“Politically-directed billions of dollars of subsidies for wind and solar power invite corruption and will likely drive energy prices higher, debt-loads deeper, and allow heavily-polluting older coal factories and power plants to continue operation when they would otherwise be replaced by cost-effective natural gas combined-cycle power. This is surely an unintended consequence for consumers, taxpayers, and the environment.”
Wind and solar power subsidies jolted and damaged European economies, especially Spain and Italy. China’s economy received a similar jolt in 2015. But did U.S. trade policy encourages Chinese government subsidies for not-quite-ready wind and solar power projects?
Consider this 2010 article on costly Spanish solar subsidies passed during the administration of socialist Prime Minister Jose Luis Rodriquez Zapatero.
Zapatero introduced the subsidies three years ago as part of an effort to cut his country’s dependence on fossil fuels. At the time, he promised that the investment in renewable energy would create manufacturing jobs and that Spain could sell its panels to nations seeking to reduce carbon emissions.
Yet by failing to control the program’s cost, Zapatero saddled Spain with at least 126 billion euros of obligations to renewable-energy investors. The spending didn’t achieve the government’s aim of creating green jobs, because Spanish investors imported most of their panels from overseas when domestic manufacturers couldn’t meet short-term demand.
Spain stands as a lesson to other aspiring green-energy nations, including China and the U.S., by showing how difficult it is to build an alternative energy industry even with billions of euros in subsidies, says Ramon de la Sota, a private investor in Spanish photovoltaic panels and a former General Electric Co. executive.
“The government totally overshot with the tariff,” de la Sota says. “Now they have a huge bill to pay — but where’s the technology, where’s the know-how, where’s the value?[WUWT post drawing from Bloomberg article, “Spain’s Solar Deals on Edge of Bankruptcy as Subsidies Founder“]
Consider the “seen and unseen” with Spain’s costly and tangled green energy policies. Media initially reports all the new solar projects and jobs around the country. Environmentalists tout the benefits of “free” green energy from the sun. But the costs turned out to be significantly higher the energy from newer and cleaner natural gas, coal, and nuclear sources.
China has embarked on a vastly larger solar power push, notes this 2015 MIT Technology Review article
In 2015, the country added more than 15 gigawatts of new solar capacity, surpassing Germany as the world’s largest solar power market. China now has 43.2 gigawatts of solar capacity, compared with 38.4 gigawatts in Germany and 27.8 in the United States. … Under its 13th Five Year Plan, China will nearly triple solar capacity by 2020, adding 15 to 20 gigawatts of solar capacity each year for the next five years.
Solar energy promoters and politicians have similar incentives at US and EU social promoters and politicians. Solar energy is “free” from the sun, once solar panels and infrastructure are installed. And China, unlike Spain, has the advantage of building its own solar panels.
Chinese politicians have an additional incentive to invest big in solar: Chinese industry, especially state-owned factories–consume huge amounts of coal each year. Protectionists in the US and EU are eager to combine with environmental groups to lobby for a carbon tax that would sound environmentally friendly but would hit Chinese manufacturers hardest.
So Chinese official can cloak their coal-powered economy with the claim that they are investing more in green energy than any other country in the world. However, solar and wind power have difficulty competing with low-cost and clean natural gas power, and problems with China’s solar enthusiasms will likely grow. As the MIT Technology Review article notes:
China is also the world’s largest carbon emitter, it burns more coal than any other nation, and its solar capacity is only a small fraction of its total energy portfolio. What’s more, capacity does not always equate to generation: the National Energy Administration estimates that nearly one-third of solar capacity in Gansu province, and more than one-quarter in Xinjiang, was idle last year.
