China has already made its choice.  China is spending about $9 billion a month on clean energy.  It is also investing $44 billion by 2012 and $88 billion by 2020 in Ultra High Voltage transmission lines.  These lines will allow China to transmit power from huge wind and solar farms far from its cities.  While every country’s transmission needs are different, this is a clear sign of China’s commitment to developing renewable energy.

The United States, meanwhile, has fallen behind.

– U.S. Secretary of Energy, Steven Chu

In an attempt to generate support for implementing a cap on carbon dioxide, Energy Secretary Steven Chu and others paint a very dire picture of the U.S.-vs.-China race for clean energy, implying that China is quickly outstripping us in that race.[i] However, all the facts are not on the table. In both 2008 and 2009, the U.S. added more non-hydroelectric renewable capacity than it added traditional capacity (natural gas, coal, oil, and nuclear).[ii] At the end of 2009, the U.S. ranked first in wind capacity in the world with China’s wind capacity about 30 percent less than the U.S. level. At the end of 2008 (the most recent data available), the U.S. ranked fourth in solar capacity, with only Germany, Spain, and Japan having a larger amount. Where China is outstripping us in domestic construction is in coal-fired, nuclear, and hydroelectric generating technologies. Because of U.S. legal and regulatory red tape, it is much harder to build these energy technologies in the U.S. than in China.

What Does the Capacity Data Show for Wind and Solar Power?

According to the Solar Energy Industries Association, the U.S. ranks fourth in the world in solar capacity with 8,800 megawatts at the end of 2008.[iii] Germany, Spain, and Japan, in that order, had larger amounts of solar power at the end of 2008 than the U.S.[iv] China had just 0.3 megawatts of installed solar PV capacity at the end of 2009[v] or 0.003 percent of the solar capacity of the U.S.

According to the Global Wind Energy Council, the U.S. leads the world in wind generating capacity, with 35.2 gigawatts at the end of 2009; Germany is second with 25.8 gigawatts, and China is third with 25.1 gigawatts.[vi] In 2009, the U.S. installed almost 10 gigawatts of wind capacity, a record,[vii] and China installed 13 gigawatts.[viii]

Why is China Building Wind and Solar Capacity?

China builds wind and solar because ratepayers in other countries are paying them to do so. China has been taking advantage of the Clean Development Mechanism (CDM) under the Kyoto Protocol to obtain funding for its solar and wind power.[ix] Under this program, administered by the United Nations, wealthy countries can contribute funds and get credit for “clean technology” built elsewhere as long as it is additional, that is, as long as that technology would not have been built otherwise. China is the world’s largest beneficiary of the program and has benefited to the point where 30 percent of its wind capacity is not operable because it is not connected to the grid.[x] However, in mid 2009, the U.N. started questioning whether the Chinese CDM program was in fact “additional,” because the U.N. found that China was lowering its subsidies to qualify for the program.[xi] That is, China was reducing its own government’s support in order to get international subsidies.

How Do the U.S. and China Electric Construction Programs Compare?

While China is building non-hydro renewable slightly faster than the United States, overall it is building new electrical generation much, much faster than the United States. The most comparable international database on electric generating capacity is found on the Energy Information Administration (EIA) website.[xii] Comparing the electric generating capacity data by technology type for the two countries, at the end of 2007 (the last year of comparable data), the Chinese had a total of 716 gigawatts of generating capacity, about 280 gigawatts less than the 995 gigawatts of capacity in the U.S.

The U.S. has been building generating capacity at a very slow rate, adding between 8 and 15 gigawatts a year since 2004. The Chinese in contrast, to fuel their bulging economy, have added between 75 and 106 gigawatts a year, from 2004 to 2007. Based on Secretary Chu’s comments, one might think that the additional capacity that China was adding was all non-hydroelectric renewable and nuclear capacity. However, that has not been the case. Between 2004 and 2007, the Chinese have added 226 gigawatts of fossil fuel generating capacity, 40 gigawatts of hydroelectric capacity, 2 gigawatts of nuclear capacity, and only 6 gigawatts of non-hydro renewable capacity.

What are China’s Electric Construction Plans?

Both China’s generating sector and its industrial sector rely heavily on coal, with 79 percent of its electric generation being coal-fired.[xiii] According to the National Energy Technology Laboratory (NETL), from 2004 through 2007, China has been building 30 to 70 gigawatts of coal-fired power a year, and has about 70 gigawatts more under construction. NETL sees China building over 185 gigawatts of coal-fired plants in the future.[xiv] (See figure below.)

According to Australia, China is planning to build 500 coal-fired plants over the next ten years.[xv] That means: every week or so, for the next decade, China will open another large coal-fired power plant.[xvi] Australia has just signed a $60 billion deal with China to build a coal mine in Queensland and a 311-mile rail way for transporting the coal to the coast for export to China’s power plants.[xvii]

While China has been slow in adding nuclear power plants, it currently has 20 nuclear reactors under construction and more starting construction this year.[xviii] Four AP 1000 reactors are under construction at 2 different sites: Haiyang and Sanmen.[xix] These are the same reactors that the U.S. Nuclear Regulatory Commission (NRC) has ruled need additional analysis, testing, or design modifications of the shield building to ensure compliance with NRC requirements before they can be constructed in the U.S.[xx] China expects to achieve a total nuclear capacity of 60 gigawatts by 2020, and 120 to 160 gigawatts by 2030,[xxi] surpassing the total nuclear capacity of the United States.

China has a goal to produce 15 percent of its energy from renewables by 2020.[xxii] To help meet this goal, China is planning to build the world’s largest wind farm in the northwest part of the country. The plan is for 5 gigawatts in 2010, expanding to 20 gigawatts in 2020, at a cost of $1 million per megawatt,[xxiii] or $1,000 per kilowatt, about half the cost of an onshore wind unit in the U.S., according to the Energy Information Administration.[xxiv]

What about the U.S.?

