Washington, DC – As part of the ongoing efforts in the US Senate to enact sweeping, energy-rationing legislation, the Senate Finance Committee held a hearing today entitled “Climate Change Legislation: Considerations for Future Jobs.” Following the hearing, Thomas J. Pyle, president of the non-partisan, market-oriented Institute for Energy Research (IER), issued this statement:

“There is perhaps nothing more misleading surrounding the ongoing global warming debate than claims that cap-and-trade legislation will be a jobs boon and will spur economic activity. Look no further than the DeSoto Solar Center in Florida – a Florida Power and Light installation. On his recent visit, President Obama touted the center as the ‘largest solar field in the United States.’ However, the president failed to mention that the panels and other items were all manufactured abroad. The solar cells came from the Philippines; the steel mountings from Canada; the electric boxes from Germany. And how many ‘green jobs’ have been created there? Two full-time employees, six part-time groundskeepers that will work one week a month during the rainy season.

“Cap and trade backers often cite European countries, like Spain and Germany, as a model for the US follow. Yet both of these nations have failed miserably at delivering affordable and reliable energy and creating jobs. Spain’s government has committed more than $753,000 per ‘green job’ over the past 9 years. And in Germany, per worker annual taxpayer subsidies have reached $240,000. Beware of the politician promising you a green job in one hand because he is pick-pocketing you with the other.

“Washington must craft comprehensive energy policies that do not empower Congress or bureaucrats to determine which energy forms win or lose in the market. Cap and trade aims to increase the cost of our most affordable, abundant and reliable energy forms, including coal, oil and natural gas. With unemployment now at a 26-year high, raising energy costs across the board and making it more difficult for us to compete in the global economy is not the right solution to help put Americans back to work.”

READ MORE: Key experts from a recent Washington Post article entitled “Painting a street green hasn’t stimulated one new job”:

In Baltimore, the 300 block of East 23 1/2 Street is getting patched up in time for winter. One economic stimulus program is paying to insulate 11 rental rowhouses, another is paying for furnaces and a third is covering the cost for reflective roofs to be installed by prison inmates in a job-training program.

The block is part of one of the biggest initiatives ever undertaken by the federal government, a nationwide push to improve the energy efficiency of buildings. But as the national unemployment rate crosses into the double digits and Republicans question the stimulus program’s impact, the work on East 23 1/2 — even with all of its activity — has so far not produced a single job.

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

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Green Stimulus Money Going Overseas

Since September 1, 84 percent of the $1.05 billion in clean energy grants has gone to foreign wind companies. Foreign countries benefiting from stimulus funds for wind technology are Spain (57%), Germany (12.6%), Japan (9.5%), and Portugal (5%).[i] Companies began applying for grants at the end of July and awards were announced by the two joint administrators of the program, the Energy and Treasury Departments, beginning on Sept. 1. In the first round of the grants, 77% went to foreign wind developers, followed by 84% in the second round. Of the 11 wind farms that received grants, 695 of the 982 installed turbines were manufactured by a foreign company.[ii]

Further, there are few restrictions on how the grants can be used. According to the Investigative Reporting Workshop at American University, over $800 million were provided to wind farms that were already producing electricity. As required by law, all 11 wind farms started operating after January 1, 2009, but before the grants were awarded.[iii]

Turbine Manufacturing Dominated by Foreign Competitors

The U.S. currently has the most installed wind capacity in the world, but it is not a leader in the manufacture of turbines. The Investigative Reporting Workshop reported that of the turbines currently under construction in the U.S., 67 percent are slated to be purchased from foreign-owned turbine manufacturers.[iv] According to U.S. customs data for 2008, and the U.S. Trade Commission, the U.S. imported $2.5 billion worth of wind turbines last year—up from $365 million in 2003.

In the future, wind turbines and/or their component parts may be coming from China where lower labor costs have allowed Chinese-made products to dominate many manufactured goods in the U.S. GE, a major U.S. wind turbine producer, already owns three facilities in China that produce turbine components. GE is also planning a factory in Vietnam that will employ 500 local workers and export 10,000 tons of components to GE Energy assembly plants around the world.[v]

China is already beginning to develop its own strong hold for wind power in the U.S. A joint venture between China’s Shenyang Power Group, the U.S. Renewable Energy Group, and Cielo Wind Power LP to develop a 600 megawatt wind farm on 36,000 acres in West Texas, costing $1.5 billion, was announced on October 29, 2009.[vi] A-Power Energy Generation Systems Ltd., a provider of distributed generation systems in China and a fast-growing manufacturer of wind turbines, will supply the turbines. A-Power Energy entered the wind power industry last year.[vii] Delivery of wind turbines for the West Texas wind farm is scheduled for March 2010.[viii]

Graphic courtesy Investigative Reporting Workshop

Solar Cells Manufactured Overseas

Not only are wind turbines mostly manufactured in countries overseas, but so are photovoltaic (PV) cells. Florida Power & Light (FPL) started operating its 25 megawatt photovoltaic solar plant in southwest Florida in conjunction with a visit to the plant by President Obama on October 27. [ix] The DeSoto plant in southwest Florida is the first of a total of 110 megawatts of solar capacity that FPL will install at 3 different sites by the end of 2010. Although Obama praised FPL’s work in the solar arena, he did not tell the American public that the components of the DeSoto plant are from foreign countries. While the PV cells were provided by a firm from California, they were made in the Phillipines. The steel PV frame holding the cells was produced in Canada, and the electrical parts and boxes were made in Germany, where solar power has been given heavy subsidies by the German Government. While German manufacturers have been producing PV technology for their country’s solar expansion, they are now concerned that China will take over their market due to costs that are 30% lower.[x]

Conclusion

The Obama Administration has told the American public that it will produce jobs and stimulate the U.S. economy through green energy technology. He has also touted that stimulus funds will be used for goods made in America. Yet, the the Investigative Reporting Workshop at American University finds that this is not the case. And, more examination of green energy development in the U.S., shows Asian and European countries well established here in providing the component parts for green energy technology.

