The Downside of Relying Heavily on Intermittent Renewables

by Reihan Salam

While Americans often praise European governments for having embraced renewable energy, David Garman and Samuel Thernstrom of the Energy Innovation Reform Project (EIRP) note that these efforts have proven extremely costly:

Wind and solar generate 3.5% of America’s electricity today, but Denmark gets 30% of its electricity from wind and hopes to produce 50% by 2020. Germany, Europe’s largest national economy, produces roughly 12% of its electricity from wind and solar today, and it wants renewable energy to account for 35% of electricity generation by 2020.

Clean energy powered by renewable resources is understandably attractive. But the honeymoon with renewables is ending for some Europeans as the practical challenges of the relationship become clear.

The first challenge is cost. Germany has reportedly invested more than $250 billion in renewable energy deployment, and its households pay the highest power costs in Europe—except for the Danish. On average, Germans and Danes pay roughly 300% more for residential electricity than Americans do.

Another challenge of Europe’s growing dependence on renewable energy is far more serious: the potential loss of reliable electrical supply. It’s one thing to ask consumers to pay more for cleaner energy; it’s another to force them to endure blackouts. [Emphasis added]

Garman and Thernstrom go on to explain the challenges that have arisen as the penetration of intermittent renewables has increased, and they identify lessons for U.S. energy reform advocates:

Lavish subsidies for wind and solar have changed Europe’s generation mix, but the costs have been high because the subsidy structure prioritized mass deployment rather than efficiency, reliability and innovation. Even in the U.S., the wind-production tax credit has occasionally produced “negative pricing”—that is, turbine operators pay grid operators to take their power even though it isn’t needed, just so the wind generators can collect tax credits.

If Congress insists on subsidizing renewable energy (and to be fair, Washington subsidizes all forms of energy), it should reform subsidies to incentivize innovations that would improve the efficiency and reliability of wind and solar, as well as the development of improved energy-storage technologies.

I look forward to more from the EIRP on exactly how we might overhaul energy subsidies to promote efficiency and reliability.