Recent Solar Plant Construction

North Carolina. Western North Carolina is home to a new 555-kilowatt solar array that has been placed atop a landfill.[i] This small solar farm—built in response to bids for projects that would meet North Carolina’s Renewable Electricity Standard—is the fourth to begin operating in the state, with four more under contract. [ii] FLS Energy owns and operates the solar farm and will sell its power to Progress Energy Inc. The solar plant consists of 2,340 photovoltaic panels and is expected to generate about 730,000 kilowatt-hours of electricity annually, only a 15-percent capacity factor.  It is reported to have created five new jobs. Unfortunately, to provide counterweight against high winds and support on the ground, FLS Energy had to construct concrete pads on top of the landfill as a base for the solar panels, creating carbon dioxide emissions and partially negating some of the environmental benefit from the solar generated electricity.

Across 500 acres north of West Palm Beach, the FPL Group utility is grafting what will be the world’s second-largest solar plant onto the back of the largest fossil-fuel power plant in the United States. (NYT)

Florida. The N.C. plants are smaller than the solar plant that came on line last fall in southern Florida. That plant consisting of over 90,500 photovoltaic panels is a 25,000 kilowatt plant, built by Florida Power and Light.[iii] The plant costs more than $6,000 per kilowatt to construct, about 6 times what a natural gas combined cycle plant would cost, according to the Energy Information Administration (EIA), an independent agency within the U.S. Department of Energy.[iv]

Florida Power and Light is building another solar plant in Indiantown, Florida, which is an experiment of marrying a solar plant with a gas-fired plant to reduce cost.[v] Florida Power and Light expects to cut cost by about 20 percent compared with a stand-alone solar facility since it does not have to build a new steam turbine or new high-power transmission lines. Once totally completed, the solar plant will be able to generate 75,000 kilowatts of power using 190,000 mirrors, tripling the size of the Florida plant described above. But it is dwarfed by the adjacent gas plant, which can produce about 3,800 megawatts of power. As you can see by the picture below, the more efficient natural gas plant also requires far less land mass than the solar plant. At a cost of $476 million, it will cost $6, 347 per kilowatt to construct.

These solar plants and other renewable generating plants are being constructed in response to subsidies and grants from the federal and state governments and because of state mandates called Renewable Electricity Standards or Renewable Portfolio Standards.  Over half of the states and the District of Columbia have enacted Renewable Electricity Standards that require a specified percentage of future generation to be from renewable power.

What are the Costs of Competing Technologies?

Construction Costs

The EIA provides the construction costs for a slate of generating technologies and their expected annual generating costs for 2016, the first year that they can be compared owing to the different construction times for each plant type. The construction costs, without finance charges,[vi] are depicted in the following graph. The capital costs (in 2008 dollars) range from $648 per kilowatt for a gas-fired turbine to $6,171 per kilowatt for a photovoltaic solar plant, the highest cost of all of the future generating technologies that EIA considers in its forecasts.  Coal and gas-fired plants generally dominate a forecast where current laws and regulations are assumed to continue in the future. A conventional coal plant with equipment for removing sulfur dioxide and nitrogen oxide emissions runs $2,223 per kilowatt and a coal-fired integrated gasification combined cycle plant runs $2,569 per kilowatt. Gas-fired combined cycle plants are of even lower cost at $968 per kilowatt. These technologies can be used as base-load plants that operate at high capacity factors when electricity demand is at its highest.

Annualized Generating Costs of New Plants

Many advocates of renewable technologies indicate that while the capital cost of so called “green technologies” may be higher than conventional fossil-fueled technologies, the benefit is zero fuel cost for their preferred technologies–solar and wind. While that is true, wind and solar technologies cannot provide base-load power because the sun is not always visible and the wind does not always blow, meaning the electricity may not be available when you need it. Taking into account these factors as well as operation and maintenance costs and fuel costs, EIA  puts their slate of future generating technologies on a comparable basis by calculating levelized cost, that is, the annual cost of generating power including capital, fuel, operation and maintenance, and finance charges.[vii] And, in the case of coal, they include the equivalent of a $15 per ton carbon dioxide emission fee to represent the current financial and regulatory environment for coal-fired plants. Many coal-fired plants are finding difficulty in getting financing and/or are facing regulatory or legal delays in obtaining permits.

The levelized costs among the various technologies (expressed in 2008 dollars) range from $79.3 per megawatt-hour for a gas-fired combined cycle plant to $396.1 per megawatt-hour for a photovoltaic solar plant. Coal plants run from $100.4 to $110.5 per megawatt-hour for conventional coal and integrated combined cycle, respectively. Although wind has a lower cost than solar, it is still higher on an annualized basis than gas and coal-fired plants because of its lower capacity factor. Wind turbines built on-shore are estimated to cost $149.3 per megawatt-hour, and wind built off-shore has estimated annual costs of $191.1 per megawatt-hour. Again, the costs are for a plant beginning operation in 2016, the first year that can be compared for a new plant because of the difference in construction times among the various technologies.

Why Are Electric Utilities Building Wind and Solar Plants?

Subsidies and Mandates for Renewable Technologies

Electric utilities are building wind and solar plants because of incentives offered and mandates laid down by state and federal officials. These include subsidies in the form of investment tax credits, production tax credits, accelerated depreciation of the asset for tax purposes, and Renewable Electricity Standards (RES), which require electric utilities either to build a required amount of renewable power or to purchase credits from other electric utilities who more than meet the targeted requirements. Currently, twenty-eight states and the District of Columbia have renewable electricity standards.[viii] The RES specifications differ by state. North Carolina is the only state in the southeast with an RES. Many southern states are against a federal RES because they will have to purchase renewable credits from other areas of the country since they have very little “green” resources. Purchasing electricity credits will increase their electricity rates, possibly driving out industry from their states. While more than half the states have an RES, many are not monitoring its compliance, and, with the exception of Texas, are not meeting their renewable targets.[ix]

Solar power has had a 10-percent investment tax credit since 1978, which was made permanent by the Energy Policy Act of 1992. The Energy Policy Act of 2005 established a 30-percent personal tax credit, not to exceed $2,000, for the purchase of solar electric and solar water heating property. The Emergency Economic Stabilization Act of 2008 extended the 30-percent tax credit to 2016 and lifted the   cap. It also allowed electric utilities to qualify, paving the way for electric utilities to begin constructing solar thermal and solar photovoltaic facilities.

Wind received a federal production tax credit (PTC) as part of the Energy Policy Act of 1992, defined as a 1.5-cents-per-kilowatt-hour payment (adjusted annually for inflation), available for 10 years to investors for facilities placed in service between 1994 and June 30, 1999. The PTC for wind has expired and been reinstated several times since its origination. The Emergency Economic Stabilization Act of 2008   extended the PTC to 2.1-cents-per-kilowatt-hour through 2012. The $787 billion economic stimulus that President Obama signed into law in February 2009 makes a 30 percent investment tax credit available in lieu of the production credit.

Federal Subsidies for Renewable Power Compared to Other Generating Technologies

While these are some of the more direct subsidies that wind and solar receive, there are many others at both the federal and state level, such as the accelerated depreciation mentioned above. The EIA did a study comparing the federal subsidies received for electric generation by fuel type for fiscal year 2007.[x] They found that wind and solar received almost 100 times more in subsidies than oil and natural gas plants on an electricity production basis.  Total federal subsidies for electric production from wind power were $23.37 per megawatt hour (in 2007 dollars) and for solar power were $24.34 per megawatt hour, compared to 44 cents for traditional coal, 25 cents for natural gas and petroleum liquids, 67 cents for hydroelectric power, and $1.59 for nuclear. These subsidies include the federal production and investment tax credits, but do not include accelerated depreciation (a five-year tax write-off) and state subsidies. Energy subsidies are paid for by consumers and tax payers; they are not free.