The U.S. has made it difficult to build generating plants in this country, particularly coal-fired and nuclear power plants. According to NETL, only eight coal-fired plants totaling 3,218 megawatts became operational in the U.S. in 2009, the largest increase in coal-fired capacity additions in one year since 1991.[xxv] Prospects of cap-and-trade legislation, reviews and re-reviews by the Environmental Protection Agency, direct action protests, petition drives, renewable portfolio standards in many states, competition from wind power, and lawsuits have slowed the construction of new coal-fired plants.[xxvi] As of late February, activists had derailed 97 of the 151 new plants that were in the pipeline in May 2007. According to the Sierra Club, 126 coal plants have been stopped since 2001.  And, for the first time in more than 6 years, not one new coal plant broke ground in 2009. The graph above compares the coal-plant additions in the U.S. to that of China, showing only a handful of coal plants under construction in the U.S.  With new coal-fired plants extremely limited by the above, some are purporting that the current direction for activists may be to phase out the existing fleet of coal-fired power plants.[xxvii] Because the capital cost of most of our coal-fired plants has been paid, that fleet produces almost 50 percent of our electricity at very little cost. Average production costs for coal-fired generators in 2008 were only 2.75 cents per kilowatt hour, second to our nuclear plants at 1.87 cents per kilowatt hour.[xxviii]

No nuclear plant has started up in the U.S. since 1996,[xxix] and no construction permits have been issued since 1979.[xxx]NRC requirements, financing difficulties, and slow fulfillment of the nuclear provisions of the Energy Policy Act of 2005 have slowed the construction of new nuclear power reactors. However, as part of the 2005 Energy Policy Act, President Obama announced last month that his administration is offering conditional commitments for $8.33 billion in loan guarantees for nuclear power construction and operation. Two new 1,100 megawatt Westinghouse AP1000 nuclear reactors are to be constructed at the Alvin W. Vogtle Electric Generating Plant in Burke, Georgia, supplementing the two reactors already at the site. The two new nuclear generating units are expected to begin commercial operation in 2016 and 2017 at a cost of $14 billion. As part of the conditional loan guarantee deal, the U.S. Nuclear Regulatory Commission must determine if the AP1000 fulfills the regulatory requirements for a construction and operating license.[xxxi] (These are the same units permitted, licensed, and being constructed in China right now.) But, as a recent Wall Street Journal energy conference noted, loan guarantees are “meaningless in the absence of regulatory certainty.” Further, Obama’s budget cutbacks for Yucca Mountain, the proposed nuclear waste repository, are yet another signal that President Obama may not “walk the talk.”[xxxii]

Natural gas and wind power are the technologies that seem best able to surmount the financial, regulatory, and legal hurdles of getting plants permitted and operational. In 2008, the U.S. added over 15,000 megawatts of electric generating capacity, of which 4,556 megawatts was natural gas-fired and 8,136 megawatts was wind power.[xxxiii] However, organized local opposition has halted even some renewable energy projects by using “not in my back yard” (NIMBY) issues, changing zoning laws, opposing permits, filing lawsuits, and bleeding projects of their financing.[xxxiv]

The Energy information Administration projects that the U.S. will need 200 gigawatts of additional generating capacity by 2035 to replace capacity that will be retired and to meet new electricity demand.[xxxv] Of that amount, EIA expects that 13 percent will be coal-fired, 53 percent natural gas-fired, 4 percent will be from nuclear power, and 29 percent from renewable power (23 percent is expected to be wind power), assuming that no changes would be made to current laws and regulations.[xxxvi]

Conclusion

China realizes that it needs affordable energy to fuel its economic growth, and is building all forms of generating technologies at breakneck speed. By contrast, the electric generating construction program in the United States has slowed tremendously, owing to regulatory, financial, and legal problems. Without reasonably priced energy, it will be difficult to achieve high levels of economic growth in the U.S., and industry will move offshore where energy is more affordable. Will Secretary Chu’s policies get us to affordable energy, or will the administration’s policies divert us from obtaining the energy that we need to fuel our economy?

[ii] Renewable Energy Policy Network for the 21^st Century, Renewables Global Status Report 2009 Update, May 13, 2009, http://www.ren21.net/pdf/RE_GSR_2009_Update.pdf

[iii] http://www.seia.org/cs/about_solar_energy/industry_data

[iv] Ibid.

[v] Center for American Progress, Out of the Running, March 2010, http://www.eenews.net/public/25/14571/features/documents/2010/03/04/document_cw_01.pdf

[vi] Global Wind Energy Council, http://www.gwec.net/index.php?id=13, and Global Wind Energy Council, Global wind power boom continues amid economic woes, March 2, 2010, http://www.gwec.net/index.php?id=30&no_cache=1&tx_ttnews[tt_news]=247&tx_ttnews[backPid]=4&cHash=1196e940a0

[vii] American Wind Energy Association, U.S. Wind Energy breaks all records, January 26, 2010, http://www.awea.org/newsroom/releases/01-26-10_AWEA_Q4_and_Year-End_Report_Release.html

[viii] Global Wind Energy Council, Global wind power boom continues amid economic woes, March 2, 2010, http://www.gwec.net/index.php?id=30&no_cache=1&tx_ttnews[tt_news]=247&tx_ttnews[backPid]=4&cHash=1196e940a0

[ix] CNN, U.N. halts funds to China wind farms, December 1, 2010, http://edition.cnn.com/2009/BUSINESS/12/01/un.china.wind.ft/index.html

[x] The Wall Street Journal, “China’s Wind Farms Come with a Catch: Coal Plants”, September 28, 2009, http://online.wsj.com/article/SB125409730711245037.html

[xi] CNN, U.N. halts funds to China wind farms, December 1, 2010, http://edition.cnn.com/2009/BUSINESS/12/01/un.china.wind.ft/index.html

[xii]http://tonto.eia.doe.gov/cfapps/ipdbproject/iedindex3.cfm?tid=2&pid=34&aid=7&cid=r1,&syid=2004&eyid=2008&unit=MK

[xiii] Energy information Administration, International Energy Outlook 2009,  http://www.eia.doe.gov/oiaf/ieo/index.html

[xiv] National Energy Technology Laboratory, Tracking New Coal-fired Power Plants, January 8, 2010,  http://www.netl.doe.gov/coal/refshelf/ncp.pdf

[xv] http://windfarms.wordpress.com/2009/01/29/china-building-500-coal-plants/

[xvi] The New York Times, “Pollution From Chinese Coal Casts a Global Shadow”, http://www.nytimes.com/2006/06/11/business/worldbusiness/11chinacoal.html?_r=1

[xvii] Australia Signs Huge China Coal Deal, http://windfarms.wordpress.com/2010/02/06/australia-signs-huge-china-coal-deal/

[xviii] Nuclear Power in China”, World Nuclear Association, November 6, 2009, www.world-nuclear.org/info/inf63.html

[xix] Westinghouse News Releases, “Westinghouse and the Shaw Group Celebrate First Concrete Pour at Haiyang Nuclear Site in China”, September 29, 2009, http://westinghousenuclear.mediaroom.com/index.php?s=43&item=200

