While some of that money will certainly go to funding legitimate aspects of NOAA’s (though non-authorized) mission, a significant portion is expected to be diverted to supporting the agency’s priorities related to its “Coastal and Marine Spatial Planning” program – short-hand, some say, for zoning the responsible development of offshore energy square off the map.

Given those priorities, and recognizing the severe impact they could have on the American public, the Institute for Energy Research (IER) today released a series of questions that members of the Appropriations subcommittee should ask – and for which, they should demand answers – as the new NOAA chief sits in front of them today to defend her budget.

Question #1: In the Interim Framework document released by CEQ in December, the task force dismissed suggestions that an ocean zoning scheme would adversely impact the safe development of offshore energy. Rather, the document says, such a regime would ultimately benefit productive forms of offshore activity – allowing them to be managed “in a manner that reduces conflict, enhances compatibility among uses and with sustained ecosystem functions and services, and increases certainty and predictability for economic investments.”  Do you stand by that statement? If so, can you offer the committee a guarantee that neither existing, nor potential energy exploration in the future, will in any significant way be curtailed or otherwise affected by the zoning plan for which you are seeking funds today?

Question #2: Is it the official opinion of your agency and its staff that it’s currently just too easy, too quick, and too inexpensive for would-be energy producers to secure the permits and approvals necessary, and then navigate the years of attending litigation, to eventually have the chance to explore for energy offshore? Is it your view that the current system — overseen by the U.S. Department of the Interior, but in many ways managed by the federal court system – simply does not make it difficult enough for this work to be executed?

Question #3: Principle no. 7, included on page 8 of your December framework document, identifies the “precautionary approach” as a guiding principle the directing agency will follow in determining whether to levy action in response to threats – real or perceived – offshore. According to that approach, the lack of “scientific certainty” will in no way impede the swiftness with which the agency acts to shut down development or activities it believes pose “serious” harm to the environment. Can you not see, Madame Administrator, how such a principle might possibly be vulnerable to abuse in the hands of someone intent on impeding offshore energy exploration?

Question #4: Can you provide the committee a scientific justification for why your agency felt it necessary to include the Great Lakes under jurisdiction of the oceans zoning task force? Are you aware that the Great Lakes are, in fact, not oceans? Are you further aware that the submerged lands in the Great Lakes region are technically under the jurisdiction of the states to which they are adjacent — and are actually part of the aggregate territory of those states? Can it be said the inclusion of the Great Lakes under this federal regime represents an attempt by your agency to bring areas under federal control currently managed by the states?

Question #5: It has been reported that your oceans zoning commission may decide to grant itself the authority to regulate all activities that in any way affect inland water sources. Some have speculated that this might create a scenario in which NOAA is empowered with the ability to direct and prohibit activities related to onshore energy development, in addition to its more direct authority, albeit of dubious legal grounding, over offshore exploration. Are you willing today to stand up and disabuse those concerns? Are you willing to promise this committee that neither your agency, nor this nebulous task force of which you are a member, will ever use this authority to deny Americans access to onshore energy resources?

#####

FOR IMMEDIATE RELEASE:
March 16, 2010
CONTACT:
Patrick Creighton: 202.621.2947
Chris Tucker: 202.346.8825

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.

The Good News—the Air is Getting Cleaner

The report can be summed up with this graphic from EPA:

GDP, vehicle miles traveled, population, and energy consumption have all increased since 1990. But despite the fact that more people are using more energy to produce more goods and services, air pollution emissions have decreased.

EPA reports that air quality has improved for the six main air pollutants:

Since 1990, nationwide air quality has improved significantly for the six common air pollutants. These six pollutants are ground-level ozone, particle pollution (PM2.5 and PM10), lead, nitrogen dioxide (NO2), carbon monoxide (CO), and sulfur dioxide (SO2). Nationally, air pollution was lower in 2008 than in 1990 for:

• 8-hour ozone, by 14 percent
• annual PM2.5 (since 2000), by 19 percent
• PM10 , by 31 percent
• Lead, by 78 percent
• NO2 , by 35 percent
• 8-hour CO, by 68 percent
• annual SO2 , by 59 percent

The below graphic, from EPA’s website, (but not in the actual air trends report) shows air quality trends since 1970. These trends are even more dramatic than the 1990 to 2008 numbers.