Despite more than 30 years of subsidies, set asides, and favorable treatment, for the first eleven months of 2009, solar power produced only 0.02 percent of our electricity and wind power produced only 1.7 percent of our electricity. [xi]

Conclusion

Government is intended to work for the people. However, governments have expanded their influence to many areas of our lives where the rationale for action is suspect, even nonexistent. Arguments such as “energy independence from OPEC oil” make no sense when evaluating options for the electricity sector because this fuel generates only 1 percent of U.S. electricity, and this small quantity could be easily replaced if it were economical to do so.

Wind and solar are supposedly the answer for reducing carbon dioxide emissions from electrical generation.  But as Texas has found,[xii] wind and solar tend to reduce natural gas-fired generation (the least carbon-intensive fossil fuel) rather than coal-fired generation (the most carbon-intensive fossil fuel), because existing coal-fired generation is less expensive than gas-fired generation. Finding the correct policy to meet one’s goals tends to be difficult in such a complex economic environment. A bad policy can be more damaging than no policy, because it costs the American public money either through taxes or through higher rates for products.

Some people believe that “green energy” will create jobs that will stimulate the economy. But case studies from Spain,[xiii] Germany,[xiv] and Denmark[xv] have shown just the opposite. Early on, Spain embarked on a program of “20-percent renewable by 2010,” to set an example for other countries. However, a Spanish study has found that for every green job the Spanish government created, 2.2 jobs were destroyed elsewhere in the economy, and 9 out of 10 government-created green jobs were temporary. The phrase “20 percent by 2010” turned out to be a close approximation of Spain’s unemployment rate.[xvi]

A German study found that green jobs created by government actions disappear as soon as government support is terminated. A Danish study found that the government’s wind experiment was an expensive way to create jobs or to reduce carbon dioxide emissions.

So why are our politicians continuing to subsidize and mandate inefficient and expensive sources of energy? Doing so only increases taxes (to pay for the subsidies) and increases the price of energy. It’s a lose-lose proposition.

[ii] http://www.progress-energy.com/aboutus/news/article.asp?id=23642

[iii] http://www.fpl.com/environment/solar/desoto.shtml

[iv] Energy Information Administration, Electric Generating Technologies Cost Assumptions, http://www.eia.doe.gov/oiaf/aeo/index.html

[v] The N.Y. Times, The Newest Hybrid Model, March 4, 2010, http://www.nytimes.com/2010/03/05/business/05solar.html

[vi] Energy Information Administration, Annual Energy Outlook 2010 Early Release, Electric Generating Technology Cost Assumptions, http://www.eia.doe.gov/oiaf/aeo/index.html

[vii] Energy Information Administration, Annual Energy Outlook 2010 Early Release, 2016 Levelized Cost of New Generation Resources from the Annual Energy Outlook 2010, http://www.eia.doe.gov/oiaf/aeo/electricity_generation.html

[viii] http://go.ucsusa.org/cgi-bin/RES/state_standards_search.pl?template=main

[ix] “A National Renewable Portfolio Standard: Politically Correct, Economically Suspect,” Robert J. Michaels, April 2008 Electricity Journal.

[x] Energy Information Administration, Federal Financial Interventions and Subsidies in Energy Markets 2007, http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/pdf/chap5.pdf, Table 35

[xi] Energy Information Administration, Monthly Energy Review, February 2010, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec7_5.pdf

[xii] The Wall Street Journal, Natural Gas Tilts at Windmills in Power Feud, March 2, 2010, http://online.wsj.com/article/SB10001424052748704188104575083982637451248.html?mod=WSJ_Com modities_LeadStory

[xiii] Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf .

[xiv] Economic impacts from the promotion of renewable energies: The German experience, http://www.instituteforenergyresearch.org/germany/Germany_Study_-_FINAL.pdf

[xv] Wind Energy-The Case of Denmark, September 2009, http://www.cepos.dk/fileadmin/user_upload/Arkiv/PDF/Wind_energy_-_the_case_of_Denmark.pdf

[xvi] http://dailycaller.com/2010/03/04/what-exactly-is-a-green-job/

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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He also won’t mention that while the plant employed 400 draftsmen, carpenters, and others during its construction, few full-time employees will be needed during its operation—one engineer to trouble shoot problems and six ground keepers to keep the grass trimmed and animals away.[iii] As such, the ongoing operation of this solar plant will not help the rising Florida unemployment rate.

FPL spent $152 million building the plant[iv], which amounts to $6,080 per kilowatt—a figure substantiated by the Energy Information Administration, who ranks photovoltaic solar the highest cost technology of a potential slate of 20 possible future generating technologies.[v]

While traditional fossil fuel technologies cost substantially less, solar photovoltaic technology is being supported by Federal subsidies, consisting of investment tax credits and accelerated depreciation, and by mandates for renewable power in many US states.[vi] The Florida Legislature approved a one-time rate increase of about 31 cents per month for the average customer to cover the construction of three solar test sites totaling 110 megawatts—about one half of one percent of the total energy FPL produces.[vii]

European Experience

The US is not the only country building and subsidizing solar plants. In fact, it ranks fourth in the world for cumulative installed solar electric power. Germany ranks first, Spain second, and Japan third.[viii] In Germany, solar producers receive as much as 64 US cents per kilowatt hour through a feed-in tariff, which requires utility companies to purchase renewable power at their higher cost. The feed in tariff for photovoltaic solar in Germany is more than eight times higher than the electricity price at the power exchange.[ix] Germany is reducing its subsidies for solar to ease costs for electricity consumers. Surprisingly, Germany’s photovoltaic manufacturing industry is beginning to support slashing subsidies due to competition from Chinese manufacturers, whose production costs are 30 percent lower. China is now the world’s largest producer of solar cells.[x]

Spain has a mandate requiring 20 percent of its electricity generation to come from renewable power by 2010, and it uses feed-in tariffs to further promote renewable generation. In 2008, Spain’s solar power cost was over 7 times higher than its average electricity price.[xi] Spain also slashed subsidies for solar power, limiting those subsidies to 500 megawatts, about one-fifth of the solar capacity it subsidized in 2008.[xii] In Japan, the government has set a target for 30 percent of all households to have solar panels installed by 2030.[xiii]

Subsidy Levels by Country

In 2008, the International Energy Agency released an analysis of policies used to deploy renewables during the period 2000-2005 for the 30 countries of the Organization for Economic Cooperation and Development and for Brazil, Russia, China, India, and South Africa.[xiv] They found that the investment costs of photovoltaic systems are high, representing the most important barrier to their deployment. The agency’s calculated 2000-2005 policy effectiveness levels for photovoltaics are lower by a factor of ten than for more mature renewable technologies such as wind energy. Feed-in tariffs (complemented by the easy availability of soft loans and fair grid access) have been very effective in Germany, albeit at a high cost. In recent years, the level of the German feed in tariff for solar photovoltaics has decreased to some extent, and an element of degression, a pre-determined percentage decrease in the renewable technologies’ support level, has been introduced. The German parliament approved proposals for acceleration of degression rates for stand-alone installations from 5 percent per year in 2008 to 10 percent per year in 2010 and 9 percent from 2011 onwards. According to the IEA, this creates incentives to reduce costs.

