Tuesday, March 10, 2009

Spain, Wind and Jobs...

Spain has a great many wind farms. By 2010 Spain will have 20,000 megawatts of installed capacity. Even in 2009 at the peak of the winds in February it was able to generate 11,800 megawatts – 29% of the energy requirements of Spain on a particular day (meaning that the turbines were working at 69% of their capacity). Spain ranks third in the world for wind power. Ahead of Spain are Germany, at nearly 24,000 megawatts of capacity, and the United States, at No. 1, with over 25,000 megawatts.

But there is a cost. Wind power has grown in Spain because of subsidy – also the case for solar power. In the case of wind, subsidy is market price (regulated by the Government with a requirement that the energy companies must buy wind power) plus 90% of the market price for a period of fifteen years, when it drops to 80%. In the case of solar power, the subsidy is 575% of the market price for twenty five years, when it falls to 460% above market. Contracts are underwritten by the Government at an annual cost of (app) €28.6 billion. It is not surprising, then, that the Government’s 2008 target for growth in installed capacity for renewable power of 371 megawatts was beaten by the actual new capacity created – 2,934 megawatts. The Spanish government has now capped growth

Obama has already pointed to Spain as an example the US should follow. He may want to be cautious. A recent economic analysis from the Juan Carlos University in Madrid suggests that, rather than creating the 50,000 jobs the Spanish government claimed would be created, the net green jobs created are closer to 15,000. Most of these jobs are associated with construction, since few are required once construction is completed to maintain and manage the wind and solar installed capacity. What is more, renewable energy has led to lost jobs elsewhere (especially when coupled with the impact of the European Carbon Credit Trading System – cap and trade). The study just mentioned suggests that the net costs of creating a single sustainable green job are app. €500 million. It also suggests that, for every green job created, some 3.9 jobs are lost in other sectors – someone has to pay for this subsidy level.

Further, Spain (as is the case in Germany and the US) realize that wind power is unreliable and has to be supported by “firming” – gas powered, nuclear or coal fired power to cover for periods when the wind is low but energy demand is high. As wind capacity increases, so too does the capacity of fossil fuel or nuclear systems to “cover” for low wind periods.

It is inevitable that these developments, which guarantee return on investment to wind power and solar companies of between 12-20% for up to 20 years, will increase energy costs and enlarge the number of people who experience energy poverty. It will also lead to companies being taxed more to pay for this scheme – estimates are that new green taxes cost Spanish companies some €15 billion in direct and indirect taxes over the last five years, some 35 times the original Government estimate of €85 million.

So strong are the new taxes and regulatory challenges for Spanish companies that some are leaving Spain – Acerinox, the Spanish steel maker, is downsizing its operations and looking at whether it should stay in Spain.

No one, it seems, is able to make money selling wind power or solar unless it is subsidized the customer price is regulated. Those looking at renewable energy need to be careful and learn from the experience of Spain.

3 comments:

Diego said...

We are subsidizing wind energy as it gets 7% more efficient every year, which means it will be twice as cost-effective ten years from now, which means cheaper than any other source of energy.

Once it becomes the cheapest way to get electricity, and the US buys wind turbines for some 10% US GDP, you will see all those jobs coming to Spain. (By the way, the same goes for high-speed rail, underground systems, electric cars, etc.).

Anonymous said...

It is sad to see that humans are slow learners.
Windmills are not computer chips, to make them more efficient they have to be bigger. Have a vision; transfer your self only fifty years in the future.
What I see is cars, mobile phones that operate for life on inbuilt fuel; I see power station’s that are very small and produce only electrical power and nothing else, I see people on Mars and leaving our solar system; what I don’t see are windmills and solar collectors.

Diego said...

anonymous,

wind turbines get more efficient by using new, cheaper, lighter materials; that's what makes today's windmills far more efficient than those built in the Middle Ages, not sheer size.

The fact is windmills have gotten 7% more efficient every year in the last decade, and that trend rate is expected to continue, which means they'll get twice as cost-effective ten years from now, which means cheaper than any other source of energy.