The Bad News: the Press Does Not Seem Interested in Telling the American People Our Air Quality has Dramatically Increased

This is good news that air quality continues to improve and even more so because the American people do not know it. According to a 2004 poll from the Foundation for Clean Air Progress, only 29 percent of people thought that “America’s air quality is better than . . . it was in 1970.”

One reason that the American people do not know this is because the press does not report on it.  So far not one major newspaper has written a story about the good news in this air trends report—there’s nothing from the Washington Post, New York Times, Los Angeles Times, or any of the other major news outlets. The only story we could find is from E&E News (a subscription-based environment and energy news service) and even then it was the 12^th story in their afternoon publication.

It’s tough for the American people to lean to the truth about air quality when the media does not report the good news.

Our Air is Getting Cleaner

Today we can breathe easier knowing that our air is much cleaner than in the past. Even though the media is not reporting this good news to the American people, our air quality has substantially improved and will continue to improve. The data shows the truth.

The problem is that energy efficiency is not free. Appliances with greater energy efficiency cost more money—sometimes a lot more and frequently take more time to do the same amount of work.

Americans, not policymakers, should be free to choose which appliances make the most sense for their families instead of being forced to purchase more expensive and more energy efficient appliances.

Energy efficiency mandates are based on the premise that Americans consumers do not make wise choices about energy efficiency without the government forcing them to make “good” choices. It is a dubious claim. Consumers pay attention to their electric bill, and that is especially the case with commercial users of appliances.

Mandating greater energy efficient makes the appliances and equipment more expensive. In 2006, the Consumer Reports Best Buy for top-load washing machines only cost $380.[1] That was before the federal energy efficiency mandate for washing machines. In 2007, when washing machines had to comply with the new energy efficiency mandate, Consumer Reports said that “we can’t call any washer a Best Buy because models that did a very good job getting laundry clean cost $1,000 or more.”[2]

Since then, washing machines have improved—but the energy efficiency mandates still make them more expensive than they would otherwise be. The least expensive washing machine Consumer Reports recommends still costs $480[3] and the next lowest-priced recommend washing machine costs $650.[4] If a consumer saves $15 a year[5] in energy costs by using one of these more efficient washers, it takes nearly 5 years to recoup the extra costs of the $480 model and over 16 years to recoup the extra cost of the $650 model (even adjusting for inflation from 2006 to 2010).

Federal officials who desire to mandate energy efficiency standards apparently assume that households and businesses are not making smart choices about energy efficient appliances. This is not borne out by actual data. According to data from the Association of Home Appliance Manufactures, household appliances are becoming much more efficient. Between 1980 and 2008, air conditioners became 41.5 percent more energy efficient, dishwashers became almost twice as energy efficient, and refrigerators became nearly three times as energy efficient.[6] The graph below shows the percent improvement in energy efficiency of standard household appliances:

Americans are intimately aware of the costs of their utility bills and are always looking for ways to balance the convenience of their appliances with energy savings. When federal regulators step in and mandate energy efficiency improvements, the mandate increases the price of appliances and limits Americans’ choices. Actual data shows that appliances are becoming more energy efficient over time. There is no need for lawmakers to step in and artificially limit our choices.

[2] Consumer Reports Annual Buying Guide, Jan. 1, 2008, available at http://www.accessmylibrary.com/coms2/summary_0286-34226514_ITM.

[3] Consumer Reports, Washers & Dryers, Feb. 2010 p. 47. The model is a GE WJRE5500G.

[4] Id. at 46. The model is a Frigidaire Gallery GLTF2940F.

[5] In 2009, Consumer Reports noted online in subscriber only section of their website that “Each improvement in energy-efficiency scores, from good to very good, for instance, cuts an average of $10 to $20 from your annual energy expenditures.” The 2010 washing machines are rated at “Very Good” for energy efficiency, while the 2006 washer was rated as “Good” on energy efficiency.