The IEA calculated the remuneration levels in 2005 for each renewable technology for the 35 countries they analyzed. The solar remuneration levels are given in the figure below. In Luxembourg, for example, the remuneration level in 2005 was as high as 90 cents US per kilowatt hour. The average renumeration levels are higher for solar photovoltaic technologies than for other more mature renewable technologies due to their high investment costs.

Conclusion

Even with large subsidies, solar photovoltaic power is having trouble gaining market share, contributing less than one percent to the total power generated in each of the countries that have the largest solar capacity in the world—Germany, Spain, and the United States. The reason is the high investment costs that solar power needs for deployment. Regardless, our Federal and state governments seem intent on making consumers of electricity pay for solar technologies that are not economic against traditional generating technologies causing taxpayers and customers to subsidize their construction and operation. Our state and Federal politicians tout that this will help employment. However, when the largest solar plant built in the United States goes operational on Tuesday, it will lose 393 employees that it employed for less than a year, needing only 7 for ongoing operations.

[i] http://my.att.net/s/editorial.dll?eeid=6895421&eetype=article&render=y&ck=&ch=mo

[ii] http://www.fpl.com/environment/solar/desoto.shtml

[iii] “Solar plant set to open, even as shadows loom”, Herald Tribune, Zac Anderson, Oct. 14, 2009, http://www.heraldtribune.com/article/20091014/ARTICLE/910141033/2055/NEWS?Title=Solar-plant-set-to-open-even-as-shadows-loom

[iv] Ibid.

[v] Energy Information Administration, Assumptions to the Annual Energy outlook 2009, Table 8.2, http://www.eia.doe.gov/oiaf/aeo/assumption/index.html

[vi] http://www.instituteforenergyresearch.org/2009/10/19/the-u-s-doubles-down-on-solar-subsidies-while-europe-retreats/

[vii]“Solar plant set to open, even as shadows loom”, Herald Tribune, Zac Anderson, Oct. 14, 2009, http://www.heraldtribune.com/article/20091014/ARTICLE/910141033/2055/NEWS?Title=Solar-plant-set-to-open-even-as-shadows-loom

[viii] Solar Energy Industries Association, http://www.seia.org/cs/about_solar_energy/industry_data

[ix]“Economic Impacts from the promotion of renewable energies”, Rheinisch-Westfalisches Institut fur Wirtschaftsforschung , http://www.instituteforenergyresearch.org/germany/Germany_Study_-_FINAL.pdf

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

[xi] Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf

[xii] Wall Street Journal, “Darker Times for Solar-Power Industry”, May 11, 2009, http://online.wsj.com/article/SB124199500034504717.html .

[xiii] Energy Information Administration, International Energy Outlook 2009, May 2009, page 68, http://www.eia.doe.gov/oiaf/ieo/pdf/0484(2009).pdf .

[xiv] International Energy Agency, “Deploying Renewables: Principles for Effective Policies”

The concept of an RPS is not new. Twenty-nine states and the District of Columbia currently have some form of RPS[iii], but few states are meeting their mandates,[iv] and these states have often tailored their “qualified renewables” liberally to what makes sense to their area. Texas, a state that has met its mandates mainly from wind-generated power, the least-cost qualified renewable, is now considering expanding into more costly renewables, such as solar power. Houston, for example, is considering using solar to generate 1.5 percent of its government’s needs from a 10-megawatt plant to be built by NRG and to be operating by July 2010. When the sun is not visible, the plant will be backed-up by the city’s natural gas-fired generating units.

The proposed 10-megawatt Houston plant is estimated to cost $40 million[v], $4,000 per kilowatt, which is a smaller cost figure than many other solar project estimates and most probably speculative. And, that $4,000 per kilowatt is also far more costly than other generating technologies that are more reliable to boot. For example, the Energy information Administration (EIA), an independent agency within the U.S. Department of Energy, is estimating the cost to build a coal-fired plant at about half the estimated cost in Houston, or just over $2,000 per kilowatt, and a natural-gas fired plant at less than a quarter of that cost, at below $1,000 per kilowatt. [vi] EIA’s estimate for a photovoltaic plant, which is what is being proposed in Houston, is just over $6,000 per kilowatt, 50 percent higher than the NRG cost estimate.[vii] In fact, photovoltaic solar is the highest-cost generating technology of EIA’s slate of 20 potential technologies for generating this country’s future electricity needs.[viii]

European Experience

However, we do not have to use EIA’s cost figures to know that solar is non-competitive with conventional grid generation. Several countries in Europe have already implemented RPS type programs with hefty subsidies funded by the country’s taxpayers. They include Spain, Germany, and Denmark. For example, in Alvarado, Spain, the energy firm Acciona inaugurated a 50-MW concentrating solar power plant in late July. The cost is €236 million, about $350 million U.S., or about $7,000 per kilowatt.[ix] Construction of the plant began in February 2008, with an average of 350 people working throughout the 18-month construction period. The plant will be run by a 31-person operation and maintenance team. This is the second solar plant of this type built in Spain. Its predecessor has been operating since June 2007.[x]

Spain ranks second in the world in installed solar capacity, second only to Germany.[xi] To achieve that ranking, Spain initiated legislation that requires 20 percent of its electricity generation to be from renewable energy by 2010. To make renewable energy attractive to investors, Spain also subsidized its renewable technologies. In 2008, for instance, when solar power generated less than 1 percent of Spain’s electricity, its cost was over 7 times higher than the average electricity price. Due to feed-in tariffs, utility companies were forced to buy the renewable power at its higher cost. And not only is solar power more expensive, jobs that could have been fostered and continued elsewhere in the Spanish economy were foregone to meet the government’s renewable mandates. A Spanish researcher found that while solar energy employs many workers in the plant’s construction, it consumes a great amount of capital that would have created many more jobs in other parts of the economy. In fact, for each megawatt of solar energy installed in Spain, 12.7 jobs were lost elsewhere in the Spanish economy.[xii] Recently, the Spanish government decided to slash subsidies to solar power. Spain will subsidize just 500 megawatts of solar projects this year, down sharply from 2,400 megawatts last year.[xiii]

Germany—the world’s highest ranking country for installed solar capacity and the largest market for solar products—is also slashing its subsidies for solar power in order to ease costs for electricity users. Owners of solar panels receive as much as 43 euro cents (64 U.S. cents) per kilowatt hour of power they generate.[xiv] The Energy Information Administration calculates the levelized cost of electricity[xv] from solar photovoltaic power to be 39.57 cents per kilowatt hour (2007 dollars) in 2016,[xvi] far less than the German subsidy. According to some German researchers, the feed-in tariff for solar is 43 euro cents per kilowatt hour (kWh), making solar electricity by far the most subsidized technology among all forms of renewable energy. This feed-in tariff for solar photovoltaic power is more than eight times higher than the electricity price at the power exchange and more than four times the feed-in tariff paid for electricity produced by on-shore wind turbines. Because of solar power’s low capacity factor, solar generated only 0.6 percent of Germany’s electricity in 2008.[xvii] Since the sun doesn’t always shine on solar plants, solar power cannot compete with more mature generating technologies. The EIA estimates the capacity factor for solar in 2008 to be 17 percent.[xviii]

U.S. Subsidies

While the U.S. does not have feed-in tariffs at this time, it does subsidize solar power through investment tax credits that are as high as 30 percent currently and until 2016. Solar also benefits from a permanent investment tax credit of 10 percent in the U.S., and a 5-year accelerated depreciation write-off. The Energy information Administration estimates that total federal subsidies for electric production from solar power for fiscal year 2007 were $24.34 per megawatt hour, compared to 25 cents per megawatt hour for natural gas and petroleum fueled technologies—98 times higher.[xix] Yet, even with these subsidies, solar generated only 0.02 percent of U.S. electricity in 2008.[xx] That is because solar at around 40 cents per kilowatt hour is more than 4 times as expensive on a levelized cost basis than its fossil competitors. (EIA estimates that levelized costs for conventional coal are 9.46 cents per kilowatt hour and those for natural gas combined cycle are 8.39 cents per kilowatt hour (in 2007 dollars) for 2016.[xxi])