The problem is not with international trade per se. In a genuinely free market, where politicians do not pick winners or losers, the most efficient firms would capture market share, be they American or foreign. The result would be the best products at the lowest prices for American consumers.

The real problems are a government “stimulus” plan and efforts to centrally plan a “green economy.” The government can only “stimulate” by spending money that it has first taxed or borrowed from the private sector. It would be bad enough for the government to destroy jobs in American fossil fuel industry while spending money on domestic producers of “green energy.” But it is particularly absurd for the U.S. government to cripple American industry while shoveling the lion’s share of the pork into the hands of foreign beneficiaries.

[ii] Ibid.

[iii] Ibid.

[iv] Ibid

[v] “Vietnam’s first turbine component plant underway”, May 13, 2009, http://www.vietnewsonline.vn/News/Business/Companies-Finance/6072/Vietnams-first-turbine-component-plant-underway.htm

[vi] www.reuters.com/article/pressRelease/idUS200008+29-Oct-2009+BW20091029

[vii] “Lone Star, Meet Red Star: China’s $1.5 Billion Wind-Power Deal in Texas”, October 30, 2009, http://blogs.wsj.com/chinarealtime/2009/10/30/lone-star-meet-red-starchina%e2%80%99s-15-billiob-wind-power-deal-in-texas/

[viii] www.reuters.com/article/pressRelease/idUS195122+29-Oct-2009+PRN20091029

[ix] http://www.instituteforenergyresearch.org/2009/10/26/highest-cost-generating-plant-comes-on-line-in-florida-to-obama-fanfare/

[x] “Solar-Power Incentives in Germany Draw Fire,” Vanessa Fuhrmans, Wall Street Journal, September 28, 2009, http://online.wsj.com/article/SB125383541153239329.html

Washington, DC – Though proponents of so-called government-funded ‘green jobs’ often reference the ‘success’ European countries have enjoyed in their experiments with such regulations and mandates, a study released today in the United States sheds new light on Germany’s experience with renewable energy and heavy taxpayer subsidies. Entitled ‘Economic impacts from the promotion of renewable energies: The German Experience,’ the study was published by German think tank Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI).

According to the study, “Germany’s experience with renewable energy promotion is often cited as a model to be replicated elsewhere, being based on a combination of far-reaching energy and environmental laws that stretch back nearly two decades.” Researchers add this: “German renewable energy policy … has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country’s energy portfolio.”

Thomas J. Pyle, president of the Institute for Energy Research (IER) – a non-partisan market-oriented energy think tank – issued the following statement:

“Today, Vice President Biden will tout the economic benefits of ‘green jobs’ and ‘green energy.’ However, this new analysis from Germany only further emphasizes the fact that when renewable energy has been mandated and subsidized by taxpayers, economies have constricted and suffered. Germany, like Spain, is just another example of how billions of tax dollars forced to support wind and solar energy create not a hint of economic or environmental benefits.

“Some in Washington, who are working to restrict, mandate and subsidize certain energy forms that would otherwise be unaffordable, continue to offer Germany as a case-study for success. However, such a policy could increase electricity prices nearly 20 percent and require a subsidy of nearly $240,000 dollars per ‘green job.’

“This study should serve as a cautionary tale of what is likely to occur should the US continue down the road of mandating politically-favored, expensive power. We would be well served to learn from, and not repeat, the mistakes of Germany, Spain and Denmark.”

Key findings:

• 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 US.

• 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% increase in consumer’s electricity bills.

• Government support for solar energy between 2000 and 2010 is estimated to have a total net cost of $73.2 billion US, and $28.1 billion US for wind. A similar expenditure in the US would amount to about half a trillion dollars US.

• 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.

On Monday, report co-author Dr. Colin Vance will be in Washington, D.C., part of a three-day tour (Monday-Wednesday) aimed at explaining to a wider American audience the core conclusions of their report. Those interested in speaking with Dr. Vance or setting up an interview should contact Patrick Creighton (202.621.2947) or Laura Henderson (202.621.2951).

More on the RWI Study

• Fact Sheet: Strike Three:  First Spain, Then Denmark, and Now Germany…

• Notable Quotes: Should the U.S. Follow Germany’s Renewable Energy Experiment?

• In pictures: Impact on electricity rates by region and by state

• Study: Economic impacts from the promotion of renewable energies: The German Experience

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

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• Dr. Michael’s full study is available here.
• The following is a fact sheet to accompany Dr. Michaels’ study (PDF version here).

