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Tag Archives: subsidies

New year, new nuclear: Hinkley fallout

A special extended bumper New Year edition

By Dave Elliott

The UK starts 2015 with a big new year headache- the Hinkley nuclear project. It is a huge uncertain project, and it is far from clear, if goes ahead, whether  it will prove to be a wise investment, given the fall in energy costs and the emergence of cheaper renewable alternatives. (more…)

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All change in Germany, the EU, and the US?

By Dave Elliott

Things are changing in Germany. With renewables booming, German energy giant RWE has suffered a massive loss of €2.8 billion, its first loss in 60 years. It has admitted it got its strategy wrong, and should have focused more on renewable and distributed energy rather than conventional fossil fuels: ‘We were late entering into the renewables market – possibly too late.’  A previous RWE CEO had gone on record with the immortal line: ‘Photovoltaics in Germany make about as much sense as growing pineapples in Alaska’.  www.reuters.com/article/2012/01/18/germany-energy-idUSL6E8CI12Y20120118

Now Germany has 36.5GW of PV, supplying around 5% of its electricity and at peak times much more!  And about 8% from its 33GW of wind.  (more…)

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UK Renewables progress: market pressures bite

By Dave Elliott

Renewables are doing well, supplying around 22% of global electricity from around 1,560 GW of generating plant, and 19% of total global primary energy, according to the 2014 edition of REN21s annual renewable review: http://www.ren21.net/gsr

However, although they are still expanding, the rate of growth is slowing. Total global investment in clean energy fell 9% in 2013 to $254bn, following a 9% drop in 2012, according to Bloomberg New Energy Finance. Some of this was due to the reduced costs of PV solar, but in the wake of the global recession and increased market pressures, renewables do seem under some stress. That’s been reflected by (or some might say is the result of) the less than positive policies adopted by some governments. (more…)

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Green Mirage – or arrested development?

Green energy policies mean ‘more pain than gain’ for the UK, according to a new Civitas report ‘Green Mirage’ by Dr John Constable, director of policy and research at the Renewable Energy Foundation (REF). He claims that the low-carbon economy will not deliver many jobs in the UK. He reviews a series of economic models developed for the EU Commissions 2009 EmployRES, which, he notes, predicted that the EU-27’s s climate policies will have only ‘slight’ net positive benefits in terms of GDP and net employment by 2020. He points out that this outcome assumes that Europe remains dominant in the world export markets for low-carbon technologies, whereas, the experience of competition between the German and Chinese solar industries does not support this view. Basically China came up with cheaper solar cells and dominated the market.

Moreover, any EU gains will be unevenly spread, with the UK missing out. For example, Spain was the main winner on most of the Commission’s optimistic export scenarios gaining an estimated 120,000 net jobs via current green policies, and over 150,000 if green subsidies are accelerated. But the UK loses 10,000 jobs with current green policies and 30,000 jobs if those policies are accelerated with more subsidies.
Basically, he adopts a traditional free market view, and argues that, the more green technologies are subsidised by the EU, the greater the predicted net loss for British workers.

He and REF are have been very hostile to subsidies. He notes that in the period 2002-2010 the UK spent £5 billion subsidising dedicated renewable electricity generators, at a cost of £230,000 per wind industry worker. He says that the subsidy per wind industry worker in the year 2009/10 amounted to £54,000, which is greatly in excess of the median earnings in either the public (£29,000) or the private sectors (£25,000).

Challenging the approach taken by the Campaign against Climate Change, in their booklet ‘One Million Jobs’, he claims that continuing to subsidise renewables will not only result in net job losses, it will also impose high costs on the rest of the economy, undermining international competitiveness. A subsidised artificial market for low-carbon industries will provide a ‘premature reward for unready technologies’, and actively discourage further invention. He claims that current green policies waste resources that could be better spent on improving low-carbon technologies for the future.

As a result, ‘Far from re-energising Britain’s economy, the ‘green economy’ will drain investment from other sectors, making Britons pay more for electricity indefinitely and live less productive lives with access to fewer jobs’.

In response, trade lobby RenewablesUK (RUK) said that the figures used by Constable were not a reliable guide to the future – so far the UK had focused on on-shore wind using imported technology, whereas now, investment was expected to be directed more towards off-shore wind. ‘A lot of the calculations seem to be based on what’s happened in the past – we are looking at the future. Britain is set to be a market leader in offshore wind.’

The hope is that more of the resultant jobs will created in the UK- as a result of inward investment in new manufacturing facilities. RUK says “The potential for job creation is phenomenal If you take onshore, offshore and the associated supply chains then by 2021 it’s around 88,000 jobs in the UK. To be talking about a net loss of jobs is not borne out by evidence’ Constable is not impressed by this view- he suggest that, although some areas in the UK may benefit, the overall economic inefficiency of subsidies for renewables will lead to a net loss.

The numbers can of course be debated endlessly- econometrics is a complex and some might say unreliable science. But for example, the EC report which Constable refers to concludes that, if the EU can meet its target of getting 20% of its energy from renewables by 2020, that will provide a net effect of about 410,000 additional jobs and 0.24% additional gross domestic product (GDP). Note that this is net job gains- taking account of those jobs lost due to restructuring of the energy industry. If that really is the case, it is surely to be welcome, rather than, as Constable seems to think, being too small to matter.

Leaving the numbers aside, clearly there are some basic ideological differences in approach between Constable and those who look to renewables as part of the solution to both climate and economic problems, and in particular on the issue of subsidies. For example, Constable seem to see subsidies and innovation as being fundamentally opposed. That rather depends on your time frame. Subsides can be seen as investments in the future, helping new technologies and markets to develop, and that can lead to reduced costs longer term. But the risk is that the focus will just be on the near-market options, as with the Renewables Obligation- which was in any case very wasteful and inefficient. Thankfully it’s now to be phased out. So Constable should be pleased. Rather than this approach, we need support for the less developed options, to help them move down their learning curves to lower costs. That’s what the Feed In Tariffs have tried to do across the EU, with some considerable success in terms of wind power and also PV solar, although evidently that has not happened fast enough, in the case if PV solar, to avoid the charge that the FiT was passing to much cost on to consumers. So the PV FiTs have been cut back. Constable would not doubt be pleased, but if you want to push renewables on fast, you do have to provide extra support through some mechanism – just leaving it up to the market will not be enough.

It seems to be the case though that Constable does not want to push renewables fast, at least not the current ones, and not in the way that has been done so far. It is fair enough to have a debate on strategic choices. For example, REF has backed heat-producing renewables, as a better option than electricity generating micro-generation. But at times it is hard to follow REFs economic logic. For example in the past REF has been very critical of the support given to wind power, and has thereby evidently happily joined in with the anti-wind reaction. But more recently REF have backed offshore wind- despite that fact that this is much more expensive than on-land wind. Perhaps it has recognised that the resource is very much larger. And that costs will fall. Similarly for wave and tidal stream power. There is obviously plenty to debate when looking at which renewables to back, with REF clearly having its own views

However, in this new report, Constable seem to challenge the whole renewable energy project, at least as currently configured and supported. Presumably, if we are still to have a low carbon future, then that leaves us with slow development of renewables and more emphasis on low-carbon technology like Carbon Capture and Storage and nuclear power. That would be a somewhat odd recipe to be backed by an organisation called the Renewable Energy Foundation.

Constable: http://www.amazon.co.uk/Green-Mirage-Low-carbon-Economy-Further/dp/1906837309

EmployRES Report: http://ec.europa.eu/energy/renewables/studies/doc/renewables/2009_employ_res_report.pdf

CaCC booklet: www.campaigncc.org/greenjobs

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