Of course, the U.S. is slow in learning from Europe’s experiences. On October 12, 2009, California Governor Arnold Schwarzenegger signed into law S.B. 32, a feed-in tariff that requires California utilities to buy all renewable generation under 3 megawatts within their service territories, until they hit a state-wide total cap of 750 megawatts.[xxii] How California will monitor this program is yet to be seen. It has yet to achieve its renewable generating mandates from its RPS program.[xxiii]

Conclusion

Solar power has it place in certain applications. As always, the individual citizen or company should be able to choose if solar works for their energy needs. But using solar power to generate electricity for the electrical grid is very expensive. Requiring ratepayers to buy solar power, either through renewable energy mandates or through feed-in tariffs, will only increase the price of electricity. The last thing the economy needs is higher energy prices, but that is exactly what solar energy’s supporters are promoting.

[i] Robert J. Michaels, The Other Half of Waxman-Markey: An Examination of the non-Cap-and-Trade Provisions, http://www.instituteforenergyresearch.org/pdf/Other_Half_of_Waxman-Markey–FINAL.pdf

[ii] H.R. 2454, section 101

[iii] Database of State Incentives for Renewables and Efficiency (DSIRE), North Carolina State University, http://www.dsireusa.org/incentives/index.cfm?SearchType=RPS&&EE=0&RS=1

[iv] Traci Watson, States not meeting renewable energy goals, USA Today, Oct. 8, 2009, http://www.usatoday.com/money/industries/energy/2009-10-08-altenergy_N.htm.

[v] “Solar forecast: expensive”, Loren Steffy, Houston Chronicle, September 29, 2009, http://www.chron.com/disp/story.mpl/business/steffy/6643904.html

[vi] Energy information Administration, Assumptions to the Annual Energy outlook 2009, Table 8.2.

[vii] Ibid.

[viii] Ibid.

[ix] Sonal Patel, Power Digest, Power Magazine, Sept. 2009, http://powermag.com/business/2144.html.

[x] Sonal Patel, Interest in Solar Tower Technology Rising, Power Magazine, http://powermag.com/renewables/solar/Interest-in-Solar-Tower-Technology-Rising_1876.html.

[xi] Solar Energy Industries Association, http://www.seia.org/cs/about_solar_energy/industry_data

[xii] Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf

[xiii] Wall Street journal, “Darker Times for Solar-Power Industry”, May 11, 2009, http://online.wsj.com/article/SB124199500034504717.html .

[xiv] “Merkel’s Coalition to “Definitely” Cut German Solar subsidies”, Brian Parker and Nicholas Comfort, Bloomberg, October 12, 2009, http://www.bloomberg.com/apps/news?pid=206011

[xv] The levelized cost of a generating technology is the present value of the total cost of building and operating the generating plant over its financial life.

[xvi]“Levelized Cost of New Electricity Generating Technologies” , Institute for Energy Research, May 12, 2009, http://www.instituteforenergyresearch.org/2009/05/12/levelized-cost-of-new-generating-technologies/

[xvii] “Economic impacts from the promotion of renewable energies”, Rheinisch-Westfälisches Institut für Wirtschaft sforschung

[xviii] “Solar forecast: expensive”, Loren Steffy, Houston Chronicle, September 29, 2009, http://www.chron.com/disp/story.mpl/business/steffy/6643904.html

[xix] Energy information Administration, Federal Financial interventions and Subsidies in Energy markets 2007, http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/index.html .

[xx] Energy Information Administration, Monthly Energy Review, Table 7.2a, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec7_5.pdf

[xxi]“Levelized Cost of New Electricity Generating Technologies” , Institute for Energy Research, May 12, 2009, http://www.instituteforenergyresearch.org/2009/05/12/levelized-cost-of-new-generating-technologies/

[xxii] Greenwire, “California: Schwarzenegger signs feed-in tariff, spate of enviro bills”, October 12, 2009, http://www.eenews.net/Greenwire/2009/10/12/4/

[xxiii] Robert J. Michaels, “A National Renewable Portfolio Standard: Politically Correct, Economically Suspect,” Electricity Journal 21 (April 2008)

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.

#####

Now, after months of limiting access to additional sources of domestic energy, Secretary Salazar has decided to fast track taxpayer-subsidized solar energy development on federal lands. The Bureau of Land Management (BLM), an agency within the Department of Interior, announced earlier this month its intent to use 676,048 acres in six states—California, Nevada, Utah, Arizona, New Mexico, and Colorado—as solar energy study areas. The process to prepare these areas will take 2 years. The first step—soliciting comments via a Federal Register Notice—has already been completed. Comments were due by July 30, 2009. Salazar claims that this action, which will permit the construction of 13 commercial-sized solar facilities on public lands, will create 50,000 jobs.[1]

Salazar failed to mention that because solar power is heavily subsidized by taxpayer dollars, the jobs this plan creates will lead to many jobs lost elsewhere in the economy. He also failed to note that electricity generated by these plants will cost consumers 2.5 to 4 times more than generation from efficient energy sources like coal and natural gas. And solar is subsidized almost 100 times more than petroleum and natural gas, as measured on an electricity production basis (that is, in terms of dollars of subsidy per megawatt-hour produced).

Solar Power Is the Most Expensive Renewable

For decades, advocates of solar power have argued that it will soon be cost-competitive with conventional energy sources. But solar continues to cost much more than other, more efficient, sources of producing electricity. Economist Gilbert Metcalf of Tufts University compiled the table below comparing the cost of electricity from various sources.[2] The column titled “Current Law” shows the price of electricity under current law. However, current law provides for differing tax treatment for each source of electricity. To cancel out the different tax treatments for the different sources of electricity, Metcalf calculated the column titled “Level Playing Field,” which shows the cost of electricity assuming all of the sources were treated equally by the tax code. The last column shows the price if there were no taxes.

Metcalf explains that the costs of wind and solar shown here are actually too low because the cost does not reflect the fact that wind and solar work only intermittently. People demand access to electricity 24 hours a day and become frustrated when the lights go off, even for a short period. To have electricity when clouds cover the sun or the wind is not blowing requires stand-by power that can produce electricity when the renewables are not available.

Solar Power Will Continue to be the Most Expensive Renewable

According to the Energy information Administration (EIA), an independent agency within the Department of Energy, solar will continue to be the most expensive source of renewable electricity. EIA recently calculated the average cost of generating power from new fossil fuel, renewables, and nuclear energy. They estimate that by 2016 solar power will still cost 2.5 to 4 times more than the cheapest alternative, coal, which currently generates almost 50 percent of our electricity.

In reality, solar is even more expensive. EIA applied a three-percentage point increase to the cost of capital for coal-generated electricity to account for the possibility that future coal projects may need to purchase allowances or invest in other greenhouse gas emission-reducing projects to offset their emissions. This three-percent increase is similar to a $15 per ton carbon-dioxide-emissions fee.[3] On the other hand, EIA applied a two percentage point reduction in the cost-of-capital for eligible renewable technologies to take account of the loan guarantee program of the stimulus bill.

