We do not understand why IER gets the American Wind Energy Association (AWEA) so spun up. Maybe it’s because of our opposition to government subsidies. Maybe it’s because we don’t believe that government mandates forcing people to buy energy from expensive, inefficient sources is good for the economy. Or perhaps it is because of our belief that consumers, not Washington, should choose the sources of energy they think is best for them.
Whatever the reason, we would like to apologize to AWEA. Apparently we compelled them to use ad hominem attacks like “anti-clean energy” to describe our organization and “bogus” to describe our research. We would have preferred that AWEA produce a substantive rebuttal to our recently released report, “Economic impacts from the promotion of renewable energies: The German Experience.”
In an October 21st blog post, AWEA states “IER’s strategy clearly is to discredit wind energy in other countries.” We do not have a strategy to discredit wind energy in other countries. President Obama and top Administration officials are telling us that America must follow Germany’s example with respect to renewables or we will be left behind. Taking the President at his word, we sought to better understand Germany’s experience by commissioning a study by the think tank Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI). The report found the following facts:
- Financial aid to Germany’s solar industry has now reached a level that far exceeds average wages, with per worker subsidies as high as $240,000.
- In 2008, the price mark-up attributable to the government’s support for “green” electricity was about 2.2 cents US per kWh. For perspective, a 2.2 cent per kWh increase here in the US would amount to an average 19.4 percent increase in consumer’s electricity bills.
- Between 2000 and 2010, the net cost of the German government support for solar was $73.2 billion and an additional $28.1 billion for wind. Because the U.S. economy is five times larger that Germany’s, a comparable expenditure in the U.S. would amount to about half a trillion dollars.
- Green jobs created by government actions disappear as soon as government support is terminated, a lesson the German government and the green companies it supports are beginning to learn.
- Government aid for wind power is now three times the cost of conventional electricity.
AWEA lobbies Congress for government handouts and subsidies for wind energy production, so we understand why they would like to these facts to remain hidden. As the report shows, Germany’s experiment with promoting renewable energy has been expensive, and transplanting that experience to the United States will be expensive.
Apples to oranges, AWEA argues, because Germany is not a good model for the United States. In their own words:
“The problem is that the United States is not considering a feed in tariff as a means to encourage wind development because it would not work. Instead, the US is considering a free-market based national Renewable Electricity Standard, and numerous studies have shown that an RES would decrease electricity prices.”
We hope AWEA informs President Obama and other top Administration officials that Germany’s feed-in tariff is not a good model for the United States.
We hope AWEA informs Representative Jay Inslee, who is promoting legislation to establish a federal feed-in tariff, that the United States is not considering a feed-in tariff, as it would probably come as a surprise to him.
In a Congressional hearing on September 24, 2009, Representative Inslee explained that Germany’s system of promoting renewables through a feed-in tariff is a better way to go than the Spanish experience.
We hope AWEA informs itself that Germany’s feed-in tariff “would not work” in the U.S., instead of describing it as “similar to a Renewable Electricity Standard” which AWEA strongly supports. Here’s what AWEA’s website says:
“A distributed generation or “feed-in” tariff ensures that locally owned, small-scale renewable energy systems become significant contributors to the local power supply. A feed-in tariff is similar to a Renewable Electricity Standard (see “Wind energy policy issues” www.awea.org/faq/wwt_policy.html) except that instead of establishing a set quantity of renewable electricity a utility must generate, it establishes a set price at which a utility purchases excess electricity from a renewable generator, such as a small wind system.”
In AWEA’s blog post, they describe a national Renewable Electricity Standard as “a free-market” program. That is not accurate. In free markets, people are free to choose. A Renewable Electricity Standard forces people to buy wind, solar, and other government-approved energy sources. It is a mandate. Forcing someone to buy your product is not a free-market program by any definition.
Contrary to AWEA’s assertion that a Renewable Electricity Standard would lower energy prices, common sense and real-world evidence suggest otherwise. Wind and other government-approved renewables are more expensive than other forms of energy. Common sense tells us that requiring people to buy expensive and inefficient renewable energy, through a renewable energy mandate, will only increase the cost of electricity. Currently, twenty-nine states have binding renewable electricity mandates and the electricity prices in those states are thirty-eight percent higher than in states that do not have binding renewable electricity mandates.
Lastly, AWEA states that they expect IER “to take on other countries that have successfully integrated wind into their energy mix.” That assumes, of course, that increased electricity prices and billions of dollars in subsidies is a sign of successful integration of wind into a country’s electricity mix. Some would beg to differ, especially those who are footing the bill.
The Administration tells us that U.S. energy policy should emulate countries like Spain, Denmark, and Germany. The facts show that the promotion of renewables in Spain, Denmark, and Germany has been very expensive and has resulted in lower employment overall as an opportunity cost of the lavish subsidies. Of course, it is up to policymakers to ultimately decide whether the United States should follow a similar path, but no one should mislead Americans into thinking that doing so will come without a cost.