[xx] Westinghouse Statement Regarding NRC News Release on AP1000 Shield Building, http://westinghousenuclear.mediaroom.com/index.php?s=43&item=203

[xxi] Nuclear Power in China, World Nuclear Association, November 6, 2009, www.world-nuclear.org/info/inf63.html

[xxii] USA Today, “China Pushes Solar, Wind Power Development”, http://www.usatoday.com/money/industries/energy/environment/2009-11-17-chinasolar17_CV_N.htm

[xxiii] The Wall Street Journal, “Wind Power: China’s Massive and Cheap Bet on Wind Farms”, July 6, 2009, http://blogs.wsj.com/environmentalcapital/2009/07/06/wind-power-chinas-massive-and-cheap-bet-on-wind-farms/

[xxiv] Energy information Administration, Assumptions to the Annual Energy Outlook 2009, Table 8.2, Electricity Market Module, http://www.eia.doe.gov/oiaf/aeo/assumption/index.html

[xxv] National Energy Technology Laboratory, Tracking New Coal-fired Power Plants, January 8, 2010,  http://www.netl.doe.gov/coal/refshelf/ncp.pdf

[xxvi] A messy but practical strategy for phasing out the U.S. coal fleet, http://www.grist.org/article/death-of-a-thousand-cuts/

[xxvii]Ibid.

[xxviii]http://www.nei.org/resourcesandstats/documentlibrary/reliableandaffordableenergy/graphicsandcharts/uselectricityproductioncosts

[xxix] “Nuclear Power: Outlook for new U.S. Reactors”, Congressional Research Service, March 9, 2007, www.fas.org/sgp/crs/misc/RL33442.pdf

[xxx] Energy Information Administration, Annual Energy Review 2008, Table 9.1, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec9_3.pdf

[xxxi] Environment News Service, Obama Backs First New U.S. Nuclear Plant with $8.3 Billion, February 16, 2010, http://www.ens-newswire.com/ens/feb2010/2010-02-16-091.html

[xxxii] The Wall Street Journal, An Energy Head Fake, March 11,2010, http://online.wsj.com/article/SB10001424052748704784904575112144130306052.html?mod=WSJ_Opinion_AboveLEFTTop

[xxxiii] Energy Information Administration, Electric Power Annual, Tables 1.1 and 1.1.A, http://www.eia.doe.gov/cneaf/electricity/epa/epa_sum.html

[xxxiv] For a repository of stalled and stopped energy projects, see U.S. Chamber of Commerce, “Project No Project Energy-Back On Track”, http://pnp.uschamber.com/

[xxxv] Energy Information Administration, Annual Energy Outlook 2010 Early Release, Table A9, http://www.eia.doe.gov/oiaf/aeo/pdf/appa.pdf

[xxxvi] Ibid.

And at the same time, top Administration officials have worked hand-in-glove to ensure that the same bad actors – who were to be the beneficiaries of billions in tax dollars through the stimulus’ “green jobs” slush fund – secure even more carve-outs, special favors, and sweetheart deals. Why? It’s quite simple. The American Wind Energy Association (AWEA), or “Big Wind,” understands full well that in order to exist, the wind industry must continue to receive massive streams of taxpayer handouts.

Top Energy Dept. Officials, “Big Wind” in Cahoots

Chicago Tribune: “Questions swirl around wind-jobs studies … The [Spanish] study, funded by a free-market think tank with links to the fossil fuel industry, calculated that government subsidies for the wind-power industry killed more jobs than they created, because the subsidies drained money from the (more efficient) private sector. … Climate activists scheduled a conference call to discuss how to refute the Spanish researcher’s claims. The group included officials from the American Wind Energy Association – a wind industry trade group, known as AWEA, which spent millions of dollars lobbying last year in Washington. The call also included researchers from the National Renewable Energy Laboratory, a division of the Energy Department. … “AWEA policy people are quite concerned.” A [Energy Dept.] colleague replied: “We need to come up with an appropriate response to these criticisms soon. I just spoke to a few people at AWEA about this.” … Emails show the Laboratory researchers shared a draft of those findings with officials from the wind industry group before the white paper was published. “ (3/3/10)

Washington Examiner: “Obama administration colluded with ‘windmill welfare queens’ to rebut European ‘green job’ studies … “Windmill welfare queens” — the corporations who stand to benefit from carbon regulation, and who already benefit from massive subsidies — are telling Americans that they can “have their cake and eat it too” when it comes to emissions controls and so-called “green jobs.” A FOIA request now reveals that as the Obama administration scrambled to respond last year to strong evidence that “green jobs” are a massive an economic drain, costing 570,000 Euros apiece, Department of Energy officials relied heavily on Big Wind and its monied backers. …the Left in government and the rent-seeking corporations who make their money not by producing anything, but by putting their hands in the next guy’s pocket.” (3/4/10)

American Thinker: “Obama administration protecting the ‘green’ investments of its friends … Crony capitalism is alive and well in Barack Obama’s Washington. … Green energy promoters are raking in our tax dollars, often for wasteful “investments .” … Now comes word that the Obama administration’s Department of Energy has engaged in some “monkey business” to rebut a study that showed investments in wind energy costs far more jobs than they create. A Spanish university study had calculated that government subsidies for the wind power industry killed more jobs because they diverted money from more efficient private businesses. … The Obama administration’s attack on the Spanish study was written by two non-economist, pro-wind activists from the National Renewable Energy Laboratory. This is a part of the Department of Energy and is overseen by Assistant Secretary of Energy Cathy Zoi , who previously served as the CEO of Al Gore’s Alliance for Climate Protection. Al has a pal to protect his vast investments in renewable energy.” (3/4/10)

The Hill: “Senior Republican seeks info on Energy Department, clean energy group secret talks … Rep. James Sensenbrenner (R-Wis.) wants to know the extent to which Energy Department officials talked to supporters of clean energy subsidies before DoE published an unusual rebuttal to a study critical of green job programs. He fired off a letter to a DoE official on Wednesday asking a series of pointed questions about discussions between government officials and groups like the American Wind Energy Association and the Center for American Progress, a left-leaning think tank run by White House confidant John Podesta. … A recently released batch of emails showing possible collaboration between DoE and a group whose members stand to benefit from clean energy subsidies won’t help. … The controversy seemed largely over until the release this week of emails, obtained by a free-market think tank through public records laws, that suggest some measure of cooperation among DoE officials and representatives from AWEA, CAP, and the Union of Concerned Scientists.” (3/4/10)