Solar Subsidies Are Huge

The federal government provides large subsidies for solar power generation in an effort to make solar more cost-competitive. Solar is eligible for a 10-percent business investment tax credit, which was made permanent as part of the Energy Policy Act of 1992. The Energy Policy Act of 2005 established a 30-percent personal tax credit, capped at $2,000 for the purchase of solar electric and solar water heating property. That tax credit was extended to 2016 by the Emergency Economic Stabilization Act of 2008, which also lifted the $2,000 cap and allowed electric utilities to qualify. [4]

To understand the significance of those subsidies, the EIA compared them to other fuels used for electric generation. The EIA calculated that federal subsidies for solar in fiscal year 2007 were over 55 times higher than those for traditional coal-fired generation and almost 100 times more than those for petroleum and gas generation, on an electricity production basis.[5] Even more stark differences in subsidies were documented by the General Accounting Office (GAO), which found that solar received subsidies over 1,200 times the subsidies provided to coal, on an electricity production basis.[6] The difference is largely in accounting, in that GAO attributes all solar subsidies to electricity generation where EIA attributes the majority of solar subsidies to residential, commercial, and industrial end users.

Solar Development Causes Job Loss Elsewhere

To judge the relevance of Secretary Salazar’s statement about job creation, let’s look at other countries that have more experience with solar technology construction. Spain, for example, requires that 20 percent of its electricity be produced from renewable energy by 2010. Its National Energy Commission estimates that 2,945 megawatts of solar capacity were installed by year-end 2008, making Spain second among nations for installed solar capacity. That capacity generated less than one percent of Spain’s electricity in 2008, and at a price per kilowatt hour that was over seven times higher than the average price of electricity. To attract investors and make renewable energy competitive against other forms of energy, Spain regulated rates and subsidized its renewable market. However, a prominent Spanish researcher found that for each megawatt of solar energy installed in Spain, 12.7 jobs were lost elsewhere in its economy. While solar energy may appear to employ many workers in the plant’s construction, it consumes a substantial amount of capital that would have created many more jobs in other parts of the economy. [7] Recently, the Spanish government decided to slash subsidies to solar power. The government will subsidize just 500 megawatts of solar projects this year, down sharply from 2,400 megawatts last year. [8]

Solar Energy Requires Massive Land Area

The land mass requirement for solar technology is large, which is why Salazar’s BLM is putting aside over 670,000 acres for it. Compared to nuclear power, for example, the acreage requirement is almost 230 times as much.[9] For this reason, some politicians are urging that the size of solar projects be limited. For example, Interior Appropriations Subcommittee Chairwoman Dianne Feinstein (D-Calif.) said solar projects are “huge” and their size should be limited so that they do not “become an enduring blight upon the land.” She said solar installations require fences, troughs, and steam plants. “That has a huge mark on land that we’re trying to conserve.”[10]

Will Energy “Alternatives” Make us Energy Independent?

Some argue we need increased electricity production from solar power to reduce our reliance on oil, coal, and natural gas. Solar currently, however, produces only 0.02 percent of the electricity generated in this country. Its increased production will not displace petroleum or make the United States more energy independent, as 99 percent of our electricity is already produced by non-petroleum sources. [11] Our demonstrated reserve base of coal will last over 436 years, at current consumption levels,[12] and much more coal is known to be available.[13] Nuclear fuel can be reprocessed and used again to generate electricity in our nuclear facilities—something other countries are already doing. And although there is great political desire to force the use of renewable energy to replace fossil fuels, it simply cannot happen anytime soon, as hydrocarbons supply 84 percent of our current energy demand[14] and 71 percent of our electricity generation.[15] The level of manufacturing capacity needed to replace a significant portion of that simply does not exist. For example, new solar installations required to replace just one percent of U.S. fossil fuel generated electricity would consume all of the world’s current solar module manufacturing capacity.[16]

As noted above, while Salazar is fast-tracking solar, in early February, his Interior Department canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether or not they were appropriate for leasing. Also in February, Salazar halted the previous administration’s oil-shale research and development leasing efforts, saying he would offer new lease terms after seeking public input.[17] In April, a federal circuit court invalidated the 2007–2012 offshore leasing program, saying the most promising sales in Alaska needed more documentation.[18] At the end of July, the court clarified that they were only requiring the Alaska OCS sales to be placed on hold, meaning the Gulf of Mexico sales could proceed. Alaskan OCS areas are the most prospective for new oil and gas discoveries because few wells have been completed there.[19]

Last year, when oil prices exceeded $140 per barrel, over twice the current price, Congress allowed the moratoria on oil and natural gas development in restricted areas in the outer continental shelf to expire.[20] However, all of the recent actions noted above reduce our ability to increase domestic production of oil and natural gas, lessen petroleum imports, and create needed jobs. The outer continental shelf—including sections which have been off limits to drilling since the early 1980s—may contain as much as 115 billion barrels of oil.  Taking full advantage of our potential offshore energy production could generate 1.2 million new jobs, $8 trillion in additional economic output and, $2.2 trillion in extra tax receipts nationwide.[21]

For decades, the federal government has restricted access to vast tracts of our domestic energy resources. Now, the government is mandating politically popular, but inadequate energy sources such as wind and solar. Taken together, these policies will create higher prices for U.S. consumers and restrict job formation. In the case of energy policy, the facts speak for themselves—our government is clearly the problem, not the solution.

[2] Source: Gilbert Metcalf, Federal Tax Policy Toward Energy, p. 22 (Oct. 2007) http://web.mit.edu/globalchange/www/MITJPSPGC_Rpt142.pdf

[3] http://www.instituteforenergyresearch.org/2009/05/12/levelized-cost-of-new-generating-technologies/

[4] http://www.instituteforenergyresearch.org/2009/06/11/facts-on-energy-solar/

[5] Energy Information Administration, Federal Financial Interventions and Subsidies in Energy Markets 2007, http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/pdf/execsum.pdf, Tables ES5 and ES6.

[6] General Accounting Office, Federal Electricity Subsidies, Oct. 2007, page 21, http://www.gao.gov/new.items/d08102.pdf

[7] Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf .

[8] Wall Street Journal, “Darker Times for Solar-Power Industry”, May 11, 2009, http://online.wsj.com/article/SB124199500034504717.html

[9] http://www.instituteforenergyresearch.org/2009/06/11/facts-on-energy-solar/

[10] Environment and Energy Daily, Interior: Senators grill Salazar on renewable energy siting, June 4, 2009, http://www.eenews.net/EEDaily/2009/06/04/archive/3

[11] Energy Information Administration, Annual Energy Review 2008, Table 8.2a, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec8_8.pdf

[12] Energy Information Administration, Annual Energy Review 2008, Tables 4.11 and 7.1, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec4_23.pdf and http://www.eia.doe.gov/emeu/aer/pdf/pages/sec7_5.pdf

[13] http://pubs.usgs.gov/dds/dds-077/ and http://www.eia.doe.gov/cneaf/coal/page/acr/table17.html

[14] Energy Information Administration, Annual Energy Review 2008, Table 1.1, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec1_5.pdf

[15] Energy Information Administration, Annual Energy Review 2008, Table 8.2a, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec8_8.pdf

[16] The Credit Crunch’s Implications for Energy, Robert Goodof, Equity Research Analyst, February 2009. http://www.loomissayles.com/internet/internet.nsf/($DocumentID)/A9D1F278A7F6AD9485257561005A804D/$FILE/ccimplications_energy209.pdf

[17] Environment and Energy Daily, Energy policy, March 16, 2009, http://www.eenews.net/EEDaily/2009/03/16/archive/1?terms=salazar+and+OCS