[6] Data from the Association of Home Appliance Manufactures, cited by Mark J. Perry at http://mjperry.blogspot.com/2009/10/chart-above-shows-significant-increases.html.

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/

Interior Secretary Ken Salazar and Bureau of Land Management (BLM) Director Bob Abbey will testify today before the Senate and House Appropriations panels, respectively. The Interior Department is the nation’s largest land and mineral owner, and the BLM is tasked with managing both the surface and subsurface energy resources on these federal lands. Interior is also tasked with managing the almost 2.4 billion acres of mineral estate – an area larger than all the land in the United States – on the Outer Continental Shelf (OCS). Currently, the government has leased about 3% of these offshore lands for domestic energy development.

Thomas J. Pyle, president of the non-partisan Institute for Energy (IER), issued the following statement regarding the Interior Department’s budget request, which discourages domestic energy production through new fees and layers of burdensome and unnecessary bureaucratic red tape.

“It’s good and well to say that you support domestic energy production on taxpayer-owned Federal lands; it’s another thing to advance policies that actually promote such commonsense development. This Administration has not only implemented a de-facto ban on new development of our homegrown energy resources offshore, but the budget request that Secretary Salazar and Director Abby are presenting today will increase red tape, fees, and regulatory hurdles on development of these job-creating energy resources.

“Increasing regulations, taxes and barriers on energy development, and you will discourage investment, the Administration’s logic goes. These misguided efforts will drive capital investment and good-paying American jobs overseas. Some smaller energy producers may even be forced to shut their doors. For Western states – like Utah, Colorado and Wyoming, where bureaucrats in Washington largely determine where and how energy can be produced – taxpayers, small businesses and local governments all lose out on the economic development, royalties and the jobs generated from oil, gas and coal development on taxpayer-owned lands.

“This Administration has a clear choice: encourage responsible energy development on taxpayer-owned federal lands, or continue to deny Americans access to affordable, domestic energy resources and the millions of jobs that come with it. It’s very clear, and unsettling, which path this proposed budget will lead our nation.”

Additional resources from IER:

Press release: Obama Admin Delays Atlantic OCS Development until at Least 2014, Will Congress Force Interior’s Hand?

Study: The Economic Contribution of Increased Offshore Oil Exploration and Production to Regional and National Economies

Analysis: The President’s Bogus Green Economics

#####

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MARCH 4, 2010
CONTACT:
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PATRICK CREIGHTON, 202.621.2947

In this context, of course, “seizing the energy opportunity” means that the government seizes tax dollars to help private companies invest in inefficient energy projects that could not survive in a free market. As your mother always told you, just because all the cool countries are jumping off an energy-boondoggle cliff, doesn’t mean Americans should too. It’s good to be “left behind” with all the affordable energy provided by fossil fuels.

CAP’s Vision

The Center for American Progress (CAP) study summarizes the apparently dire situation:

By 2020, clean energy will be one of the world’s biggest industries, totaling as much as $2.3 trillion.1 Over the past year, other countries made huge investments to seize the economic opportunity provided by the historic shift from fossil-based energy to renewable, low-waste electricity and fuel. These investments weren’t made out of thin air, but were a result of intentional public policies, which in turn provided a strong stimulus for new public and private investment in new clean-energy markets, infrastructure, and human resources. (p. 1, emphasis added)

We agree on one thing: The investments in inefficient energies didn’t come out of thin air. On the contrary, the type of “clean energy” programs that CAP is pushing would rely on money taken from taxpayers. Even private funding would largely be driven by government mandates that artificially penalize traditional energy sources.