Notable Provisions in Waxman-Markey:

• Mandate that utilities provide 20 percent of electricity from qualified renewables by 2020, up from about 2.8 percent today[1] (Sec. 101): The bill requires utilities to obtain at least 6 percent of their electricity from sources defined as renewable by 2012, 9.5 percent by 2014 and 20 percent by 2020 (some portion may come from efficiency-related savings).And if those mandates aren’t strict enough, Waxman-Markey also:
  • Defines wood and plant waste from federal lands as non renewable, while the same material, if found on certain non-federal lands, is renewable. (Sec.126)
  • States that new hydroelectric power from the U.S. is renewable; hydroelectric power from Canada is not.[2]
• Establish a new $1 billion annual tax on electricity from coal and natural gas-fired power plants (Sec. 114): These tax proceeds are given to a nonprofit corporation to “accelerate the commercial availability of carbon dioxide capture and storage.” The Pew Center on Global Climate Change estimates this technology will increase coal-fired electricity costs by 40 to 70 percent.[3]
• Provide assistance to the many workers who will lose their jobs as a result of the bill’s economically destructive provisions (Sec. 421–424).
• Micromanage energy efficiency standards for lighting and appliances (Sec. 211–212), including swimming pool lights, portable lights, decorative gas lighting systems, theme park lights, stage lights, lights for artwork, water dispensers, hot food holding cabinets, hot tubs and more.
• Establish a new $30 billion revolving loan fund to subsidize wind turbines, solar energy, fuel cells, batteries, biomass equipment and other energy sources (Sec. 246).
• Create a Clean Energy Deployment Administration (CEDA) with $7.5 billion in Treasury “Green Bonds” (Sec. 182): CEDA will use taxpayer dollars to invest in energy technologies that private investors consider too risky. Waxman-Markey does not explain why the federal government, which has no history of investing wisely, will make better investments than private investors.
• Require utilities to develop large scale plans for electric vehicles (Sec. 121) and increase the ceiling on loans to auto manufactures to build electric cars (Sec. 125). The bill also allows the Secretary of Transportation to require automobile manufactures to produce flex-fuel vehicles (Sec. 127), and even authorizes $350 million for a “Cash for Clunkers” program for electric motors (Sec. 245).
• Continue to allow EPA to regulate greenhouse gases using criteria other than global climate change (Sec. 831–835). Waxman-Markey prohibits EPA from regulating greenhouse gases based on their effect on global climate change, but does not prohibit EPA from regulating greenhouse gases on any other basis, such as ocean acidification.
• Stall EPA’s efforts to determine the complete lifecycle greenhouse gas emissions of ethanol (Sec. 551). Though EPA has been working to determine the lifecycle greenhouse gas emissions from the production of ethanol, the bill stalls that effort. Recent science shows the lifecycle greenhouse gas emissions of ethanol may be greater than gasoline.[4]
• Replace local and state building codes with a federal building code (Sec. 201). Apparently, state and local governments cannot be trusted to make their own decisions about what buildings to allow in their jurisdiction, so the federal government will require more expensive buildings across America. This is needless additional regulation, as weather and storm effects vary throughout the US.
• Create a federal grant program to help electric utilities plant trees (Sec. 205).
• Create an independent consumer advocacy office within FERC that is run by a political appointee and will not answer to the Commissioners (Sec. 198). This section also removes the independence of the office of Administrative Litigation and places it under a political appointee.
• Establish a “National Climate Adaptation Program,” which empowers federal zoning of land and the oceans under the guise of climate change (Sec. 471–482).
• Require the President to impose tariffs on imports from counties that do not reduce their emissions by 2020 (767–768).

Waxman-Markey does not include:

• Any provisions that will increase the supply of energy without increasing prices, subsidies and costs to taxpayers.
• Any provisions to accelerate access to billions of barrels of oil and natural gas on the outer continental shelf or the over 2 trillion barrels of oil in oil shale.

[1] See Institute for Energy Research, How Much of Your State’s Electricity Meets Congress’s Definition of Carbon-free “Renewable” Energy?, http://www.instituteforenergyresearch.org/2009/05/02/does-your-electricity-come-from-congress-approved-sources/. This requirement only applies to investor-owned utilities, not municipal utilities which sell 25 percent of the nation’s electricity. Waxman-Markey defines renewable hydro as hydro built on or after January 1, 1988. The vast majority of hydro in the United States was in place before 1988. It is not clear how much hydropower was brought online after 1988, so the 2.8 percent figure might slightly underestimate the amount of electricity which qualifies as renewable under Waxman-Markey.

[2] See Sec. 101. "Qualified hydropower" under the standard must be from a facility approved by FERC, which eliminates relatively plentiful Canadian imports from qualifying under the RPS.

[3] Vello A. Kuuskraa, A Program to Accelerate the Deployment of CO2 Capture and Storage (CCS): Rationale, Objectives, and Costs, report by Advanced Resources International, Inc. for the Pew Center on Global Climate Change, October 2007 at 14 and 18-25. http://www.pewclimate.org/docUploads/CCS-Deployment.pdf.

[4] Jason Hill et al, Climate Change and Health Costs of Air Emissions from Biofuels and Gasoline," Proceedings of the National Academy of Sciences 106 (Feb. 10, 2009), 2077-2082.

Thomas J. Pyle, president of IER, a market-oriented energy think tank, issued the following statement in response to today’s hearing:

“The direct transfer of wealth, jobs and opportunity from the United States to the rest of the world has begun in earnest, as a program sold to Americans under the banner of ‘green jobs,’ but, in reality, will generate little more than pink slips. Unfortunately, rather than working to ensure that Europe’s failed experiments don’t harm us more than they already have, a number of committee members today actually called on Congress to send more of our taxpayer money overseas, viewing this as some sort of bizarre solution for addressing climate change.