[18] Environment and Energy News, Offshore drilling, April 17, 2009, http://www.eenews.net/eenewspm/2009/04/17/archive/3?terms=salazar+and+OCS

[19] The Associated Press, Offshore drilling ruling does not apply to the Gulf, http://www.google.com/hostednews/ap/article/ALeqM5ijmzoObcMDyeXXrne4t-7meTNxQwD99OC5V00

[20] http://www.api.org/policy/exploration/index.cfm

[21] The American Energy Tour, Part II, U.S. Rep. Adrian Smith, July 6, 2009, http://www.mccookgazette.com/story/1552538.html

• In 2008, solar represented 0.09 percent of all energy consumed in the U.S. [1] and 0.02 percent of all electricity generated in the U.S.[2]

• In 2008, solar generating capacity in the U.S. totaled 514 megawatts and generated 843 million kilowatt hours.[3] Solar turbines generated only a percentage of their theoretical maximum output due to their intermittency (the sun does not always shine).
• In 2006, photovoltaic cell and module shipments totaled 337 megawatts, and were estimated at 430 megawatts in 2007. These include communications, transportation, health, and grid-interactive and remote electric generation applications. [4]
• Due to incentives in the stimulus and to state mandates highlighted below, the Energy Information Administration projects solar thermal and photovoltaic generating capacity in the electric power sector to increase to 0.60 gigawatts by 2010, 1.02 gigawatts by 2020, and 1.24 gigawatts by 2030. End-use photovoltaic capacity is expected to grow to 1.86 gigawatts in 2010, 10.78 gigawatts in 2020, and 12.3 gigawatts in 2030. Together, generation from solar is projected to increase to 4.12 billion kilowatt hours by 2010, 20.11 billion kilowatt hours by 2020, and 23.22 billion kilowatt hours by 2030. This level of projected solar generation in 2030 represents 0.46 percent of total U.S. electricity generation.[5]
• Because solar power is available only when the sun shines and varies with the seasons of the year, statements about how solar units can produce enough electricity to serve a large number of homes are misleading. Since a solar unit cannot supply power continuously, dispatchable generators (usually fossil-fuel) are required to provide back-up power to the system.

Transmission Facts

• Total spending on new transmission by all investor-owned utilities in 2006 [current dollars] was $6.9 billion.[6] This figure underestimates total transmission spending since it excludes Government-owned utilities and cooperatives.
• According to a November 2008 study by Brattle Group, total investment in transmission and distribution through 2030 is expected to total $880 billion, where $298 billion would be for transmission and $582 billion would be for distribution. The figure includes integration of 214 gigawatts of new generating capacity of which 39 gigawatts is for renewable technologies required under existing state renewable portfolio standards, continued installation of a “smart grid”, accommodation for new end-use technologies such as plug-in hybrid electric vehicles, and bringing new efficiencies and service options to end use customers. The authors caution that the figure could be an underestimate since it is derived from shareholder-owned electric utility expenditure data that excludes investments made by electric cooperatives and Government-owned utilities. [7]
• There is no standard definition of a “smart grid”. It generally refers to technologies that: 1) provide customers with information and tools that allow them to be responsive to system conditions, 2) ensure more efficient use of the electric grid, and 3) enhance system reliability. The latest federal stimulus law provides $11 billion for smart grid technology, including $4.5 billion for smart-technology matching grants. [8] The $11 billion is a small percentage of what’s needed to get to the $880 billion mark, and that amount does not support a 20 percent renewable scenario by 2030.
• In Europe, it is estimated that 1.2 trillion Euros ($1.55 trillion) would be needed to build a super grid that captures offshore wind, hydropower, and solar panel arrays. [9] It would require a new network of cables and interconnectors to bring offshore generated electricity to land and modernization of the onshore grid to deal with sudden changes in supply and demand and clear bottlenecks.

Solar Subsidies

• The Energy Information Administration estimates that total Federal subsidies for electric production for fiscal year 2007 from solar power are $24.34 per megawatt hour, compared to 44 cents for traditional coal, 25 cents for natural gas and petroleum liquids, 67 cents for hydroelectric power, and $1.59 for nuclear. Solar subsidies for non-electric production in fiscal 2007 totaled $2.82 per million Btu, second only to ethanol/biofuels at $5.72 per million Btu. (Figures are in 2007 dollars.) [10]

• According to the General Accounting Office, in fiscal year 2007, solar received 9.2 percent of all federal research subsidies to power generation but produced only 0.016 percent of U.S. electricity. Per kilowatt-hour, this was 1255 times higher than the amount allocated to coal, most of which was spent to develop cleaner technologies. Coal produced 51.4 percent of all U.S. electricity in fiscal year 2007.[11]

Policies Affecting Solar

• While no federal renewable portfolio standard (RPS) exists, 28 states and the District of Columbia have a renewable portfolio standard mandating a certain percentage of a utility’s power plant capacity or generation to come from renewable sources by a certain date.[12] However, most States are out of compliance with their own program due to issues with their RPS formulation, reporting mechanisms, monitoring, and exaction of penalties for non-compliance.[13] (Texas is the major exception.)
• Tax incentives directed toward solar generation originated with the Energy Tax Act of 1978 (Public Law 95-618), which established a business energy tax credit of 10 percent of investment in solar technologies. The business tax credit was extended periodically until passage of the Energy Policy Act of 1992. As part of the Energy Policy Act of 1992, it became a permanent 10 percent tax credit. Section 1335 of the Energy Policy Act of 2005 (EPACT2005)(Public Law 109-58) established a 30-percent personal tax credit, not to exceed $2,000 for the purchase of solar electric and solar water heating property. The Emergency Economic Stabilization Act of 2008 extended it to 2016 and lifted the $2,000 cap. The 2008 law allowed electric utilities to qualify. [14]
• The New Technology Credit , also known as the Production Tax Credit (PTC), was first introduced as part of the Energy Policy Act of 1992 (EPACT1992) (Public Law 102-486). The credit was defined as a 1.5-cents-per-kilowatthour (kWh) payment (adjusted annually for inflation), payable for 10 years, to private investors as well as to investor-owned electric utilities for electricity from wind power and closed-loop (dedicated crops) biomass facilities. The American Jobs Creation Act of 2004 (AJCA) (Public Law 108-357) expanded the PTC to include solar energy. However, the recipient of the credit had to choose one of the two credits (i.e. either the PTC or the ITC). The Energy Policy Act of 2005 (EPACT2005) (Public Law 109-58) made solar facilities placed into service after December 31, 2005, ineligible for the PTC. While solar was eligible for the PTC for a brief period, its impact on solar development was largely inconsequential. [15]

What Does Solar Cost?