CEI’s Chris Horner on Pajamas Media: “‘Anti-Lobbyist’ Obama Administration Recruited Left-Wing Lobbyists to Sell Bogus ‘Green Jobs’ … The Department of Energy – specifically the office headed by Al Gore’s company’s former CEO, Cathy Zoi – turned to George Soros’ Center for American Progress and other wind industry lobbyists to help push Obama’s wind energy proposals. … As candidate and president, on eight separate occasions Barack Obama instructed Americans to “think about what’s happening in countries like Spain [and] Germany” if they wanted to know what successful “green jobs” policies look like, and if they wanted to know what we should expect here in the U.S. from his agenda. … After the Spanish study embarrassed the White House, prompting substantial media attention and even questioning at a press conference, Obama swapped out Denmark for Spain for later references to an enacted “green jobs” program. … The American Wind Energy Association – the lobby for “Big Wind” in Washington, D.C., which includes a few Spanish wind giants – also attacked the publication of the Spanish paper. Soon, the Obama administration published a five-page talking points memo assailing the economic assessment – written by two young, non-economist, pro-wind activists from the National Renewable Energy Laboratory (NREL).” (3/3/10)

The Hill: “Spanish jobs spat revisited … The Competitive Enterprise Institute, used public records laws to obtain emails showing NREL shared its response with groups supporting renewable energy policy, like the American Wind Energy Association, before releasing the rebuttal publicly.” (3/3/10)

Reason: “Restoring Science to Its Rightful Place — Shilling for Green Jobs … Last year, a study released by researchers at Spain’s King Juan Carlos University found that subsidized green jobs were an economic black hole. … The green lobbyists just knew the study must be wrong and breathed huge satisfied sigh of relief when a new study refuting the JCU study was produced by the National Renewable Energy Laboratory. Science had once again triumphed over rightwing anti-science ideology – green jobs forever! But some cynical people were suspicious of the provenance of the NREL study. So they filed a Freedom on Information Act (FOIA) request with the Department of Energy to see how the study came about. It turns out that it was vetted by the renewable energy industry, specifically the lobbyists at the American Wind Energy Association.” (3/3/10)

Washington Post: “Wind industry influenced DOE report … The Chicago Tribune first reported the connection, which came to light after the libertarian Competitive Enterprise Institute gave the paper the results of its Freedom of Information Act request. The controversy centers on the Aug. 1 white paper, “National Renewable Energy Laboratory’s (NREL) Response to the Report ‘Study of the Effects on the Employment of Public Aid to Renewable Energy Sources’ from King Juan Carlos University (Spain).” (3/3/10)

That’s a Great Question: “What, exactly, is a ‘green’ job?”

IER’s Robert Murphy on The Daily Caller: “What, exactly, is a ‘green’ job? … By their very nature, government-created green jobs are unsustainable. If they weren’t, it wouldn’t take government mandates or billions in taxpayer subsidies to create them in the first place – and it certainly wouldn’t take billions more to sustain them. … The Spanish embarked on the world’s most aggressive renewables program – President Obama specifically praised it soon after his inauguration as a model for his own agenda. Yet, as the Spanish government faced budget difficulties, it was forced to rein in its support for renewables. … Apparently, even this monumental handout wasn’t enough to sustain those jobs: The Spanish bubble popped, and today the country is wracked with an unemployment rate on the doorstep of 20 percent. … For every “green” job the government “creates” in one area, it destroys a real job somewhere else. But the whole charade isn’t simply a wash, because government green jobs policies make the economy less productive. They raise prices – especially for energy – across the board and make consumers poorer.” (3/3/10)

Iain Murray on NRO: “Green-Jobs Fantasy … Germany and Spain went down the green-jobs road many years ago, for much the same reasons as the ad­ministration. They saw it as a way to make their countries world leaders in coming technologies, provide good jobs to replace decaying industries, and insulate against energy shocks originating overseas. It didn’t work out that way. … The story is the same in Spain, which set out to be the world leader in solar technology. A study by a team from King Juan Carlos University in Madrid led by Gabriel Calzada Alvarez found that the opportunity costs of public investment in renewable energy were very high, resulting not just in significant numbers of jobs destroyed or never created, but in unsustainable bubbles in the renewables sector. … There are already signs that green jobs created in the U.S. are going to be just as expensive as the German and Spanish ones.” (3/4/10)

Orange County Register, Op-Ed: “We need green money, not green jobs … The love affair on the left with “green jobs” is, of course, about ideology, which is why facts are irrelevant. It is another excuse to grow government and bring European socialism to America. … In a Zogby poll done after the presidential election, 73 percent of blacks said they were opposed to taxing fossil fuels to promote alternative energy. The Carter Administration invested $2.1 billion in the Great Plains Coal Gasification Plant to convert coal to gas. The result? Zero. Federal government spending since 1961 on “advanced energy technologies and basic energy science research” totals $187 billion with hardly anything to show. Poor folks don’t need socialism or green jobs. They need green money. They’ll get more of it being free, going to school, getting married and going to work.” (3/3/10)

#####

FOR IMMEDIATE RELEASE
MARCH 4, 2010
CONTACT:
LAURA HENDERSON, 202.621.2951
PATRICK CREIGHTON, 202.621.2947

The NREL Study Approach

Photo: NREL.gov

The NREL study considered four scenarios, three at the 20 percent level of wind generation, and one at the 30 percent level, the scenarios being differentiated by the number of onshore versus offshore wind turbines that would be built. The 20 percent scenario requires about 225,000 megawatts of additional wind capacity and the 30 percent scenario about 335,000 megawatts. That’s 9 to 13 times greater than the wind capacity that existed at the end of 2008. And it would require that 16,000 to 24,000 megawatts to be constructed each and every year. By comparison, the largest amount of wind capacity actually constructed in a year was slightly less than 10,000 megawatts, in 2009. [ii] Because wind generation is intermittent, the capacity of the new wind units needs to be above the target generation level. The offshore component would represent 0 to 28 percent of the required generating capacity, depending on the scenario. Offshore units are more expensive to build than the onshore units, but fewer transmission upgrades may be needed.