“As Dr. Hayward testified today, America’s subsidization of expensive, unreliable forms of energy cannot be sustained domestically, and cannot be defended as a foreign transfer aboard. It’s my hope that the committee left today’s hearing with a better understanding of what we can expect under this regime, and a better appreciation of the consequences it would necessarily visit upon the American people.”

The following excerpts were taken from Dr. Hayward’s prepared remarks:

“At the present time, the U.S. runs a trade deficit in renewable energy technologies, and there is good reason to expect this to continue, especially if there is a significant expansion in the deployment of renewable sources here in the U.S.”

If the U.S. and Europe place a higher price on carbon while the developing world does not, it will ironically make fossil fuels more attractive for the developing world. Either way, it is easy to predict that in ten years our leading energy technology export will still be oil and gas drilling equipment, where we currently enjoy a trade surplus.”

“Above all, policymakers should regard with skepticism claims of net new jobs in the energy sector that depend on subsidies or mandates.”

• Click HERE to view Dr. Steven Hayward’s testimony from today. Hayward, a F. K. Weyerhaeuser Fellow in Law and Economics at the American Enterprise Institute, is an IER board member.
• Click HERE to view a recent Washington Post article on green jobs entitled “In Michigan, A Yellow Light for Green Jobs.”
• Click HERE to read a WHAG-TV report under the headline “Is President Obama Overpromising Green Jobs?”

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

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Contact:
Patrick Creighton 202.621.2947
Chris Tucker 202.621.2951

Spanish Prof. to Congress: Avoid Spain’s Failed Experiment with “Green Jobs”

Academic draws attention to the rise, fall and outright collapse of Spanish green jobs bubble

WASHINGTON – Spanish professor Gabriel Calzada appeared before the US House Select Committee on Energy Independence and Global Warming this afternoon to discuss his country’s failed experiment in directing more than $40 billion in taxpayer funding toward the promotion of so-called “green jobs.” Calzada’s research found that for every “green job” the Spanish government created, more than two others were squandered away as an opportunity cost on the broader economy. Today, Reuters reported that “some economists warn the Spanish unemployment rate could reach 20 percent next year and remain over that level until 2012.”

Thomas J. Pyle, president of the Institute for Energy Research (IER), a free market energy think tank, issued this statement in response:

“Professor Calzada’s real-world perspective and rigorous academic investigation of Spain’s failed renewable energy mandates should send a serious wake-up call to Congress. His groundbreaking research on the extent to which a green jobs-focused economy program can actually lead to fewer jobs, and billions in squandered resources, has without question helped move the needle of this debate in the right direction.

“Allowing the government to mandate, limit, subsidize – and ultimately select — who wins in our future energy economy and who does not is an economic policy that history has shown cannot succeed. Thanks to Dr. Calzada, we know that a similar program has failed in Spain, leaving nearly 20 percent of that nation’s people without work. To install a similar system here in the United States would not only be a mistake, it’d represent the willful destruction of the future U.S. economy.”

NOTE: Calzada was quoted in yesterday’s Washington Post:

“What they’re talking about now — creating a new sustainable economic model through alternative energy — is going to be exactly the opposite of sustainable,” said Gabriel Calzada, a Spanish economist and critic of the government’s alternative energy policy. “You’re only going to create more distortion, more bubbles. It isn’t going to work.”

MORE:

Testimony: Gabriel Calzada Álvarez, PhD, before House Select Committee on Energy Independence and Global Warming, September 24, 2009

Blog: The NREL’s Flawed White Paper on the Spanish Green Jobs Study

Press Release: Let the Inquisition Begin

Study: Study of the Effects on Employment of Public Aid to Renewable Energy Sources

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FOR IMMEDIATE RELEASE:
September 21, 2009
Contact:
Patrick Creighton 202.621.2947
Chris Tucker 202.346.8825

Let the Inquisition Begin

Spanish Prof. Returns to the States, Sets Out to Set the Record Straight on His Country’s Failed Experiment with Green Jobs

WASHINGTON – Four months removed from the release of his study on Spain’s experience with the mass government subsidization of so-called “green jobs,” Spanish professor Gabriel Calzada returns to the United States this week, prepared and eager to debate critics of his groundbreaking report, but heretofore finding no one willing to explain or defend that criticism.

“President Obama no longer cites Spain as an example for the United States to model itself after in spending billions of taxpayer dollars on temporary, make-work ‘green jobs’ – in large part due to this study,” said Thomas J. Pyle, president of the Institute for Energy Research (IER), which commissioned the Spanish report.

Added Pyle: “But the president’s rhetorical about-face on Spain has done nothing to dissuade the interest groups, and even some of his own political staff, from continuing to cast aspersions on the report, its author, and even IER. Now Calzada is back. And even though he’s offered to debate anyone, anywhere, anytime, on any terms, all we’ve gotten back is the melodic sound of crickets.”

Following a recent white paper on the study issued by the Department of Energy’s National Renewable Energy Laboratory (NREL), Dr. Calzada sent letters ahead of his visit to Energy secretary Steven Chu, NREL director Dan Arvizu, and EPA administrator Lisa Jackson – thanking each for taking the time to investigate the conclusions of his study, and inquiring whether they would be interested in defending their analyses in person. Invitations for debate were also extended to the Center for American Progress, a left-of-center think tank in Washington that has produced a steady stream of ill-informed commentary on the study over the past four months.

