Green
Bubbles Bursting
From the April
20, 2009 National
Review
April 13, 2009
by Alex Alexiev
With the
selling of President Obama’s economic agenda now in full
gear, this is a good time to take stock of his energy plans
against the background of energy trends worldwide. Alas,
even a brief glimpse reveals that Obama’s focus on
renewable energy and the introduction of a cap-and-trade
regime runs counter to both economic rationality and
current energy trends to the point of guaranteeing its
inevitable failure, which will result in serious economic
harm to the United States.
The president is imposing his green agenda on America, even
as the renewable-energy bubbles of the Left are bursting,
and the world is witnessing the astounding comeback of the
kind of energy Obama scrupulously avoids mentioning:
nuclear power. To understand this surprising reality, the
best place to start is to look at the record of the three
countries Obama specifically mentioned in his address to
Congress as leading the United States in the
renewable-energy revolution: China, Japan, and Germany.
China, he said, “has launched the largest effort in history
to make their economy energy efficient.” True enough, but
that effort has nothing to do with renewable energy, and
it’s not even clear that it’s working. To the Chinese,
energy efficiency means more efficient coal-burning
equipment, co-generation, coal liquefaction, and other
improvements of their primarily coal-based energy industry.
Despite marginal improvements in this area, China is now
the largest carbon-dioxide emitter in the world and can, at
best, slow down but not stop carbon-emissions growth for
the foreseeable future. As far as renewable energy proper
is concerned, its share of total energy production not only
is minuscule, but has actually declined over the past two
years, according to Beijing’s State Electricity Council.
There is, however, one clean-energy sector in which China
is making a lot of progress and has even more ambitious
plans for the future: nuclear power.
What about Japan? It does produce a lot of solar panels for
export and subsidizes rooftop solar installation, but its
renewable-energy production target for 2010 is only 3
percent. Instead, Tokyo plans to boost the share of nuclear
power to 41 percent from the current 30 percent in less
than a decade.
This leaves Germany as a model for our green future. At
first glance, it is a renewable-energy success story and,
to no one’s surprise, it has become the poster child of the
green fantasy universe. In just a few years, the country
has become the world’s powerhouse of green energy,
currently generating nearly 15 percent of its electricity
from wind power and solar energy, which already exceeds the
EU target of a 12.5 percent renewable share for 2010. A
heartwarming story, it seems — until one starts asking
questions as to how a country that has neither much sun,
nor much wind, got there; how much it cost; and where it is
going from here.
The reality, of course, is that it doesn’t matter how much
sun or wind there is as long as the government provides
huge subsidies at the expense of the taxpayer and of the
economy’s future prospects. In Germany, through a scheme
innocuously called “feed-in tariff,” this has meant
guaranteeing solar producers, for instance, a price seven
times higher than the wholesale rate for 20 years. No wonder every
entrepreneur-for-the-dole promptly lined up to feed at the
public trough and created an artificial industry overnight.
Yet, with Germany’s electricity bill going up by 38 percent
in just one year (2007 over 2006), this is hardly a
sustainable proposition. If that’s not enough, several
years of operational experience have proven what experts
have known or feared for a long time: that renewable energy
is not only very expensive but also highly inefficient and
unreliable. Solar panels, for example, seldom convert more
than 25 percent of sun energy into electricity, while wind
power’s “load factor” — i.e., electricity produced per
installed capacity — seldom exceeds 20 percent in Germany.
The intermittent nature of both of these sources makes them
completely unsuitable for baseload-grid consideration,
meaning that they have to be backed up by conventional
energy — which, of course, defeats the purpose of green
energy as an alternative.
Nor does the German and overall European experience with
cap-and-trade provide any reason to be optimistic about the
prospects of Obama’s plan to raise $646 billion through a
similar scheme. Four years after its introduction, the EU
carbon-trading scheme has failed to create a functioning
emissions-permit market, to generate revenues, or to reduce
carbon-dioxide emissions as promised, even as it led to
large electricity-rate increases and windfall profits for
some of the worst polluters on the Continent.
The bottom line is that for the foreseeable future
renewable energy will remain a pie-in-the-sky green
fantasy, not feasible economically without huge public
subsidies.