According to the study, this level of wind power is technically feasible, but to handle it the transmission system would need upgrades, including 17,050 to 22,697 miles of new high-tech lines, depending on the scenario, and over one hundred billion dollars in capital investments ($101 to $145 billion). The study determined that the cost of integrating intermittent wind power into the Eastern grid, in the 20 percent scenarios, would be $5 per megawatt-hour,[iii] or about 0.5 cents per kilowatt-hour of electricity (in 2009 dollars).[iv] The integration costs are the incremental costs incurred during operation that can be attributed to the variability and uncertainty introduced by wind generation. This cost is in addition to the costs of constructing the wind turbines and generating the wind power. The study also assumes that a large-scale consolidation of grid control organizations would need to occur in order to permit the sharing of wind power across the vast eastern grid, which could be a very large challenge.[v]

The study also noted that it would be imperative to upgrade the transmission grid before building the wind capacity because it takes longer to upgrade the grid than it does to build new wind capacity. Also, the authors point out that without the grid enhancements, there would be curtailment or shutting down of wind units. China has already found this out—their grid cannot handle 30 percent of the wind units they have constructed.[vi]

NREL admits that wind cannot be a capacity resource. And because our electricity system is dependent on capacity value—meaning that electricity can be obtained on demand and controlled as needed—wind power must have back-up power to provide that dedicated capacity. That issue alone limits wind’s usefulness.[vii] Texas, the state with the largest wind capacity (at 9,400 megawatts), provides exemptions to wind-turbine owners when their turbines do not deliver power as promised because the wind isn’t blowing. By contrast, when the owners of coal, nuclear, or gas-fired plants cannot deliver power owing to an operational or maintenance problem, they must pay for whatever back-up power is needed. The cost of backing-up wind power companies is thus paid for by all generators.[viii]

Among the report’s conclusions is this: The reductions in spending on fossil fuels that will come from replacing coal-fired electricity with wind-generated power would offset the costs of additional transmission.  But the report neglects to mention that it is more economic to construct and operate coal-fired plants than wind plants.  Let’s compare the findings of the NREL study to other studies and experience.

How Does NREL Compare With Other Studies and Reports?

One prominent progressive activist[ix] claimed that we are well on our way to meeting the target because the Department of Energy’s Energy Information Administration (EIA)[x] projects in their revised Annual Energy Outlook 2009[xi] that wind will be 5 percent of U.S. electricity in 2012 and that all renewable power would reach 14 percent. That forecast assumes the renewable incentives in the federal stimulus package, as well as the renewable electricity standards now operative in more than half of all U.S. states, which mandate that a certain percentage of future generation be produced from renewable energy. But the activist failed to provide EIA’s forecast for later years, which shows that wind does not remain the most economic option once better wind resources (lower-cost sites) are used up, and the subsidies provided by the stimulus are no longer available. In 2024, EIA forecasts wind to be only 2 percent higher than it is expected to be in 2012, and to represent only 4 percent of electricity generation, which is 1 percentage point less than its share in 2012. Biomass generation, a base-load technology, is expected to increase from 1 percent of generation in 2012 to 4 percent in 2024, with all renewable power increasing from 14 to 16 percent of total generation between 2012 and 2024.[xii]

EIA’s analyses, even when they include a cap-and-trade policy or a national renewable electricity standard (RES), show other clean technologies to be more economic than wind power once the lower-cost wind sites are exhausted and the subsidies expire, particularly given that significant new transmission will be needed to accommodate more remote wind resources. For example, following a request from Chairman Edward Markey of the House Energy and Commerce Committee, EIA analyzed a 25 percent RES in 2025 that was based on the proposal in the American Clean Energy and Security Act of 2009.[xiii] EIA considered two scenarios that depended on the amount of energy-efficiency credits available, one at the maximum level and one with no efficiency credits. In one scenario, wind in 2025 did not increase from reference case levels. In the other scenario, the increase in wind generation was 20 percent, increasing from a 4 percent to a 5 percent level of total generation. However, biomass generation increased either 82 percent or 134 percent from reference case levels. Having represented 4 percent of total generation in the reference case in 2025, biomass generation increased its share to either 7 percent or 10 percent of generation, depending on the case considered by EIA. (The larger share is in the no efficiency credit scenario.)

Based on another analysis at the request of Chairmen Waxman and Markey, EIA examined the proposed cap-and-trade provisions in the American Clean Energy and Security Act of 2009, along with its other provisions.[xiv] While many cases are analyzed, the basic case has renewable generation increasing from 16 percent in the reference case to 20 percent in the basic case in 2025, and nuclear generation increasing from 18 percent in the reference case to 25 percent in the basic case, a larger share increase. Both wind and biomass have a 4 percent share of the generation market in 2025 in the reference case, with biomass generation doubling its share to 8 percent in the basic case and wind increasing by only 1 percentage point to 5 percent. Since biomass and nuclear are base-load technologies, they generate more electricity from an equal amount of capacity than does wind power, which is an intermittent technology, generating electricity only when the wind blows.

Another advantage that biomass and nuclear technologies have over wind is their cost. Generation costs in 2016, according to the EIA, are $119 per megawatt-hour for nuclear (in 2008 dollars), $149.3 for onshore wind, $191.1 for offshore wind, and $111 for biomass.[xv] Thus, on an economic basis, it is no wonder that biomass and nuclear are expected to penetrate the market more than wind when the latter’s costs increase owing to more remote and difficult-to-construct sites. While the NREL study indicates that the savings from coal could pay for the increase in wind-transmission costs, it fails to report that conventional coal and integrated coal gasification technology are some of the cheapest technologies for generating electricity. According to EIA, their generation costs in 2016 (assuming the equivalent of a $15 per ton carbon dioxide emissions fee) are $100.4 per megawatt-hour and $110.5 per megawatt-hour respectively, obviously lower than the costs of the “clean” technologies.

Other studies have found similar results, including studies by the National Association of Manufacturers and the American Council for Capital Formation,[xvi] the Charles River Associates,[xvii] the Environmental Protection Agency,[xviii] and the Congressional Budget Office.[xix]

Another study analyzing transmission requirements was done recently for New England.[xx] The study identified a potential for up to 12,000 megawatts—a 75-fold increase from current wind capacity—with 7,500 megawatts onshore and 4,500 megawatts offshore. In order to meet the 12,000 megawatts of wind potential, the study anticipates 4,320 new miles of transmission with costs between $19 and $25 billion. A more modest scenario of 4,000 megawatts of on- and offshore wind was estimated to need 3,615 miles of new transmission, ranging in cost from $11 to $14 billion.[xxi] These results seem to imply that the transmission estimates from the NREL study may be low, as regards both the amount of transmission capacity needed and the associated cost of integrating massive amounts of wind capacity into the eastern interconnection.