As yet, no one has responded.

Specific to the NREL polemic, IER released a rebuttal piece earlier this month identifying the manifold errors in the agency’s report, and asking, more broadly, how it was decided that taxpayer resources should be used to generate a political document referencing a study produced on another continent. The IER response to the NREL white paper can be found in its entirety here.

Dr. Calzada will be in Washington, D.C. starting today, and extending through Thursday, September 24. Those interested in setting up an interview with the professor should contact Patrick Creighton (202.621.2947) or Chris Tucker (202.346.8825). Copies of all letters sent can be found below.

• Calzada letter to Chu/Jackson (9/15/09)

• Calzada letter to Chu/NREL (9/14/09)

• Calzada letter to Chu/Jackson (4/30/09)

Before we discuss AWEA’s disagreements with IER and the Danish wind study, it is important to note a few things that AWEA did not disagree with. AWEA did not dispute that wind is heavily subsidized. AWEA did not dispute that wind power is an inefficient way to reduce carbon dioxide emissions. The Danish wind study, for example, found that it costs on average $124 per ton of carbon dioxide reduced. And the AWEA did not dispute that subsidizing wind power is a very inefficient way to create jobs. The Danish wind study found that, optimistically, “the subsidy per job created is 600,000-900,000 DKK per year ($90,000 – $140,000 USD). This subsidy constitutes around 175-250% of the average pay per worker in the Danish manufacturing industry.” The AWEA, however, disagreed, with a few other issues which we discuss below.

Wind Energy: The Case of Denmark

President Obama, the AWEA, and other supporters of wind energy point to Denmark as a model the United States should emulate. For example, as the AWEA writes in a fact sheet, “In western Denmark, wind supplies more than 25% of the electricity that is used during windy winter nights. If wind energy in the U.S. were combined with serious efforts to increase energy efficiency, we could substantially reduce our national use of fossil fuels to generate electricity.” As the Danish wind study shows, Denmark’s situation is substantially different from the situation in the United States. As a result, Denmark wind’s production is not directly replicable by the United States.

To understand Denmark’s electricity situation, we must first understand electricity production in Norway and Sweden. When electricity from wind is produced but not consumed in Denmark, the electricity is exported to Norway and Sweden. This electricity directly replaces hydropower in Norway and Sweden, allowing Norwegian and Swedish lakes and reservoirs to retain more water than release the water to produce electricity. This is only possible because of Norway and Sweden’s vast hydropower resources. According to the International Energy Agency, in 2006, over 98 percent of electricity production in Norway was produced by hydropower[1] and 43 percent Sweden’s electricity was produced by hydropower.[2]

In America, it is harder to balance the electricity wind provides to the grid. Hydropower only supplies 6 percent of the electricity in the United States.[3] In some markets, such as the Pacific Northwest, hydroelectric power is plentiful. But the fickle nature of electricity from wind means that even in the Pacific Northwest it is difficult to balance the electrical load and the Bonneville Power Administration is increasing rates for wind operators by 90 percent (down from a proposed 300 percent increase).

Furthermore it is difficult for wind to replace much of the electricity generation from coal and natural gas. Coal-fired power plants are baseload electricity plants. They are not made to cycle as the wind ebbs and flows. Natural gas-fired turbines can cycle on and off to even out wind production, but natural gas-fired turbines are less energy efficient than combined cycle generation.

Electricity from wind only supplies an average of 9.7% of the electricity Denmark consumes, the rest of Denmark’s subsidized wind production is exported, bringing no direct benefit to Danish ratepayers

Wind produces the equivalent of 19 percent of the electricity consumed in Denmark. But, on average, over half of the electricity from wind in Denmark is exported. The AWEA does not understand why the Danish wind study is critical of exporting highly subsidized electricity. The AWEA writes that “it seems especially strange for a self-described “free-market” ground like IER to be so dismissive of interstate trade.”

The Institute for Energy Research and the study’s authors support free trade. The authors of the Danish wind study are concerned that Danish ratepayers subsidize wind power with few concomitant benefits to the Danes. As the study explains on page 22:

But for the Danish householder who is paying the subsidy in order to save imported fuel and CO2 emissions, the subsidy so exported brings no direct benefit at all. The total probable value of exported subsidies between 2000 and 2008, was DKK 6.8 billion (€ 916 million) during this period.

As the paper clearly states, the problem is not the trade, the problem is the export of subsidies. Because Denmark subsidies electricity from wind, it is logical to assume that Denmark should receive the perceived benefit of those subsidies. This is especially true when Danes have exported electricity for which they paid $1.3 billion in subsidies from 2000 through 2008.

AWEA argues that the Danish Wind Study has no bearing on the situation in the United States

AWEA argues that “even if the claim made by the study were true, this example would have no bearing on the situation in the U.S.” The Danish wind situation is very relevant to the situation in the United States. AWEA has cited Denmark as a model for the United States (in this fact sheet for example, and this article on integrating utility-scale wind energy onto the grid). When President Obama and the AWEA cite Denmark as a model, it makes Denmark relevant.

The AWEA fully supports a “strong” renewable electricity mandate to require electrical utilities to get 20 percent of their electricity from renewable sources. Denmark may produce 19 percent of their electricity from wind but as explained above, that large percentage does not translate to the situation in the United States.

