Surely, however, a decade of subsidizing renewable energy means that Germany now produces substantial amounts of it, and has freed itself from dependence on foreign powers? No. Wind power represents about 6 percent of German electricity generation, and solar power is a mere tenth of that. Most German electricity is generated from natural gas, and Germany obtains 40 percent of its gas from Russia, a figure projected to rise to as much as 60 percent by 2020.
What about strengthening the middle class? Well, consumers have borne the cost of the policy. They paid over $100 billion to subsidize wind and solar power over the last decade, with the costs of the subsidies accounting for 7.5 percent of household electricity prices.
As for the climate effect, subsidizing green energy is an extremely expensive way of reducing emissions. The price for a permit to emit one ton of CO2 under Europe’s cap-and-trade scheme — the market cost of reducing emissions — is about $20. Reducing emissions by subsidizing wind power works out to a cost of $80 a ton. For solar power, the cost is a staggering $1,050 a ton.
Finally, the policy has not even supported innovation. The study found that “claims about technological innovation benefits of Germany’s first-actor status are unsupportable: In fact, the regime appears to be counterproductive in that respect, stifling innovation by encouraging producers to lock into existing technologies.” Given that even Secretary Chu admits that we need “Nobel-level breakthroughs” in energy technology to have any hope of reducing emissions by 2050, locking in these existing technologies through green-jobs programs would indeed be counterproductive.
The story is the same in Spain, which set out to be the world leader in solar technology. A study by a team from King Juan Carlos University in Madrid led by Gabriel Calzada Alvarez found that the opportunity costs of public investment in renewable energy were very high, resulting not just in significant numbers of jobs destroyed or never created, but in unsustainable bubbles in the renewables sector:
The most paradigmatic bubble case can be found in the photovoltaic industry. Even with subsidy schemes leaving the mean sale price of electricity generated from solar photovoltaic power seven times higher than the mean price of the pool, solar failed even to reach 1 percent of Spain’s total electricity production in 2008. . . .
The only way for the “renewables” sector — which was never feasible by itself on the basis of consumer demand — to be “countercyclical” in crisis periods is also via government subsidies. These schemes create a bubble, which is boosted as soon as investors find in “renewables” one of the few profitable sectors while . . . fleeing other investments. Yet it is axiomatic, as we are seeing now, that when crisis arises, the Government cannot afford this growing subsidy cost either, and finally must penalize the artificial renewable industries which then face collapse.