[China, Germany, and Spain] invested in clean energy for short-term benefits and laid a solid foundation for future sustainable economic growth by either setting a price on carbon or implementing strong national energy performance standards or both, thus spurring innovation in new technologies that lower carbon emissions. A 2009 study by the CERNA Research Program on Technology Transfer and Climate Change found clear evidence that developed countries that ratified the Kyoto Protocol—each of which set a legally binding target to reduce its carbon emissions—saw a rise in green-tech innovation patents of more than 33 percent…Developed nations that didn’t initially ratify Kyoto—the United States and Australia—saw no noticeable change in their share of total green tech patents over the same time period. (pp. 1-2, emphasis added)

It is not surprising that when governments pick winners and losers in the energy sector, the winners do better. The CAP study simply takes for granted that the economy should be moving away from fossil fuels and into politically favored technologies, such as wind and solar. But if those are the wrong sectors to expand—at least for now—then the boost in patents in “green-tech” isn’t a blessing, but a curse. By the same token, if the government banned automobiles tomorrow, that would no doubt stimulate a flurry of patents in ten-speed bicycles and Conestoga wagons. This wouldn’t signal US leadership, it would just be silly and wasteful.

The same is true for “green-tech” investments. If the government places artificial penalties on high-carbon energy sources, then the country will be poorer in conventional terms, such as GDP or per capita income. Now, if the scholars at CAP want to argue that this impoverishment is worth it to avoid global warming, then they should go ahead and make that argument.

But the scholars at CAP know that the American people wouldn’t go for such a sales pitch, especially in the midst of a deep recession and unemployment hovering at 10 percent. That’s why CAP’s spin doctors say we can have our green cake and eat it too. They claim that not only will switching to less efficient energy sources (like solar and wind) save the planet, but it will also spur new job creation.

Ironically, Lindsay Graham himself let the marketing cat out of the bag, as quoted in the New York Times:

“The momentum around this large cap-and-trade bill to save the planet has been replaced by a business model: How do we create jobs and stay ahead of the Chinese and clean up the air?” Graham said earlier this week…”Once you start changing your perspective from ‘Iowa is going to be beachfront property’ to ‘How do you create jobs and clean up the air?’ you have a completely different focus,” he added.

US First Among Lemmings?

It is amazing that the green-energy boosters continue to cite Spain as a success story, despite the fact that their unemployment rate in December was more than 19 percent. The famous Calzada et al. study has chronicled the unsustainable bubble in Spanish renewables, a bubble inflated by government subsidies and mandates that popped once the support was only slightly scaled back.

Germany’s 8.2 percent unemployment is a tad better than the United States’. But this doesn’t surprise us, as the German government has been warning against runaway “stimulus” spending. German Chancellor Merkel’s government has been more fiscally responsible than the Obama Administration; of course their economy is on a better footing at the moment.

As for China, we also note that they are adding one coal-fired power plant a week, a nuclear plant a month, and are in the process of constructing the largest hydroelectric dams known to man. Will CAP put out a study warning that the US will get left behind in the scramble for coal, nuclear and hydropower? (CAP congratulates China for 16% of its power being from hydropower and wind, failing to mention that 95% of that combo is hydropower, principally from the new Three Gorges Dam.)

The CAP study favorably cites the Chinese tariffs on foreign-made turbine components, which are in place to boost job growth in the Chinese wind sector. But, of course, this just places an obstacle in the way of American manufacturers trying to export renewable technology to China. Taken to its logical extreme, the CAP mindset would eliminate the benefits of international trade altogether, so that every country’s workforce had to produce everything internally. That would “create jobs,” no doubt, but in the same way that a household would keep really busy if it had to grow its own food and sew its own clothes.

Conclusion

The CAP study urges the U.S. government to copy the worst economic ideas from around the world. When the government picks winners and losers, it doesn’t create wealth or jobs in the long run. On the contrary, government micromanagement will simply divert resources from efficient energy sources into inefficient ones. This will raise energy prices for consumers and retard job growth.

At some point down the road, it might make economic sense for the country to switch away from fossil fuels towards renewable technologies. But it doesn’t make sense right now. The proof is that private investors aren’t willing to put their own money on the line; they want the government to force taxpayers to foot the bill.

As Ben Lieberman of the Heritage Foundation observed, Americans shouldn’t be worried when other countries are “ahead of us” as they run off a cliff

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

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