The AWEA seems to believe that the Danish wind study is critical of electricity exports and because the United States is only weakly tied to the Mexican and Canadian electrical grid, the Danish study is of no import. This misapprehends the point of the study. There problem is not with the export of the power. The study is concerned with exporting subsidies, the benefits of which should accrue to Danes, not the Swedes or Norwegians.

Wind power from Denmark does not reduce carbon dioxide emissions in Norway or Sweden

The AWEA claims that wind power flowing to Norway and Sweden reduces carbon dioxide emissions in Norway and Sweden. This is incorrect because only a very small portion on Norway and Sweden’s electricity is generated from coal, oil, or natural gas.

As noted above, according to the International Energy Agency, in 2006, over 98 percent of electricity production in Norway was produced by hydropower[4] and 43 percent Sweden’s electricity was produced by hydropower.[5] Another 47 percent of electricity production in Sweden came from nuclear power. Only 0.5 percent of Norway’s electricity comes from coal, oil, or natural gas in Norway and 3 percent of Sweden’s electricity. The graph below shows the electricity generation profiles of Norway and Sweden:[6]

Denmark’s geography is indeed better suited for wind generation than the United States

AWEA claims that the United States has better wind resources than Denmark. The mere fact that there are some good (or even fantastic) wind resources in the United States does not matter if those resources are off the electricity grid and far from electricity consumers because transmission lines necessary to transport the electricity are very expensive.

The whole of Denmark is 281 miles east to west and 229 miles long. The entire population of Denmark is not far from good wind resources (as this map shows). That is not true in the United States. As this map shows, the best onshore wind resources are in the Midwest from the Texas panhandle north to the Canadian border. There is not one large city in this area, making it expensive to get electricity from this wind to market.

Wind offshore is closer to major population centers in the United States, but offshore wind production is even more expensive than onshore wind electricity production. EIA estimates that by 2016, offshore wind will still be 62 more expensive that onshore wind and onshore wind will still be 49 percent more expensive than coal and 77 percent more expensive than advanced combined cycle natural gas electricity generation.[7]

IER’ has more on the levelized costs of electricity production here.

Wind energy (here, there and everywhere) is very expensive and highly subsidized

For decades the promoters of wind have argued that wind’s cost competitiveness is just around the corner. For example, in 1986, a representative of AWEA testified:

The U.S. wind industry has . . .demonstrated reliability and performance levels that make them very competitive. It has come to the point that the California Energy Commission has predicted windpower will be that State’s lowest cost source of energy in the 1990s, beating out even large-scale hydro.

…

We are not quite there. We have hopes.[8]

Christopher Flavin of the Worldwatch Institute has been predicting competitive viability since the 1980s. In 1984 he wrote:

Tax credits have been essential to the economic viability of wind farms so far, but will not be needed within a few years.[9]

In 1985, he wrote:

Although wind farms still depend on tax credits, they are likely to be economical without this support within a few years.[10]

In 1986, he wrote:

Early evidence indicates that wind power will soon take its place as a decentralized power source that is economical in many areas…. Utility-sponsored studies show that the better windfarms can produce power at a cost of about 7¢ per kilowatt-hour, which is competitive with conventional power sources in the United States.[11]

Even after more than two decades, wind still isn’t cost-competitive and EIA predicts wind will still be 49 to 77 percent more expensive than coal and natural gas in 2016.

The wind lobby has been very effective at securing subsidies, set-asides, and favorable tax treatment

There are a number of ways wind is subsidized and assured market share including the renewable electricity production tax credit, accelerated depreciation (Modified Accelerated Cost-Recovery System), the renewable energy production incentive, renewable energy manufacturing tax credit, state-level renewable electricity mandates, and a large number of other financial incentives at the federal and state level.

It is not surprising that electricity production from wind has expanded recently. Wind turbine designs have improved, but wind remains very expensive and as this list of subsidies, tax credits, and set-asides shows, the American taxpayer is footing the bill for the wind’s expansion. Even after decades of financial support, electricity from wind still only supplies 1.3% of all electricity generated in the US.

Conclusion

The promoters of wind point to Denmark as an example the United States should emulate. But as the Danish wind study shows, Denmark wind’s production is not directly replicable by the United States. The Danish wind experiment also shows that generating electricity from wind is an expensive way to create jobs or reduce carbon dioxide emissions.

Which leads to a final thought: If wind power is everything that proponents say it is, then why can’t it exist in the marketplace without government subsidies, government mandates, government tax credits, guaranteed market share in the form of government enforced feed-in tariffs, and backup generation from more reliable energy sources such as hydropower or natural gas?

[2] International Energy Agency, Electricity/Heat in Sweden in 2006, http://www.iea.org/textbase/stats/electricitydata.asp?COUNTRY_CODE=SE.

[3] Institute for Energy Research, Hydroelectric, http://www.instituteforenergyresearch.org/energy-overview/hydroelectric/.

[4] International Energy Agency, Electricity/Heat in Norway in 2006, http://www.iea.org/textbase/stats/electricitydata.asp?COUNTRY_CODE=NO.

[5] International Energy Agency, Electricity/Heat in Sweden in 2006. http://www.iea.org/textbase/stats/electricitydata.asp?COUNTRY_CODE=SE.

[6] Norway: International Energy Agency, Electricity/Heat in Norway in 2006, http://www.iea.org/textbase/stats/electricitydata.asp?COUNTRY_CODE=NO.