• The Energy Information Administration assumes the total overnight capital cost of solar thermal technology to be $5,021 per kilowatt (in 2007 dollars).[16]
• The Energy information Administration calculates the levelized cost of generating technologies, which is the present value of the total cost of building and operating a generating plant over its financial life, converted to equal annual payments and amortized over expected annual generation. In 2016, the levelized cost of solar thermal is 26.37 cents per kilowatt hour (in 2007 dollars) and for solar photovoltaic, it is 50 percent higher, 39.57 cents per kilowatt hour. The costs for solar technologies are higher than that of natural gas combined cycle, whose costs are 7.99 to 8.39 cents per kilowatt hour. Pulverized coal and coal-fired integrated gasification combined cycle have levelized costs at 9.46 and 10.35 cents per kilowatt hour, respectively. EIA includes a 3-percentage point increase in the cost of capital when evaluating investments in greenhouse gas intensive technologies, such as these coal projects, which is equivalent to a $15 per ton carbon dioxide emission fee, and a 2 percentage point reduction in the cost-of-capital for eligible renewable technologies under the loan guarantee program of the Stimulus Act. [17]
• According to Houston-based Standard Renewable Energy, an installed residential solar system for a 2,100-square-foot-home would cost about $25,500. [18]

Land Mass

• For comparison purposes, the land mass and output of California’s Diablo Canyon Power Plant is compared to the land mass required to produce a similar quantity of electricity using solar power. The 2,200 megawatt nuclear facility requires 3 square kilometers, while a solar power station would require 687.5 square kilometers with a power density of 3 watts per square meter.[19]
• Examples of solar plants are the 14-megawatt Nellis solar facility in Nevada with some 70,000 panels and the 11-megawatt solar facility in Serpa, Portugal, with 52,000 panels. [20]

Texas

• Texas law requires that 5,880 megawatts of new renewable generation be built in the state by 2015, which will meet about 5 percent of the state’s projected electricity demand. The legislation also sets a cumulative target of installing 10,000 megawatts of renewable generation capacity by 2025. The measure also includes a requirement that the state must meet 500 megawatts of the 2025 target with non-wind renewable generation.[21]
• According to Houston-based Standard Renewable Energy, an installed residential solar system for a 2,100-square-foot-home would cost about $25,500. The existing federal incentives (the 30-percent ITC) would subsidize that cost by $7,650. In Austin, residents get an additional subsidy of $13,500, and in Dallas, they get approximately another $7,900. [22]
• The Texas legislature recently passed a measure to let homeowners finance their solar installations with help from the local government, and pay back the cost via extra property taxes over 20 years. [23]
• The staff of the Electric Reliability Council of Texas (ERCOT) with input from stakeholders estimated the costs and benefits of various generating technologies. The cost of solar photovoltaic was estimated at $314 per megawatt hour (about 8 times more than a coal-fired plant) and the cost of solar thermal was estimated at $169 per megawatt hours (over 4 times the cost of a coal-fired plant). These costs are approximate generation cost averages with many variable factors including capital costs, life expectancy, operation and maintenance, capacity factor and fuel costs. They exclude ancillary services costs and transmission impacts. [24]

California

• The California Energy Commission has estimated that its requirement of 33 percent renewables in 2020 will entail $5.7 billion in new 500 and 230 kV transmission lines alone, in addition to lower-voltage lines, substations, and reactive power supplies. The figure does not include lines associated with new or upgraded conventional generation.[25]
• In 2006, solar capacity in California was 402 megawatts, 0.6 percent of the state total capacity of 63,213 megawatts.[26]
• In 2007, California’s solar capacity produced 0.26 percent of the state’s electricity.[27]
• In 2008, California had the most installed photovoltaic panels that are tied to the power grid, and increased its share by 179 megawatts.[28]

International

• The U.S. ranks fourth in the world for cumulative installed solar electric power. Germany is first, Spain is second, and Japan is third. [29] In Germany, a feed-in tariff of 27 cents per kilowatt hour has produced an explosion in the use of solar photovoltaics. Under a feed-in tariff, electric utilities are obligated to purchase renewable electricity at a higher rate than retail, in order for the renewable technology to overcome price disadvantages. In Japan, the government has set a target for 30 percent of all households to have solar panels installed by 2030. [30] See the bullet below on Spain.
• The International Energy Agency is projecting solar capacity to reach 208 gigawatts by 2030, 2.7 percent of the total capacity projected for that year, generating one percent of the world’s electricity. In 2006, it generated 0.02 percent of the world’s electricity and represented 0.2 percent of the world’s capacity. [31]
• Britain has a European target of meeting 15 percent of its electricity demand in 2020 with renewable sources. Some government insiders feel the task is hopeless. The government’s own clean-energy advisers have warned that Britain could spend £100bn over the next decade and still not hit the target. The credit crunch slowed the already slow rate of renewable deployment to a crawl. Almost half the power generated in Britain comes from coal and a bit more than a third from natural gas. Nuclear power stations contribute 17 percent and wind provides 0.6 percent. [32] In 2007, solar PV provided 0.3 percent of the UK’s renewable generation capacity and 0.1 percent of its renewable electricity. [33]
• Spain has legislation that requires 20 percent of its electricity production to be from renewable energy by 2010. Spain’s National Energy Commission estimates that 2,945 megawatts of solar capacity were installed by year-end 2008, with 2,253 megawatts installed in 2008, making Spain the second-largest country for installed solar capacity. Solar energy generated less than 1 percent of Spain’s total electricity production in 2008 at a price per kilowatt hour that was over 7 times higher than the average price. To attract investors and make renewable energy profitable against other forms of energy, Spain found that renewable energy must be subsidized. Spain provides both regulated rates and direct incentives to attract investment and meet its policy goals. However, a Spanish university researcher found that the “green jobs” agenda that the Spanish Government has instituted, and to which the U.S. government now promotes, has, in fact, resulted in job loss elsewhere in the country’s economy. For each “green” megawatt installed, 5.28 jobs on average were lost in the Spanish economy, and for each megawatt of solar energy installed, 12.7 jobs were lost. Although solar energy may appear to employ many workers in the plant’s construction, in reality it consumes a great amount of capital that would have created many more jobs in other parts of the economy. [34] Recently, the Spanish Government decided to slash subsidies to solar power. The government will subsidize just 500 megawatts of solar projects this year, down sharply from 2,400 megawatts last year. [35]

[2] Energy Information Administration, Monthly Energy Review, Table 7.2a, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec7_5.pdf

[3] Capacity found at Energy Information Administration, Electric Power Annual, http://www.eia.doe.gov/cneaf/electricity/epa/epaxlfile2_2.pdf for 2007 and preliminary 2008 data provided in an email from R. Schnapp, EIA, to M. Hutzler, IER, April 29, 2009; generation at Energy Information Administration, Monthly Energy Review, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec7_5.pdf.

[4] Energy Information Administration, Annual Energy review 2007, Table 10.8, http://www.eia.doe.gov/emeu/aer/contents.html, and Energy Information Administration, Annual Energy Outlook 2009, Table A16, http://www.eia.doe.gov/oiaf/aeo/index.html .

[5] Energy Information Administration, Annual Energy Outlook 2009, Tables A8 and A16, SR-OIAF/2009-3, April 2009, http://www.eia.doe.gov/oiaf/aeo/index.html .

[6] Edison Electric Institute, Actual and Planned Transmission Investment by Shareholder-Owned Utilities, 2000-2009. http://www.eei.org/common/images/industry_issues/Energy_Data_Alert/bar_Transmission_Investment.jpg

[7] The Brattle Group, “Transforming America’s Power Industry: The Investment Challenge 2010-2030, November 2008, www.thebrattlegroup.org/_documents/UploadLibrary/Upload726.pdf

[8] Greenwire, Electricity: “Will Americans learn to love the ‘smart grid’?”, www.eenews.net/Greenwire/2009/02/27/archive/1?terms=smart+grid+cost .

[9] ClimateWire, “Renewable Energy: Pricey ‘supergrid’ seen as key to offshore wind power in Europe”, 2/9/09, www.eenews.net/climatewire/2009/02/09/1

[10] Energy Information Administration, Federal Financial Interventions and Subsidies in Energy Markets 2007, http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/pdf/execsum.pdf, Tables ES5 and ES6.

[11] General Accounting Office, Federal Electricity Subsidies, Oct. 2007, page 21, http://www.gao.gov/new.items/d08102.pdf

[12] Annual Energy Outlook 2009, Legislation and Regulations, Table 3, http://www.eia.doe.gov/oiaf/aeo/pdf/leg_reg.pdf.

