Spain scuttles clean-energy subsidies; promptly watches the industry go down like a sinking ship
posted at 10:02 am on May 30, 2012 by Erika Johnsen
Serious question, greenies: is a nation justified in completely running its economy into the ground, with all of the hardship and heartache that ensues, if it’s all for the sake of instilling the populace with what the government deems necessary environmental virtue?
Saddled with a budget deficit more than twice the European Union limit and a ballooning gap between income and costs in its power system, Spain halted subsidies for new renewable-energy projects in January. The surprise move by Prime Minister Mariano Rajoy one month after taking office helped pierce investor confidence in stable aid for clean energy acrossEurope.
“They destroyed the Spanish market overnight with the moratorium,” European Wind Energy Association Chief Executive Officer Christian Kjaer said in an interview. “The wider implication of this is that if Spanish politicians can do that, probably most European politicians can do that.”
Spain’s $69 billion of investment in power capacity from 2004 to 2011 was about triple the spending per capita in the U.S. in that period, according to Bloomberg New Energy Finance data and U.S. Census Bureau population estimates. Most of the 2012-2013 spending will be for the legacy of projects approved before the aid cuts to wind, solar, biomass and co-generation.
Investment in solar photovoltaic alone is headed to skid to as little as $107 million in 2013 from $879 million this year and $1.5 billion last year, New Energy Finance estimated. For new wind projects, investment should plunge to $963 million in 2013 and $244 million in 2014 from $2 billion this year.
Here’s the message that Spain’s green-subsidy policies sent out to the world: ‘Hey, if you’ve got an idea for a green-energy project that you don’t think can compete on its own merits and turn a profit in the free market, come on over to Spain and we’ll hook you up with some sweet subsidies!’ Ergo, it should hardly come as a surprise that fiscal emergency has forced Spain to put an indefinite hold on the subsidies, and the clean-energy companies are immediately flocking to greener pastures.
Yikes. Didn’t really think that one through, did you, Spain? Germany is often heralded as a world leader in clean energy development, but in 2009, Spain’s clean-energy consumer bill rose to 6 billion euros, ahead of Germany’s 5.6 billion bill — except that Germany’s economy is almost four times bigger than Spain’s. They rushed headfirst into that one, and with top-down large-scale policymaking like that, it isn’t happenstance that their unemployment rate is currently sitting at a miserable 24 percent.
Environmentalists may argue that our worldwide fossil fuel-based energy infrastructure isn’t sustainable in the long term — even though the evidence for imminent climate-change and peak-oil crises are extremely dodgy, at best — but fiscal insolvency is demonstrably unsustainable in the long term. While some of the eurozone members’ clean-energy ‘investments’ may not be the root cause of their present crisis, they are wildly indicative of the type of no-holds-barred, feel-good spending binges that have brought them down this road. Europe just keeps on proffering examples of precisely what governments shouldn’t do, but alas, will the United States ever listen?
And, as ever, my usual disclaimer: I have nothing against alternative energy. I only ask that it follows the sustainable recipe for success signaled by the free market, rather than the economic noblesse oblige of the federal government’s political whimsy.