[6] International Energy Agency, Electricity/Heat in Sweden in 2006. Sweden: International Energy Agency, Electricity/Heat in Sweden in 2006. http://www.iea.org/textbase/stats/electricitydata.asp?COUNTRY_CODE=SE.

[7] See Energy Information Administration, Annual Energy Outlook 2009 (revised). Cited at Institute for Energy Research, Levelized Costs of New Electricity Generating Technologies, http://www.instituteforenergyresearch.org/2009/05/12/levelized-cost-of-new-generating-technologies/.

[8] Statement of Michael L.S. Bergey, American Wind Energy Association in Renewable Energy Industries, Hearing before the Subcommittee on Energy Conservation and Power of the Committee on Energy and Commerce, House of Representatives, 99^th Cong., 2^nd sess. (Washington, D.C.: Government Printing Office, 1986), p. 129.

[9] Christopher Flavin, “Electricity’s Future: The Shift to Efficiency and Small-Scale Power,” Worldwatch Paper 61, Worldwatch Institute, November 1984, p. 35.

[10] Christopher Flavin and Cynthia Pollock, “Harnessing Renewable Energy,” in Worldwatch Institute, State of the World 1985 (New York: W. W. Norton, 1985), p. 197.

[11] Christopher Flavin, “Electricity for a Developing World: New Directions,” Worldwatch Paper 70, Worldwatch Institute, June 1986, p. 53.

FOR IMMEDIATE RELEASE
September 14, 2009
Contact:
Chris Tucker, 202.346.8825
Patrick Creighton, 202.621.2947

Something Rotten? Obama Says Danes Receive 20% of Their Power Via Wind; New Study Tells the Real Story

Danish experts visit Washington this week to explain to American audiences what’s really happening in Denmark

WASHINGTON – President Obama has frequently cited Denmark as an example to be followed in the field of wind power generation, stating on several occasions that the Danes satisfy “20 percent of their electricity through wind power.” The findings of a new study released this week cast serious doubt on the accuracy of that statement. The report finds that in 2006 scarcely five percent of the nation’s electricity demand was met by wind. And over the past five years, the average is less than 10 percent — despite Denmark having ‘carpeted’ its land with the machines.

“As climate officials descend upon Copenhagen later this year to continue their work to engineer a world in which energy is rendered less reliable, less affordable and increasingly scarce, the eyes of the world will naturally fall upon the host country as well,” said Thomas J. Pyle, president of the Institute for Energy Research (IER), which commissioned the report.

“In the case of Denmark,” added Pyle, “you have a nation of 5.4 million, occupying some of the most wind-intense real estate in the world, whose citizens are forced to pay the highest electricity rates in Europe — and it still doesn’t even come close to the 20 percent threshold envisioned by President Obama for the United States. This may indeed be the model for the future – but only if you believe that a combination of smoke, mirrors and prohibitively high utility rates are the key to our economic and environmental salvation.”

Prepared by the independent Danish think tank CEPOS and co-authored by economist Henrik Meyer and Hugh Sharman, a prominent Denmark-based international energy consultant, the report details the extent to which Denmark’s claim to wind superiority is essentially founded on a myth – the function of a complicated trading scheme in which the Danes off-load excess, value-subtracted wind generation to other nations for roughly free, asking only in return that these countries sell some of their baseload power back to Denmark on the frequent occasions in which the wind does not blow there

The upshot? The Danes retain the title of world’s most prolific wind producer, and President Obama cites their experience as a path to be followed. The cost? Danish ratepayers are forced to pay the highest utility rates in Europe. And the American people are led to believe that, though wind may only provide a little more than one percent of our electricity now, reaching a 20 percent platform – as the Danes have allegedly done – will come at no cost, with no jobs lost and no externalities to consider.

Speaking of jobs, the report also pulls back the curtain on the wind power industry’s near-complete dependence on taxpayer subsidies to support the fairly modest workforce it presently maintains. Just as in Spain, where per-job taxpayer subsidies for so-called “green jobs” exceeds $1,000,000 per worker in some cases, wind-related jobs in Denmark on average are subsidized at a rate of 175 to 250 percent above the average pay per worker. All told, each new wind job created by the government costs Danish taxpayers between 600,000-900,000 krone a year, roughly equivalent to $90,000-$140,000 USD.

“That the current political leadership in Washington is enamored of the European energy model has been made abundantly clear — from the president himself, all the way on down,” added Pyle. “Less clear is the extent to which these people actually know what’s taking place over there, and whether they’re willing to level with the American people about the serious costs associated with following this dubious path.”

On Tuesday, report co-author Hugh Sharman will join CEPOS chief executive officer Martin Agerup in Washington, D.C., part of a three-day tour (Tues-Thurs) aimed at explaining to a wider American audience the core conclusions of their report. Those interested in speaking with Messrs. Sharman and/or Agerup or setting up an interview should contact Patrick Creighton (202.621.2947) or Chris Tucker (202.346.8825).

More from IER:

Danish Study: Wind Energy – the Case of Denmark (Sept. 2009)
Earth Day speech: Obama says Denmark meets 20% of its electricity demand via wind
Fact Sheet: Key take-aways from Danish wind study
Fact Sheet: Obama frequently (and incorrectly) cites Denmark’s 20 percent wind figure
Spanish Report: Study of the Effects on Employment of Public Aid to Renewable Energy Sources
Response: NREL’s flawed analysis of Spanish green jobs study
Analysis: Levelized Cost of New Electricity Generating Technologies

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Contrary to the claims of the study, both the Obama administration’s “stimulus” plan and the House-passed Waxman-Markey climate bill will indeed lower living standards for most Americans. It’s true, some groups will benefit financially from the government’s massive deficit spending and power grab—solar panel manufacturers and Wall Street carbon dioxide allowance brokers are good examples. But the nation’s poor are not politically connected, and thus will not benefit from these backroom deals. Instead, the poor will suffer the most from rising energy prices and reduced transportation options.