Experience with Wind Energy Overseas

Denmark has succeeded in attaining about 20 percent of its generation from wind power, but that level of wind has not helped the local consumers that subsidized its construction. Because wind tends to blow more in the night when demand is lower and because Denmark has no way of storing the excess wind power, Denmark exports it to Norway, Sweden, and Germany.  Norway, which gets 98 percent of its electricity from hydropower,[xxii] is able to handle the excess wind because of its hydroelectric power, which acts like a huge battery for the wind power. [xxiii]

Germany, with about 5 percent of its generation from wind must often curtail its wind energy to protect its grid. More wind would require more conventional generation to back up the wind capacity—between 80 and 90 percent of the installed wind capacity.[xxiv]

Noise pollution from wind power has been reported in England, France, and New Zealand. In New Zealand, more than 750 complaints have been lodged against a large wind project near Makara since it began operating last April, with residents complaining about noise and vibration affecting their sleep. Anti-wind groups have sprung up here and abroad. The European Platform Against Windfarms lists 388 groups in 20 European countries.[xxv]

Conclusion

This NREL study is the second in a series that considers obtaining 20 percent of electricity generation from wind. The first study, released in the summer of 2008, looked at the feasibility of 20-percent wind power by 2030.[xxvi] While EIA’s projections have not changed during this time frame, the federal government continues to pour money into studies to promote wind technology and continues to subsidize it.[xxvii] EIA’s and others’ studies have shown that subsidized wind is not an economic choice, once the better wind resources are exhausted, and could at best provide 5 percent of generation by 2025 even with an RES or a cap-and-trade proposal.

NREL may be right that the necessary upgrade to the transmission grid is technically feasible, but the real issue is whether it would provide any benefit, given the other issues surrounding wind generation. These include wind power’s inability to provide capacity value and thus its need for other capacity to serve as back up; an intermittency that provides electricity out of sync with high-demand periods; noise pollution, which requires that wind power be located in remote areas away from consumers; the high subsidization of wind power compared to competing technologies; and its inability to be stored, which results in potential operational problems with the transmission grid. In short, while it may be possible to get 20 percent of our electricity from wind, we have to ask, “Is it worth the costs?”

[ii] http://www.awea.org/publications/reports/4Q09.pdf

[iii] The National Renewable Energy laboratory, Eastern Wind Integration and Transmission Study, January 2010, http://www.nrel.gov/wind/systemsintegration/pdfs/2010/ewits_final_report.pdf

[iv] Climate Wire reported the cost of achieving the 20-percent scenarios to be less than 2 cents per kilowatt-hour, but the author of this blog could not find that number in the NREL report. The NREL report converted the $5 per megawatt-hour, and got .005 cents per kilowatt-hour, which the author of this blog finds a conversion error.

[v] Climate Wire, TRANSMISSION: 20 percent wind power by 2024 possible but ‘challenging’ – study, January 21, 2010, http://www.eenews.net/climatewire/2010/01/21/archive/3?terms=transmission

[vi] The Wall Street Journal, “China’s Wind Farms Come with a Catch: Coal Plants”, September 28, 2009, http://online.wsj.com/article/SB125409730711245037.html

[vii] http://www.masterresource.org/2010/01/selling-industrial-wind-government-the-media-and-common-sense/#more-7063

[viii] 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

[ix] http://climateprogress.org/2010/01/20/nrel-study-shows-20-percent-wind-is-possible-by-2024/

[x] The Energy Information Administration is an independent agency within the U.S. Department of Energy.

[xi] Energy Information Administration, An Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the American recovery and reinvestment Act and Recent Changes in the Economic Outlook, April 2009, http://www.eia.doe.gov/oiaf/servicerpt/stimulus/index.html

[xii] Ibid., Tables 8 and 16.

[xiii] Energy Information Administration, Impacts of a 25-Percent Renewable Electricity Standard as Proposed in the American Clean Energy and Security Act, April 2009, http://www.eia.doe.gov/oiaf/servicerpt/acesa/execsummary.html

[xiv] Energy information Administration, Energy market and Economic Impacts of H.R. 2454, the American Clean Energy and Security Act of 2009, August of 2009.

[xv] Energy Information Administration, 2016 Levelized Cost of New Generation Resources from the Annual Energy Outlook 2010, January 12, 2010, http://www.eia.doe.gov/oiaf/aeo/electricity_generation.html

[xvi] http://www.accf.org/publications/126/accf-nam-study

[xvii] The Charles River Associates, Inc., the Economic Impact of the American Clean Energy and Security Act of 2009, http://www.crai.com/uploadedFiles/Publications/impact-on-the-economy-of-the-american-clean-energy-and-security- act-of-2009.pdf

[xviii] http://www.epa.gov/climatechange/economics/economicanalyses.html#hr2454

[xix] http://www.cbo.gov/ftpdocs/102xx/doc10262/hr2454.pdf

[xx] New England 2030 Power System Study, February 2010, http://www.iso-ne.com/committees/comm_wkgrps/prtcpnts_comm/pac/reports/2010/economicstudyreportfinal_022610.pdf

[xxi] Industrial Wind Action Group, The Economics of transmission in New England, http://www.windaction.org/faqs/25906

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

[xxiii] http://www.aweo.org/ProblemWithWind.html

[xxiv] http://www.masterresource.org/2010/01/selling-industrial-wind-government-the-media-and-common-sense/#more-7063

[xxv] The Wall Street Journal, The Brewing Tempest Over Wind Power, March 2, 2010, http://online.wsj.com/article/SB10001424052748704240004575085631551312608.html?mod=googlen ews_wsj

[xxvi] U.S. Department of Energy, Energy Efficiency and Renewable Energy, “20% Wind Energy by 2030”, July 2008, http://www1.eere.energy.gov/windandhydro/pdfs/41869.pdf

[xxvii] Wind power gets a production tax credit of 2.1 cents per kilowatt hour for the first 10 years of operation for units constructed through 2012.

BACKGROUND: Last March, Spanish economics professor Gabriel Calzada published an academic analysis that showed for every green job created in Spain, 2.2 jobs were lost as an opportunity cost. This finding contradicted the Obama Administration’s claim that massive subsidies for wind and solar energy would create jobs. Calzada’s study gained national attention from the media and policymakers, making it difficult for the Administration to advance such failed policies. The Administration’s response? Huddle with big wind lobbyists and other special-interest groups to collaborate on a taxpayer-funded “rebuttal” to Calzada’s work. When the media and some in Congress inquired about the highly unusual step the Administration took in analyzing and responding to an analysis of the Spanish experience with renewable energy and green jobs, senior level government officials were not forthright or honest in their response.