China’s solar entrepreneurs prosper from the subsidies, but continue to have problems. Bloomberg reports on the latest collapse, May 12, 2016: Once a Billionaire, Miao Is Latest Humbled China Solar King
Miao’s push to dominate photovoltaics lies in pieces after Yingli missed repayment on 1.76 billion yuan ($270 million) of debt and said it’s talking with creditors about refinancing. It’s teetering is starting to look like the collapse of Shi Zhengrong’s Suntech Power Holdings Co. in 2013 — global aspirations, the amassing of billions of dollars in debt, plunging prices, overcapacity and then retreat.
In an August, 2015 post, The Chinese Government’s Impoverishing Economic Growthquoting an WSJ article:
This has a more immediate and powerful effect on GDP growth and job creation, but it comes at a high cost: overinvestment in local projects and the misallocation of capital. China’s landscape is littered with unused highways and airports, redundant steel and cement plants, unnecessary municipal office buildings and “ghost cities” filled with empty high-rises and deserted shopping malls.
From 2009-13, “ineffective investment” amounted to a stunning 41.8 trillion yuan ($6.8 trillion), according to research published in 2014 by Xu Ce of China’s National Development and Reform Commission and Wang Yuan of the Academy of Macroeconomic Research.
China’s export-driven economy depends on access to customers in developed countries, especially in Europe and the United States. So environmental groups opposed to coal-burning are a major potential threat to China’s economic future. The fear is that environmental groups joined with protectionists in Europe and the U.S. will pass carbon taxes that apply to imports as well as their own firms. Manufacturers in Europe and the U.S. use far less energy, and cleaner energy, in their advanced factories.
So manufacturers wanting protection from low-cost Chinese firms support environmental groups who call for carbon-based taxes as an environmental priority, and these taxes would hit Chinese manufacturers the hardest.
Partly in response to this fear of environmental protectionism, China’s central government has prioritized “green energy,” subsidizing vast amounts on wind power according to this Phys.org February 13, 2015 article:
Last year’s installed wind power capacity represented a 23 percent jump from the 2013 level of 16.09 million kilowatts.
China still produces about 80 percent of its total energy and about 60 percent of electricity by burning coal.
In November, the government pledged to produce 20 percent of the country’s total energy through non-fossil fuels by 2030, doubling its current level, while capping growth in its carbon emissions by the same year, it not earlier.
Already, China is a world leader in solar and wind energy production and has announced plans to further boost renewable energy investment. At the same time, China burns about half of the world’s coal and emits twice as much carbon as the United States, the second biggest emitting country.
So that’s wind power, but how about solar?Bloomberg Business, April 19 2015, reports “China Adds Solar Power the Size of France in First Quarter”
China connected 5.04 gigawatts of solar capacity to grids in the three months ended March 31, the National Energy Administration said in a statement on Monday. The Asian nation now has a total 33 gigawatts of solar-power supply.
Also in the report:
China is seeking to approve and install as much as 17.8 gigawatts of solar power this year, or nearly 2 1/2 times the capacity added by the U.S. in 2014.
Fortune reported in a June 18, 2015, article (“China is utterly and totally dominating solar panels”) that:
China has emerged as the world’s largest market for solar panels and in 2015 is expected to be home to a quarter of the planet’s new energy capacity from solar panels, according to a new report from GTM Research. China is rapidly adding as much power generation as possible, and solar is just one source of new energy generation in the country.
The Fortune article further reports:
… new growth in solar panels in China is being pushed by a new feed-in tariff program in the country (solar generators can be paid a fixed competitive price for the energy created), and the Chinese government’s ambitious “Five Year Plan,” which calls for a certain amount of solar installed in the next few years.
China’s five-year plans have a long history, and along with Soviet five-year plans, they have ending up being costly and counterproductive. Solar and wind energy have great potential as engineers and entrepreneurs develop more efficient and cost-effective technologies and designs.
But politically-directed billions of dollars of subsidies for wind and solar power invite corruption and will likely drive energy prices higher, debt-loads deeper, and allow heavily-polluting older coal factories and power plants to continue operation when they would otherwise be replaced by cost-effective natural gas combined-cycle power. This is surely an unintended consequence for consumers, taxpayers, and the environment.