsidies! Huh?

It seems that 30 of the US States mandate that a certain percentage of electrical utility capacity must come from renewable energy sources. The mandate is called a Renewable Portfolio Standard (RPS), and the required percentages are significant — all are at least 10%, and some are much larger: 30% in Colorado and New York, 33% in California (by 2020) and a whopping 40% in Hawaii. A recent report finds that for the Western states at least, even after the mandates are met, renewable energy sources will be cost-competitive with the newest traditional technology, which will be combined-cycle natural gas-fired power plants.

Science Speculation:

It’s tempting to draw conclusions from these latest headlines, but in fact there are dozens, perhaps even hundreds of public policy experiments taking place across the world that relate to renewable energy. Some are utility subsidies charged to the consumer, like the German approach. Some are based in regulation, similar to RPS. And government subsidies to assist renewable energy, such as China’s notorious solar energy subsidies, may be intended as industrial policy but are having the side effect of lowering the cost of renewable energy for everyone.

We should rejoice in this disagreement, because no one knows all the answers, and in fact the best answer is probably different in each local environment. By having all these political-social-technical-marketbased experiments ongoing, we can learn from one another. Hopefully, we’ll find a combination of energy approaches that will keep us from falling off a hydrocarbon “cliff”, whether that occurs next week or a century hence.

Does your State have a renewable energy policy? Should it be changed? What do you think?

Comments

Renewable Energy without Subsidies — 1 Comment

  1. Here are some thoughts:

    When oil runs out. Not likely to happen for a long time. I have been following the ratio of global reserves to consumption and since 1918 the number has been between 30 and 50 years. In the last couple of years partly because consumption is not increasing and new oil has been found the number is higher than 50 and in fact in 2012 it was 52.9. http://www.bp.com/content/dam/bp/pdf/statistical-review/statistical_review_of_world_energy_2013.pdf

    Wind and solar. These could be excellent solutions except that, in addition to cost, they are not reliable. The the wind does not blow and the sun does not shine all the time. This limits the amount of energy that can be generated to something like 20% if the grid is to remain stable. Three solutions are a) install gas turbines b) batteries or c) create hydrogen for fuel cell vehicles. All of which are very expensive. The Germans have an additional problem. All the wind power in in the North Sea and no one wants high voltage transmission lines to take the power south where the demand is. Transmitting power over long distances requires high voltage direct current which is expensive and lossy. Since I was born in Cyprus an interesting fact is that the top three countries with the most expensive electricity are Denmark, Germany and Cyprus. The first two are expensive because of wind and solar and the last due to corruption and mismanagement. I applaud RPS as a means of developing volume and reducing cost. Unfortunately some states like California have gone overboard and they will end up like Germany. Michigan has a 10% green electricity mandate which should be increased. Subsidizing wind and solar by making the utilities pay consumers more per kWh than they sell introduces a hidden subsidy of the few by the many who do not. When the subsidy dies as it is did in Spain all consumers suffer.

    Global warming. The biggest problem with wind and solar is that the average US consumer does not see it as a problem that affects now him and so is unwilling to pay extra for energy. Unfortunately by the time the effects will be obvious it will be too late. You have to give credit to Obama for the new CAFÉ standards 2X reduction and for the new rules bubbling at EPA for coal burning power stations. Another thing that worries me is the report of IPCC due next week. It seems that it will say that things are not as bad as the fourth report said. This will be seized by the non-believers to postpone any action.