Washington, DC – A day after being sworn into office, President Obama issued a memorandum to the heads of executive departments and agencies “reaffirming the commitment to accountability and transparency.” In the memo, the President states “All agencies should adopt a presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA [Freedom of Information Act], and to usher in a new era of open Government.” The President has also promised on numerous occasions that lobbyists will have no influence over his Administration.

Despite calls for increased transparency and openness, recent U.S. Energy Department documents obtained through FOIA requests and reported by The Chicago Tribune show significant collusion among Energy Department officials and the American Wind Energy Association (AWEA), as well as other third party special-interest groups, including the left-of-center Center for American Progress.

Assistant secretary of energy Cathy Zoi, who has held top positions at Al Gore’s Alliance for Climate Protection, is charged with crafting renewable energy policy for the Obama Administration. According to FOIA-obtained emails, Zoi and her team worked hand-in-hand with big wind’s lobby – AWEA – and other special-interest groups to rebut and discredit a groundbreaking study published by Dr. Gabriel Calzada, of Madrid’s King Juan Carlos University, that examined Span’s experience with renewable energy mandates and so-called “green jobs.”

Dr. Calzada’s original academic research squarely contradicts the Obama Administration’s position on taxpayer-funded green jobs. Calzada determined that for every “green job” the Spanish government created, 2.2 jobs were destroyed as an opportunity cost. They also found that 9 out of 10 government-created “green jobs” are temporary, highlighted the fact that Spain’s unemployment is at an all-time high, and noted that overall carbon emissions – which are said to decrease under “the greening of the economy” – actually increased.

This research on Spain’s failed attempted to create a government-mandated “green economy” served as a major setback for those who favor top-down federal energy mandates, subsidies and handouts – such as AWEA and the President himself. According to the FOIA-secured emails, high-level Energy Department officials worked with AWEA and other special-interest groups to collaborate on a taxpayer-funded rebuttal.

“This Administration may publicly pride itself on being open, transparent, and free from lobbyist influence, but these emails and internal documents demonstrate that actions speak much louder than words,” said Thomas J. Pyle, president of the Institute for Energy Research. “Dr. Calzada led and conducted a sound analysis of Spain’s failed experience with renewable energy mandates. For his work to be targeted by top U.S. government officials is disturbing. What’s worse, though, is how closely this Administration’s ties are with far-left special-interests lobbyists.”

According to a FOIA-obtained email, one Energy Department official stated, “This is the first time we’ve been asked to response so directly (right?).” His colleague responded, “That is probably true. But we can let DOE [Head Quarters] tell them why they wanted it, especially if this is the first time.”

Additional information:

Study: Spanish Green Jobs/Renewable Energy Study

Rebuttal: NREL Rebuttal to Spanish Green Jobs/Renewable Energy Study

Blog post: IER Response to DOE/NREL rebuttal

Note: The Competitive Enterprise Institute (CEI) obtained this information through a FOIA request. Christopher Horner, a senior fellow at CEI, posted his thoughts HERE.

FOR IMMEDIATE RELEASE
MARCH 3, 2010
CONTACT:
LAURA HENDERSON, 202.621.2951
PATRICK CREIGHTON, 202.621.2947

####

Where is the Grant Money Going?

The Investigative Reporting Workshop now calculates the total grant awards for green energy to be almost $2.2 billion, of which over 79 percent has gone or is going abroad.[iv] The vast majority (over 85 percent) of this stimulus money, which reimburses companies for 30 percent of their investment in renewables, is for wind power projects ($1.88 billion). Of the remainder, about $300 million is distributed among geothermal (41 percent), solar (26 percent), biomass (24 percent), and other renewable projects (8 percent).[v]

The largest grant made under the program so far was awarded to a bankrupt Australian company that built the Texas Gulf wind farm using 118 turbines made by a Japanese company that does not build wind turbines in the U.S.  That grant of $178 million went to Babcock & Brown on December 29, 2009.

Spanish companies have collected the most money ($708.3 million), with Portuguese, German, and British companies also profiting from direct payments. Eurus Energy America, the U.S. subsidiary of a Japanese firm, received $91 million in stimulus money for its Bull Creek wind farm in Texas. Five U.S. companies received a combined $290.7 million, with First Wind and NextEra (a subsidiary of Florida Power & Light) receiving the largest shares, $115 million and $99.9 million, respectively.[vi] While the recipient of the direct grant money may be clear, where the component parts were and are being manufactured is harder to decipher.

At one point, it was believed that wind turbines were too big to import. However, cities on the West Coast and in Texas have modified their ports to accommodate wind turbines and/or their component parts. By examining Customs records, the Investigative Reporting Workshop found that wind turbine components were coming into the U.S. from China, Germany, Spain, and Brazil. Although not a comprehensive review of all imports, the Workshop investigation found numerous instances of large foreign-made components being used in the wind farms awarded grants from stimulus funds.[vii]

How Does AWEA React to the News?

Last month, the American Wind Energy Association (AWEA) reported that the U.S. installed almost 10,000 megawatts of wind turbines in 2009, a record, making total wind capacity in the U.S. about 35,000 megawatts. AWEA also reported that manufacturing jobs in wind energy had gone down.[viii] This contradiction in their goals made them call for a Renewable Electricity Standard, a policy contemplated by the administration and Congress that would mandate a certain portion of electricity be generated by renewable technologies in the future. Of course not mentioned was the fact that at least 28 states and the District of Columbia already have renewable electricity standards, which certainly provided an impetus for the 9,922 megawatts erected in 2009.

As for AWEA’s rebuttal to the Investigative Reporting Workshop’s news that over 79 percent of the grants awarded from the stimulus funds were going overseas: The association pointed out that the wind farms were built in the U.S. But the fact that they are built in the U.S. does not mean that the turbines were manufactured here, nor does it mean that U.S. companies built them.

