Businesses which rely on continuing public subsidies or particular formulations of public policy always carry added risk. The reality is that public policy changes. For a brief period there is full-hearted support, often driven by a crisis or a sense of looming danger. But the attention span of electorates and policy makers is short. Something else happens, another crisis looms and a new priority takes precedence.
Those European countries which have cut support schemes for renewable energy, have just like Professor Butler writing on an FT blog yesterday was disagreeing the policy of EU said that.“Competitiveness is the watchword of the moment. Recession and unemployment are the crises which require attention”, the Professor writes. Yes indeed. Yet withdrawing public support for wind energy and other renewables to boost competitiveness, to tackle recession and unemployment is as illogical as eating an orange a day for your health and stopping as soon as you get a cold.
In 2009, the European Union directed all 27 member countries to increase their renewable energy share in the overall energy consumption by 2020. Mandatory targets were introduced for every member state. Consequently, member countries made changes to their policies so that renewable energy could be promoted. Government policies encouraged investors, leading to a remarkable growth in the renewable energy market. Lucrative subsidy schemes such as Feed-In Tariffs (FITs) coupled with the gradually decreasing prices of renewable technologies led to an additional unexpected growth in renewable energy, especially for solar and wind. Countries adopting FITs increased from nine in 2000 to 20 in 2012. The uncontrolled growth laid a burden on member countries already facing a prolonged economic crisis. Consequently, governments have made changes to their supportive schemes and cut down incentives. Measurable cuts have taken place over the past two years
The renewables sector employs over 1.2 million people in Europe. Wind energy alone contributed €32 billion to the EU economy in 2010 and employs well over 200,000 people in Europe. Europe is a net exporter of wind energy technology. Support for renewables is support for European jobs; a European industry and European growth.
Removing that support destroys those jobs and industrial leadership – in Spain, over 20,000 jobs have been destroyed between 2008 and 2010 due to the retrospective changes introduced in 2010. Moreover, it means Europe has to get its power from elsewhere: yet more polluting coal and gas; yet more money handed over to Russia, Algeria and other exporters.
“In Germany the mood has shifted decisively against more costly renewables”, Professor Butler claims. More costly than what? “Renewables will reach cost parity with conventional fuels (including gas) in many parts of the world in the very near term”, says Citibank. Wind energy is already far cheaper than nuclear, coal – if you count the €42.8 billion annual health costs – and increasingly competitive with gas.
Finally, those governments who are changing their support for renewables should bear in mind where public money is really going: OECD figures show that coal, oil and gas in the UK were subsidised to the tune of £3.63 billion in 2010, while onshore and offshore wind received only £700 million in the year to April 2011 – that’s more than five times less than fossil fuels. Moreover, International Energy Agency figures show that coal, oil and gas subsidies in 37 countries received a total of $409 billion in 2010, compared to $66 billion for renewables.
Of course, this is not the end of the story. For many parts of the sector, including on and offshore wind and some solar installations, operating costs are low compared to most other forms of power generation. Once the capital is sunk it makes sense to operate them even if the capital costs have to be partially written off and new facilities are hard to fund.