Engaging in such economically irrational policies may have
been understandable on the part of politically correct
Western elites seeking to appease their hysterical
environmental lobbies, especially when the stakes were
small, energy prices were skyrocketing, and economic
prosperity seemed assured. But those days are now gone and
probably won’t be back for quite some time. Instead, under
the perfect storm of collapsing energy prices, the worst
economic crisis in decades, a severe credit crunch, and
mass unemployment, the green-energy bubble has burst.
Around the world, Germany included, green subsidies are
being slashed, renewable-energy projects are being canceled
or postponed, private capital and credit institutions have
abandoned the sector, and many of the once high-flying
green companies are on the brink of bankruptcy. Green
energy, long touted as our salvation from environmental
doom, now appears doomed itself.
This should be a cause for celebration, for out of the
ruins of this irrational fantasy, a new, powerful trend
toward clean, inexpensive, and reliable power is gathering
steam, and it may finally bring some economic rationality
to energy policy worldwide. It has taken the form of a
remarkable economic comeback–cum–political rehabilitation
of the much-maligned nuclear-power industry. Though
Americans will hear neither their president nor his devoted
claque in the “mainstream” media discuss this, it is
already a powerful reality that may yet make the 21st
century the century of nuclear power.
What is most remarkable about the nuclear-power revival is
that it is a worldwide phenomenon that includes Western
countries that until recently were staunch fellow travelers
in the anti-nuclear bandwagon. Italy and Sweden, both of
which had moratoriums on building nuclear reactors dating
back to the 1980s, have now reversed course, and Germany
will almost certainly follow shortly. Italy now plans to
get 25 percent of its future electricity needs from eight
new nuclear plants and has already contracted with a French
company for the construction of the first four. Great
Britain envisages not only refurbishing eight aging
reactors, but also building ten new ones.
France, which never succumbed to the anti-nuclear frenzy
and already derives 80 percent of its electricity from 58
reactors, has become a world leader in nuclear technology —
eclipsing the U.S. — and is aggressively moving forward
with third-generation reactors at home and abroad. Farther
east, Ukraine, despite its Chernobyl legacy, plans eleven
new reactors by 2030, while Russia, an exporter of nuclear
technology, wants to double its electricity output from
nuclear power by 2020. Not to be left behind, Poland,
Finland, Lithuania, Bulgaria, and Romania are either
planning or already building new nuclear plants. In short,
Europe, until recently a citadel of anti-nuclear fervor, is
being transformed into a gigantic nuclear-power
construction site.
Elsewhere, the nuclear-power steamroller is making even
more impressive inroads. India and China, likely economic
superpowers of the future alongside the U.S., have both
opted for nuclear energy in a decisive way. India, which
today produces a meager 4,100 megawatts, or 3 percent of
its electricity, from nuclear power, aims to boost that
15-fold, to 63,000 MWs, with 40 new reactors by 2032. It is
already constructing five new plants and has just signed a
contract with the French company Areva for up to six more
third-generation reactors. China, which currently has a
nuclear-generating capacity of 9,000 MWs, plans to increase
that to 40,000 MWs by 2020 and 63,000 MWs ten years later.
Finally, Japan, which alongside France is a world leader in
nuclear-electricity technology, is fully committed to
nuclear power and intends to double its share of
electricity production from the current 30 percent by
mid-century.
So where does this leave the U.S., and President Obama’s
energy agenda? It leaves us in the unenviable position of
being the only major economic power led by a president
dogmatically wedded to yesterday’s make-believe universe of
green energy that has already been debunked by reality in
the rest of the world. Much as in Europe, renewable energy
in America is in a dire predicament. By the end of 2008,
American solar- and wind-power stocks had lost some
four-fifths of their value — twice the loss rates of the
general market — inflicting catastrophic losses on
investors who had bought into the green hype. Investment
and credit have both dried up and, despite the brave
rhetoric of President Obama, there isn’t enough government
money to make much difference in the absence of private
capital. In just one example of the parlous state of
renewable affairs, California, where sunlight is nearly as
abundant as lack of environmental common sense, produces
but 0.2 percent of its electricity from solar power after
three decades of heavy subsidies.
Worse may be in store. If Obama’s dubious energy agenda is
rammed through Congress, as seems likely, not only are
Americans going to be saddled with a crushing tax burden,
courtesy of the bogus cap-and-trade scheme, but the
country’s economic competitiveness could suffer lasting if
not irreparable damage. Such are the wages of our renewable
delusions.
Alex Alexiev is
an adjunct fellow at Hudson Institute.
Visit: www.savewesternOH.org