While AWEA acknowledges that not all the wind turbine components are manufactured in the U.S.,[ix] they indicate that: “jobs in construction, transportation, civil and electrical engineering, and operations and maintenance are American and cannot be outsourced.”[x] The Investigative Reporting Workshop dealt with this by using a study of the Renewable Energy Policy Project, a think-tank that advocates renewable energy technology research. The study showed that, for every 1 megawatt of wind energy that is developed, 4.3 jobs are created: 0.6 in operation and maintenance of the wind farms; 0.7 for the installation of new turbines; and 3 in manufacturing.[xi] That makes manufacturing by far the largest benefactor of jobs from the various stages of wind construction and operation. Using this estimate and the capacity of wind farms built by foreign manufacturers, the Investigative Reporting Workshop calculated that as many as 6,838 manufacturing jobs may have been created overseas.[xii]

Conclusion

The question that remains is what the stimulus funds were supposed to be used to fund. Many in Congress believe they were to be used to create jobs within the U.S. and to spur our economic recovery. If this is what the American public also intended, then creating an expensive generating product with stimulus funds that largely find their way overseas is using taxpayer money wrongly.

[ii] http://investigativereportingworkshop.org/investigations/wind-energy-funds-going-overseas/story/renewable-energy-money-still-going-abroad/

[iii] http://abcnews.go.com/WN/wind-power-equal-job-power/story?id=9759949&page=1

[iv] http://investigativereportingworkshop.org/investigations/wind-energy-funds-going-overseas/story/renewable-energy-money-still-going-abroad/

[v] Ibid.

[vi] Ibid.

[vii] Ibid.

[viii] http://www.awea.org/newsroom/releases/01-26-10_AWEA_Q4_and_Year-End_Report_Release.html

[ix] http://www.awea.org/newsroom/releases/02-11-10_RS_Response_to_ABC.html

[x] Ibid.

[xi] Renewable Energy Policy Project, Wind Turbine Development: Location of Manufacturing Activity, Page 4, http://repp.org/wind_turbine_dev.htm.

[xii] http://investigativereportingworkshop.org/investigations/wind-energy-funds-going-overseas/story/renewable-energy-money-still-going-abroad/

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

Whatever the reason, we would like to apologize to AWEA. Apparently we compelled them to use ad hominem attacks like “anti-clean energy” to describe our organization and “bogus” to describe our research. We would have preferred that AWEA produce a substantive rebuttal to our recently released report, “Economic impacts from the promotion of renewable energies: The German Experience.”

In an October 21^st blog post, AWEA states “IER’s strategy clearly is to discredit wind energy in other countries.” We do not have a strategy to discredit wind energy in other countries. President Obama and top Administration officials are telling us that America must follow Germany’s example with respect to renewables or we will be left behind. Taking the President at his word, we sought to better understand Germany’s experience by commissioning a study by the think tank Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI). The report found the following facts:

• Financial aid to Germany’s solar industry has now reached a level that far exceeds average wages, with per worker subsidies as high as $240,000.

• In 2008, the price mark-up attributable to the government’s support for “green” electricity was about 2.2 cents US per kWh. For perspective, a 2.2 cent per kWh increase here in the US would amount to an average 19.4 percent increase in consumer’s electricity bills.

• Between 2000 and 2010, the net cost of the German government support for solar was $73.2 billion and an additional $28.1 billion for wind. Because the U.S. economy is five times larger that Germany’s, a comparable expenditure in the U.S. would amount to about half a trillion dollars.

• Green jobs created by government actions disappear as soon as government support is terminated, a lesson the German government and the green companies it supports are beginning to learn.

• Government aid for wind power is now three times the cost of conventional electricity.

AWEA lobbies Congress for government handouts and subsidies for wind energy production, so we understand why they would like to these facts to remain hidden.  As the report shows, Germany’s experiment with promoting renewable energy has been expensive, and transplanting that experience to the United States will be expensive.

Apples to oranges, AWEA argues, because Germany is not a good model for the United States.  In their own words:

“The problem is that the United States is not considering a feed in tariff as a means to encourage wind development because it would not work. Instead, the US is considering a free-market based national Renewable Electricity Standard, and numerous studies have shown that an RES would decrease electricity prices.”

We hope AWEA informs President Obama and other top Administration officials that Germany’s feed-in tariff is not a good model for the United States.

We hope AWEA informs Representative Jay Inslee, who is promoting legislation to establish a federal feed-in tariff, that the United States is not considering a feed-in tariff, as it would probably come as a surprise to him.

In a Congressional hearing on September 24, 2009, Representative Inslee explained that Germany’s system of promoting renewables through a feed-in tariff is a better way to go than the Spanish experience.

We hope AWEA informs itself that Germany’s feed-in tariff “would not work” in the U.S., instead of describing it as “similar to a Renewable Electricity Standard” which AWEA strongly supports.  Here’s what AWEA’s website says:

“A distributed generation or “feed-in” tariff ensures that locally owned, small-scale renewable energy systems become significant contributors to the local power supply. A feed-in tariff is similar to a Renewable Electricity Standard (see “Wind energy policy issues” www.awea.org/faq/wwt_policy.html) except that instead of establishing a set quantity of renewable electricity a utility must generate, it establishes a set price at which a utility purchases excess electricity from a renewable generator, such as a small wind system.”

In AWEA’s blog post, they describe a national Renewable Electricity Standard as “a free-market” program. That is not accurate. In free markets, people are free to choose. A Renewable Electricity Standard forces people to buy wind, solar, and other government-approved energy sources. It is a mandate.  Forcing someone to buy your product is not a free-market program by any definition.

Contrary to AWEA’s assertion that a Renewable Electricity Standard would lower energy prices, common sense and real-world evidence suggest otherwise. Wind and other government-approved renewables are more expensive than other forms of energy. Common sense tells us that requiring people to buy expensive and inefficient renewable energy, through a renewable energy mandate, will only increase the cost of electricity. Currently, twenty-nine states have binding renewable electricity mandates and the electricity prices in those states are thirty-eight percent higher than in states that do not have binding renewable electricity mandates.

Lastly, AWEA states that they expect IER “to take on other countries that have successfully integrated wind into their energy mix.” That assumes, of course, that increased electricity prices and billions of dollars in subsidies is a sign of successful integration of wind into a country’s electricity mix. Some would beg to differ, especially those who are footing the bill.

The Administration tells us that U.S. energy policy should emulate countries like Spain, Denmark, and Germany. The facts show that the promotion of renewables in Spain, Denmark, and Germany has been very expensive and has resulted in lower employment overall as an opportunity cost of the lavish subsidies. Of course, it is up to policymakers to ultimately decide whether the United States should follow a similar path, but no one should mislead Americans into thinking that doing so will come without a cost.

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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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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