[13] “A National Renewable Portfolio Standard: Politically Correct, Economically Suspect,” Robert J. Michaels, April 2008 Electricity Journal.

[14] Energy Information Administration, Federal Financial Interventions and Subsidies in Energy Markets 2007, http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/index.html, and American Solar Energy Society, http://www.ases.org/index.php?option=com_content&view=article&id=286&Itemid=58.

[15] Energy Information Administration, Federal Financial Interventions and Subsidies in Energy Markets 2007, http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/index.html .

[16] Energy Information Administration, Assumptions to the Annual Energy Outlook 2009, Table 8.2, http://www.eia.doe.gov/oiaf/aeo/assumption/index.html.

[17] Email from C. Namovicz, Energy Information Administration, to M. Hutzler, Institute for Energy Research, April 29, 2009.

[18] Houston Chronicle, “Solar power, Looking for ray of sunshine”, May 27, 2009, http://www.chron.com/CDA/archives/archive.mpl?id=2009_4744238 .

[19] Seth Myers, Energy Tribune with input from the Energy Information Administration and the Pacific Gas and Electric Co.

[20] Energy Information Administration, International Energy Outlook 2009, May 2009, http://www.eia.doe.gov/oiaf/ieo/pdf/0484(2009).pdf

[21] http://www.pewclimate.org/node/1303

[22] Houston Chronicle, “Solar power, Looking for ray of sunshine”, May 27, 2009, http://www.chron.com/CDA/archives/archive.mpl?id=2009_4744238 .

[23] Greenwire, Solar Power, June 1, 2009, http://www.eenews.net/Greenwire/2009/06/01/archive/10?terms=solar .

[24] Issues Associated with Renewable Energy in Texas, Informal White Paper for the Texas Legislature, Mar. 28, 2005, http://www.ercot.com/news/presentations/2006/RenewablesTransmissi.pdf

[25] California Energy Commission, Intermittency Analysis Project: Summary of Final Results, CEC 500-2007-081 (2007) at 26. http://www.energy.ca.gov/2007publications/CEC-500-2007-081/CEC-500-2007-081.PDF.

[26] http://www.eia.doe.gov/cneaf/solar.renewables/page/state_profiles/california.html

[27] Energy Information Administration, http://www.eia.doe.gov/cneaf/electricity/epa/epa_sprdshts.html

[28] Reuters, U.S. installed solar capacity up 17 percent in 2008, March 20, 2009, http://www.reuters.com/article/rbssUtilitiesMultiline/idUSN2050533620090320 .

[29] Solar Energy Industries Association, http://www.seia.org/cs/about_solar_energy/industry_data .

[30] Energy Information Administration, International Energy Outlook 2009, May 2009, http://www.eia.doe.gov/oiaf/ieo/pdf/0484(2009).pdf .

[31] International Energy Agency, World Energy Outlook, November 2008.

[32] The Guardian, March 21, 2009, http://www.guardian.co.uk/environment/2009/mar/21/renewable-energy , and “Windmills flap helplessly as coal remains king”, February 18, 2009, http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5755210.ece

[33] House of Lords, The Economics of Renewable Energy, HL Paper 195-I, November 25, 2008, http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeconaf/195/195i.pdf.

[34] Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf .

[35] Wall Street Journal, “Darker Times for Solar-Power Industry”, May 11, 2009, http://online.wsj.com/article/SB124199500034504717.html .

FOR IMMEDIATE RELEASE
June 4 , 2009
CONTACT:
Laura Henderson
202.621.2951
Patrick Creighton
202.621.2947

Renewable Electricity Mandate: Pay More For Less

WASHINGTON—In advance of a Senate Energy Committee hearing on the renewable electricity mandate (REM), the Institute for Energy Research (IER) released the following fact sheet:

A National REM Would Increase the Cost of Electricity:

• Wind and solar electricity are significantly more expensive than efficient and reliable traditional electricity sources.
• Energy Information Administration (EIA) projections state that these sources will also be significantly more expensive than coal in 2016.

REMs are already Hurting Americans, Making it Harder for Small Businesses to Compete:

• 34 states already have renewable electricity standards
• Residential electricity rates are 38 percent higher and industrial rates are 50 percent higher in states with binding renewable mandates

The Electricity Sources Mandated are Not Efficient or Dependable:

• Wind generated 1.3 percent, geothermal 0.4 percent, biomass 1.3 percent, and solar less than 0.03 percent of the electricity Americans used last year.
• Energy Secretary Stephen Chu told the New York Times that solar technology would have to get five times better to be competitive in today’s market.

Americans will Pay for a National REM Twice: First as Taxpayers, then as Consumers:

• The Spanish government attempted to mandate and subsidize renewable electricity.
• Spain spent $753,778 of taxpayer dollars to create each green job.
• Spain gave $1,319,783 in subsidies to create wind industry jobs.

NOTE: A recent poll found that 58 percent of Americans said they were not willing to pay a penny more than they currently pay for electricity to combat climate change; 78 percent said that a $50 increase would cause financial ‘hardship.’

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

FOR IMMEDIATE RELEASE
May 27, 2009
CONTACT:
Laura Henderson 202.621.2951
Chris Tucker 202.346.8825

In España, Veritas: Pres. Clinton Concedes Spain’s Green Jobs Program “Has Cost Many Jobs”

Former president channels Prof. Gabriel Calzada in delivering veiled rebuke of Obama’s Spanish-inspired green jobs plan

Washington, DC – Spain’s decade-long program to subsidize the creation and continued existence of so-called green jobs through a massive infusion of taxpayer resources “has cost many jobs,” former President Bill Clinton admitted to a Spanish audience at the European University of Madrid this week, according to the Spanish daily newspaper El Mundo (a translated version of the piece can be found below).

The statement mirrors closely the findings of a recent study authored by Professor Gabriel Calzada of Spain, a report that has attracted attention in the United States as the current president continues to cite Spain as a model to be followed in promoting a similar green jobs plan here at home.

In response to former President Clinton’s comments, Institute for Energy Research (IER) president Thomas J. Pyle issued the following statement:

“Though efforts continue to be made in the United States to discredit the Spanish green jobs study, and even personally attack its author, President Clinton’s affirmation of its core findings serves as just the latest reminder that the facts are what they are – and they aren’t pretty. More than 10 years and nearly $40 billion in public investment later, Spain still only acquires less than one percent of its power from solar, and the vast majority of the so-called green jobs created by the government to support that industry are no longer in existence today. If this is the model for near-term economic growth and long-term energy security that President Obama envisions for our country, we may be in for a longer, more severe recession than we know.”

Please find below the translated version of the El Mundo article:
–
Clinton: Green Energy “Has Cost Many Jobs”

J. G. Gallego/C. Caballero
El Mundo, p. 46
May 23, 2009

Bill Clinton recognized yesterday that “this commitment to clean energy has cost many jobs” while at the same time calling for Spain to intensify investment in this industry to be able to turn high costs into new jobs.
–

NOTE: Former President Clinton’s comments in Madrid making the link between “green” government intervention and the hemorrhaging of jobs and opportunity follows a statement he made last year in which he suggested that “we just have to slow down our economy … because we’ve got to save the planet for our grandchildren.”

More from IER on the fallacy and unintended consequences of “green jobs”:

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

Study: Green Jobs: Fact or Fiction?

Study: Seven Myths about Green Jobs

Blog: Green Jobs That Nobody Wants

Blog: It Takes a Lot of Government Green to Create a Green Job

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

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