Spain: Sorry about this, but some of these renewable-energies subsidies have got to go

posted at 6:31 pm on June 9, 2013 by Erika Johnsen

Over the past decade, Spain has taken to offering pretty huge subsidies and other various incentives to actively encourage the growth of wind and solar energy — the result of which is that the country is overrun with more wind and solar farms than the country knows what to do with, and yet both types of energy are still too expensive and companies have consistently failed to make enough money to stand on their own two feet. Unfortunately for them, the government can’t afford to keep subsidizing the charade, and the time has come to make a serious change. From the WSJ:

Under a broad energy-sector overhaul to be announced as early as June 21, Spain’s government will reduce subsidies to renewable-energy producers by 10% to 20%, people familiar with the plan said Thursday.

The move could drive tens of thousands of struggling solar-energy companies and individual investors like Mr. Cabrero into default at a time of deepening recession and eventually boost loan losses for banks that financed the projects. …

Spain’s electricity system has registered deficits during most of the past decade. By May, the total accumulated deficit had reached about €26 billion ($34.04 billion). The government has promised to narrow the annual gap this year as it struggles to bring down its budget deficit and limit the rise in household electricity bills.

Spain began offering large subsidies and other incentives in the late 2000s to promote the growth of solar-energy projects. In addition, banks loaned the renewable-energy companies an estimated €30 billion. As a result, the amount of solar-power capacity installed in Spain far surpassed official government targets, increasing the tariff deficit.

Not only has the Spanish government been directly paying out the nose for the development and operation of its politically preferred forms of green energy, but the most pricey wind and solar sources have been driving up electricity costs for Spanish consumers — neither of which Spain can afford, with their financially crippling budget deficit and their 26 percent unemployment rate.

In the long run, all of these ‘favors’ and subsidies and payouts to the so-called renewable energies that politicians have so magnanimously determined will be ‘the way of the future’ are actually a major disservice to these very same technologies. Engineering the market from the top down and trotting out these projects before they are actually ready, and continuing to throw them bones as they repeatedly fail to pass the test of competition, is no way to encourage the price efficiency that could actually earn them a place in the mainstream energy market.

The end result of Spain’s years of meddling isn’t a gloriously redesigned and ‘cleaner’ energy scheme, but thousands of people taking dire losses on their investments and the opportunity cost of countless resources and dollars that could have been more productively spent elsewhere. Remind me why the Obama administration is so convinced we need to keep following Spain’s and others’ example, again?


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