Helping Business By Crippling It?

The fundamental flaw with the notion of a “green recovery” is that it overlooks all the jobs the government will destroy with its mandates and stealth taxes. For example, the PERI study tells us:

The building of a clean-energy economy in the United States can also serve another purpose: to create new ‘pathways out of poverty’ for the 78 million people in this country (roughly 25 percent of the population) who are presently poor or near-poor, and raise living standards more generally for low-income people in the United States. (p. 2)

Such claims sound good, but simply don’t hold up to scrutiny. The government can’t make the economy richer by siphoning resources away from the private sector and spending them on political pet projects, nor does it raise living standards by weaning businesses off the most efficient techniques of production.

The “green recovery” advocates are trying to have their cake and eat it too. Assume that some of the most dire global climate computer simulations are accurate, and that drastic reductions in greenhouse gas emissions are necessary to literally avert global catastrophe. Even in this case, the government’s preferred solution—taking away options from business and forcing them to make their products using less efficient energy—will lower total domestic economic output. To some, the tradeoff of averting the “what if” scenario would be worth it, but the point is, there would be a tradeoff. Americans would be forced to enjoy a lower material standard of living for the (theoretical) benefit of lower long-run temperatures.

To see how far-fetched the green jobs rhetoric is, notice that the argument has nothing intrinsically to do with “clean” energy. If cap-and-trade in carbon dioxide emissions will be such a boon to the economy, then why stop there? The government could also declare a cap on how many tons of steel businesses could use in a given year. By ratcheting down the steel cap every year (as they plan on doing with carbon dioxide), the politicians would force businesses to come up with other ways of making their products with less and less steel. According to the PERI study’s logic, this would be great because of all the new job opportunities in plastics and other soon-to-be invented sectors.

The Lower the Wage, the More Jobs You Can “Create”

The PERI study relies on a typical claim from the “green recovery” literature:

[O]ur findings show that clean-energy investments create more job opportunities than spending on fossil fuels, across all levels of skill and education. The largest benefits will accrue to workers with relatively low educational credentials. (p.2, emphasis added)

Sounds too good to be true, doesn’t it? That’s because it is. In a relatively free market economy, where for the most part lawmakers and unelected bureaucrats don’t control economic decision-making, labor and capital moves towards those sectors where they are the most productive. Some businesses, such as hair salons, are relatively labor-intensive, whereas other businesses, such as airlines or oil rigs, would be more capital-intensive. Loosely speaking, the economy’s overall output would be maximized, because every worker and machine would be deployed in the sector where they could produce the most value (and earn the most money).

Now enter the policymakers and bureaucrats who start rearranging resources. They look at businesses that generate electricity by harnessing wind and solar power, and then they look at businesses that produce electricity by harnessing coal power. Since it takes more workers to produce electricity from windmills and solar panels, they decide to cripple the coal burners and give subsidies to the wind harvesters to try to create a “green recovery.”

But if it really helped workers for them to move from efficient energy industries into “green” energy sectors, why would the government have to force them to do it? Part of the answer is that the new jobs will actually not be very high paying, as the PERI study unwittingly admits when it says, “Out of the 1.7 million net increase in job creation, roughly 870,000 of the newly available jobs would be accessible to workers with high school degrees or less.”

Saving Consumers Money By Taking Away Their Products

As bad as their arguments for “helping” workers are, the PERI approach to “helping” consumers is even worse. The government will “save” households money by forcing them to consume less energy and transportation. For example, in discussing the benefits of increasing the availability of mass transit—funded with taxes taken from the private sector—the PERI study says (p.3):

• The largest benefits will accrue to households that can replace a car with public transit.
• These households would see their annual transportation expenditures fall by roughly $2,000.
• This would represent a reduction in total expenditures for these families of about 10 percent.

Applying the same logic, if the government expanded public housing projects and doubled property taxes at the same time, that might encourage families to “save money” by moving into government-owned apartments, but it wouldn’t make them better off as a result.

What the PERI authors fail to explain is why the poor would need to be forced to reap all the benefits that will allegedly accrue from new government “green energy” mandates. For example, if it makes economic sense for a poor household to install better insulation and fluorescent lights, why does the government need to be involved at all? At best, PERI should conduct an educational campaign alerting poorer households of all these alleged savings. Or better yet, maybe they could provide free compact fluorescent light bulbs to citizens of modest means. Both would be certainly be less intrusive to the poor than fundamentally reorganizing energy markets, and consequently harming the U.S. economy, for the sake of promoting politically correct energy.

Conclusion

The $787 billion Obama “stimulus” (pork) package and the 1400-page Waxman-Markey energy tax bill will not help the poor. You don’t improve the economy or raise living standards by rearranging resources and imposing artificial constraints on the private sector. These two government programs do nothing more than siphon money from taxpayers and into the hands of lawmakers and bureaucrats to shower onto their politically connected friends. Unfortunately, the working poor are not lucky enough to be members of that exclusive club.