Europe’s green energy nightmare could haunt the US

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Michael Bastasch DCNF Managing Editor
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Europe’s green energy dream has become a green energy nightmare to some, as renewable energy subsidies have driven up power prices for households and businesses.

This led one German newspaper to claim that electricity has become a “luxury good” in the country and Europe’s top energy CEOs are warning that renewable subsidies could lead to continent-wide blackouts.

U.S. energy policy analysts are warning lawmakers that this nightmare could become a reality here as well if states and the federal government continue pushing ahead with an aggressive green agenda.

“Most of the European countries are scaling back their subsidies because it’s crushing them,” said Thomas Pyle, president of the free-market Institute for Energy Research. “The President wants us to be more like Europe.”

The European Union is attempting to generate 20 percent of its power from renewable sources by 2020 in an effort to stem global warming. However, the plan is coming with a high cost and doing little to fight global warming.

According to Eurostat, electricity prices have risen about 20 percent in Europe since 2008. Top EU business leaders are calling for an end to renewable energy subsidies for raising power costs and increasing the risk of continentwide blackouts.

“We’ve failed on all accounts: Europe is threatened by a blackout like in New York a few years ago, prices are shooting up higher, and our carbon emissions keep increasing,” said GDF Suez CEO Gérard Mestrallet.

President Obama once touted countries like Germany and Spain as world leaders in green energy, saying “they’re making real investments in renewable energy” and “surging ahead of us, poised to take the lead in these new industries.”

However, Germany and Spain have been forced to backtrack their green agendas in the face of skyrocketing energy costs and looming blackouts.

“It’s not too late to reverse to reverse course, but we can see the writing on the wall,” Pyle added.

The German green energy nightmare

Germany has a mandate to generate 80 percent of its power from renewables by 2050 — it’s well on its way, with about 25 percent of its power coming from such sources now. However, generous subsidies, called feed-in tariffs, guaranteed above market prices for green energy even when demand was falling and bringing down energy prices in general.

Coal and gas plants were shut down across Germany as it became more profitable to power the country using energy from wind turbines and solar panels. The 2011 Fukushima nuclear accident also led German Chancellor Angela Merkel to phase nuclear power.

These developments were met with glee from environmentalists, but  were met with disdain from consumers and businesses who are now seeing the prices of power rise. Germany now has the highest power prices in Europe, according to Der Spiegel.

“German consumers already pay the highest electricity prices in Europe. But because the government is failing to get the costs of its new energy policy under control, rising prices are already on the horizon,” reports Der Spiegel. “Electricity is becoming a luxury good in Germany.”

Bloomberg reports that the surcharge Germans are forced to pay because of green energy subsidies has quintupled since 2009, and cries for reform are growing in the country as large industries are exempt from having to pay the increased green fees — which will total $26 billion this year alone.

“The promotion of green electricity costs will cost our citizens ($32.5 billion) next year, which is a lot of money that could otherwise be spent on buying new cars, furniture or on restaurant visits,” said Michael Fuchs, deputy leader of the Christian Democratic Union — Merkel’s political party.

Fuchs and his counterparts in the German legislature want to see the green energy surcharges phased out after the country generates 35 percent of its power from renewables.

However, the German Green Party says that the green surcharges are rising not because of renewable energy, but because of failed government policy.

The surcharge is increasing “because the power market isn’t working and the old government has piled more and more industry aid onto non-privileged electricity consumers,” a party spokesman told Bloomberg.

Wind and solar power do not supply a consistent amount of power to the electrical grid, sometimes producing too much power or none at all. For example,when too much power is on the grid, wind turbines have to be shut down but consumers are still forced to pay for the imaginary power that the turbines theoretically generate during that time.

On the other hand, when the wind stops blowing, coal plants have to be ramped up to make up for the gap in power. This has led the German energy sector to release more carbon dioxide emissions in 2012 than in 2011 — a setback for their fight against global warming.

Despite Germany’s green revolution, the country is expected to stay reliant on coal for the foreseeable future. In 2012, 45 percent of the country’s power needs were met by burning coal.

“We won’t be able to renounce coal from Germany in the foreseeable future,” said Hildegard Mueller of the energy lobbying group BDEW. “Coal is essential to the energy mix.”

Remember Spain?

The Spanish green energy boom was once touted by President Obama for its policies that encouraged renewable energy production, but now high costs along with rising debt and unemployment have Spain backpedaling on green advocacy.

“[W]e have enormous commercial ties between our two countries and we pledged to work diligently to strengthen them, particularly around key issues like renewable energy and transportation, where Spain has been a worldwide leader and the United States I think has enormous potential to move forward,” Obama said in a 2009 speech.

Spain has made huge leaps in renewable energy generation, with 27 percent of its power supply coming from renewable sources in 2012, compared to about 13 percent in 2007, according to the New York Times.

Solar power made up 4 percent of the country’s power supply and got 1.6 billion euros in subsidies in 2012, and wind power got 1.5 billion euros in subsidies for producing 20 percent of the power supply last year.

The growing use of renewables, however, came with a hefty price tag — a cumulative $35 billion tariff deficit over the years. Spain has been trying to close this deficit by reducing subsidies and raising energy prices, but their attempts have barely put a dent in the country’s energy debt — which is slated to be at least 2.5 billion euros this year.

Spain’s green problem became magnified when the recession lowered demand for power as private sector activity slowed down, however, the country’s renewable energy mandate required that ever increasing amounts of green power be put onto the grid. This crowded out more reliable fuels like coal and gas.

Huge investments in green energy brought jobs, argued proponents of wind and solar development in Spain. However, an IER-supported study by Dr. Gabriel Calzada Álvarez of the King Juan Carlos University in Madrid found that Spain’s green dream was causing unemployment.

Calzada found that for every four green jobs the created, nine jobs were lost in other sectors of the economy.

Spain’s unemployment rate remains one of the highest in Europe, at 26.2 percent. Only Greece boasts more unemployed people.

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