May 1, 2009

Spain Is Tilting at Windmills

Dr. Robert Peltier, PE, Editor-in-Chief

Study the Statistics

Gabriel Calzada Álvarez, PhD, an economics professor at King Juan Carlos University in Madrid, completed Spain’s first comprehensive review of the long-term effects of Spain’s renewable energy policy on jobs and the economy. His report, "Study of the Effects on Employment of Public Aid to Renewable Energy Sources," was released in March. Some of its most surprising findings include these:

• The premium paid for renewable power in Spain that’s charged to consumers translates into $774,000 for each Spanish "green job" created since 2000. In an interview with Bloomberg, Álvarez stated: "The loss of jobs could be greater if you account for the amount of lost industry that moves out of the country due to higher energy prices."

• The study calculates that the programs creating those jobs resulted in the destruction of nearly 110,000 jobs elsewhere in the economy, or 2.2 jobs destroyed for every "green job" created. The report notes that Obama’s estimates of job creation gloss over jobs lost due to lost opportunity in the private capital market or the higher efficiency of private capital employed in renewable energy investment. Álvarez concluded that each "green" megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, and 5.05 by mini-hydro.

• The study also assessed the quality of green jobs created. Despite its hyper-aggressive (expensive and extensive) "green jobs" policies, it appears that Spain has created a surprisingly low number of jobs. Two-thirds of them came in construction, fabrication and installation; one-quarter in administrative positions, marketing, and projects engineering; and just one-tenth at the more permanent level of actual operation and maintenance.

• Money paid by consumers for renewable energy from 2000 to 2008 amounted to approximately $10 billion more than what the market cost would have been. The government spent more than $36 billion to subsidize renewable projects. For perspective, Spain’s economy is roughly on par with California’s.

• "The price of a comprehensive energy rate (paid by the end consumer) in Spain would have to be increased 31% to begin to repay the historic debt generated [by the subsidies]," the report says. This is an important point: Direct government investment in power generation infrastructure hides the real cost of generated electricity because the government debt does not appear in the utilities’ books and keeps rates artificially low. Álvarez called these "self-inflicted economic wounds."

• "The high cost of electricity due to the green job policy tends to drive the relatively most energy-intensive companies and industries away, seeking areas where costs are lower." Spain’s average electricity rate for a medium household was 15.2 cents/kWh in 2008, according to Eurostat — among the highest in the European Union (EU). The average U.S. residential price of electricity is less than 10 cents/kWh.

Not a Policy Model

The irony is that Spain’s entire renewable industry was built on the promise of creating millions of new, high-paying "green jobs" while simultaneously meeting EU requirement for reducing carbon emissions — the same policies now promised by President Obama.

Spain’s renewable energy policies have failed on both measures: Jobs have disintegrated, and Spain’s CO ₂ emissions have increased 50% since 2000, according to data from the European Environment Agency, forcing Spain’s purchase of allowances from Eastern Europe to meet its EU-mandated carbon limits. Let’s not repeat these mistakes.
—Dr. Robert Peltier, PE, Editor-in-Chief