I find it interesting that European countries are starting to take a closer look at some of their long-standing “green” policies from a stand-point of cost-benefit analysis. This is a refreshing change from the usual political arguments for investing in green power.
We’ve heard a lot about “green jobs” and “the
green economy” over the past few years, especially from south of the
border. The thing is, when “green jobs” programmes based
on renewable energy technologies (other than hydroelectric
power) are evaluated on a level economic playing field against
conventional energy technologies, they rarely come out on the positive side of
the ledger. We got the first inkling of that from Spain
(which President Obama had touted as a model for the adoption of green
energy technologies) with a research report published at the University of King
Juan Carlos in March 2009. This study concluded that “Despite its
hyper-aggressive (expensive and extensive) ‘green jobs’ policies it appears
that Spain likely has created a surprisingly low number of jobs, two thirds of
which came in construction, fabrication and installation, one quarter in
administrative positions, marketing and projects engineering, and just one out of
ten jobs has been created at the more permanent level of actual operation and
maintenance of the renewable sources of electricity.”; that “since 2000 Spain
spent €571,138 to create each ‘green job’, including subsidies of more than €1
million per wind industry job”; and that “the programs creating those jobs also
resulted in the destruction of nearly 110,500 jobs elsewhere in the economy, or
2.2 jobs destroyed for every ‘green job’ created.” (Note A)
The Spanish report, not surprisingly, attracted
a firestorm of vituperation from those with an ideological or financial stake
in renewable energy technologies, but it should have come as no surprise to
anyone who has looked at actual cost-benefit data. Without taking into
consideration significant tax incentives, direct payments by governments,
exemptions from regulations, and the many other benefits that the
renewable-power industry enjoys (and that the conventional power industries
markedly do not), “green power” - as I pointed out in a recent,
yet-to-be-published paper - is still vastly more expensive per installed
MWh than any conventional generation technology.
One might reasonably
ask why, if “offshore wind” and “nuclear” generation are so close in terms of
dollar investment per kWh of installed capacity, we don’t emphasize wind
more. The answer is twofold. First, wind power is
intermittent; the average capacity factor for a turbine in high-wind areas is
25% (I addressed this in my 3 Feb CoP on wind power in Texas). So in
order to generate 1 MW of power, you have to install four 1 MW turbines.
That quadruples the cost, and the quadrupling is not reflected in the
chart. The second reason is because turbines freeze in the
winter.(Note C) It would not be considered acceptable for a coal, hydro,
oil, gas or nuclear power plant to drop off line for several weeks in the
winter, as the wind farm operated north of Bathurst by GDF Suez Energy
did, because of “ice build-up”. The only reason that thousands of
New Brunswickers didn’t freeze to death is because New Brunswick has reliable
conventional power available.
But those are operational
concerns. Let’s get back to the economics of the problem. The
Spanish study, as I said, did not go over well with the proponents of wind and
solar power, and there was much wailing and gnashing of teeth.
But it did break the logjam. In May of last year, the Istituto
Bruno Leoni in Milan published a study entitled “Are Green Jobs Real Jobs?”
that looked at Italy’s experience with mandated and government-subsidized
renewable energy programs.(Note D) This study, which also incorporated a
look at the experience with green power in Denmark, Germany and Spain,
concluded that the opportunity cost of “green energy” investments in Italy was
very high: “the same amount of capital that creates one job in the green
sector, would create 6.9 or 4.8 [jobs] if invested in the industry or the
economy in general.” (Note D, p. 40) The principal reason for this, they
conclude, is that the vast majority of “green sector” jobs are temporary
because once the infrastructure is in place, the bulk of the work has been
done. In other words, “green power”, while expensive, isn’t
necessarily bad, but it is not an “industry” as such, and it is inaccurate to
paint the “green economy” as likely to create permanent
employment. It is, in fact, more likely to create temporary employment at the cost of amounts of capital that would
create much more, and much more permanent, employment if invested in other
sectors of the economy. This conclusion reinforced the conclusions of the
Spanish study.
And now, as of
yesterday, we have a third study to back up the results from the other two
- this one from the bastion of “green policy”, the UK itself. Verso
Economics, working from government and energy industry data, has
concluded that investments in renewable energy in Scotland (principally wind
power, as Scotland has no lack of wind) have cost 3.7 jobs for every one job
created in the UK as a whole - despite favourable tax and regulatory exemptions
and massive direct investments from taxpayers in both Scotland and the broader
UK.(Note E) The Scottish government disputed the
report, arguing (a) that heavy investments by foreign companies
in renewable power in Scotland prove the economic viability of renewable
energy (a non
sequitur if there ever was one), and (b)
that the Verso report ignores the impact of “climate change”.(Note F)
Actually, the UK
report doesn’t ignore climate change; it notes that in addition the
£330,000,000 in direct subsidies that renewable power in Scotland has
received, the exemption that renewable power projects in the UK enjoy from
the national “climate change levy” has deprived Her Majesty’s coffers of
approximately £100,000,000 in revenue. This brings the overall cost to
taxpayers of these projects to just shy of half a billion pounds. This
must rankle in a winter when large expanses of the UK’s wind farms
have either stood idle due to the drop in winds that tends to accompany
extremely low temperatures - or have had to be electrically heated in order to
enable them to turn at all, meaning that, for days on end, the turbines
were in fact consuming power from the grid instead of producing it.(Note G)
It’s interesting to
see renewable energy projects increasingly being evaluated on a basis
of costs vs. benefits, and to see the claims of their proponents being
subjected to at least some degree of statistical scrutiny. As money
gets scarcer over the coming years and taxpayers become ever more grudging
of government’s grip on their shrinking earnings, we may see a little
more arithmetically literate scepticism of the promise of the “green
economy,” and - just perhaps - a corresponding tightening of the purse
strings.
Cheers,
B) Data from US Energy Information Administration [http://www.eia.doe.gov/]. IGCC = Integrated Gasification Combined Cycle; NGCC = Natural Gas Combined Cycle. STG = Solar Thermal Generation. SPVG = Solar Photo-Voltaic Generation. Based on this chart, one might reasonably ask why NGCC is not the dominant electrical generation technology in the US. The answer is operating cost. In the US, natural gas is scarce and expensive, while coal – like uranium – is cheap and plentiful. NGCC turbines are expensive but efficient; their virtue lies in quick start-up, which makes them ideal as backup generation systems for unreliable or intermittent power sources, like wind. And yes, this chart appeared as Figure 19 in a paper I wrote examining the anthropogenic global warming thesis.
C) http://fullcomment.nationalpost.com/2011/02/15/new-brunswick-discovers-wind-farms-can-freeze-in-the-winter/
D) http://brunoleonimedia.servingfreedom.net/WP/WP-Green_Jobs-May2010.pdf
D) http://brunoleonimedia.servingfreedom.net/WP/WP-Green_Jobs-May2010.pdf
