With the selling of President Obama’s economic agenda now in full gear, this is a good time to take stock of his energy plans against the background of energy trends worldwide. Alas, even a brief glimpse reveals that Obama’s focus on renewable energy and the introduction of a cap-and-trade regime runs counter to both economic rationality and current energy trends to the point of guaranteeing its inevitable failure, which will result in serious economic harm to the United States.
The president is imposing his green agenda on America, even as the renewable-energy bubbles of the Left are bursting, and the world is witnessing the astounding comeback of the kind of energy Obama scrupulously avoids mentioning: nuclear power. To understand this surprising reality, the best place to start is to look at the record of the three countries Obama specifically mentioned in his address to Congress as leading the United States in the renewable-energy revolution: China, Japan, and Germany.
China, he said, “has launched the largest effort in history to make their economy energy efficient.” True enough, but that effort has nothing to do with renewable energy, and it’s not even clear that it’s working. To the Chinese, energy efficiency means more efficient coal-burning equipment, co-generation, coal liquefaction, and other improvements of their primarily coal-based energy industry. Despite marginal improvements in this area, China is now the largest carbon-dioxide emitter in the world and can, at best, slow down but not stop carbon-emissions growth for the foreseeable future. As far as renewable energy proper is concerned, its share of total energy production not only is minuscule, but has actually declined over the past two years, according to Beijing’s State Electricity Council. There is, however, one clean-energy sector in which China is making a lot of progress and has even more ambitious plans for the future: nuclear power.
What about Japan? It does produce a lot of solar panels for export and subsidizes rooftop solar installation, but its renewable-energy production target for 2010 is only 3 percent. Instead, Tokyo plans to boost the share of nuclear power to 41 percent from the current 30 percent in less than a decade.
This leaves Germany as a model for our green future. At first glance, it is a renewable-energy success story and, to no one’s surprise, it has become the poster child of the green fantasy universe. In just a few years, the country has become the world’s powerhouse of green energy, currently generating nearly 15 percent of its electricity from wind power and solar energy, which already exceeds the EU target of a 12.5 percent renewable share for 2010. A heartwarming story, it seems — until one starts asking questions as to how a country that has neither much sun, nor much wind, got there; how much it cost; and where it is going from here.
The reality, of course, is that it doesn’t matter how much sun or wind there is as long as the government provides huge subsidies at the expense of the taxpayer and of the economy’s future prospects. In Germany, through a scheme innocuously called “feed-in tariff,” this has meant guaranteeing solar producers, for instance, a price seven times higher than the wholesale rate for 20 years. No wonder every entrepreneur-for-the-dole promptly lined up to feed at the public trough and created an artificial industry overnight. Yet, with Germany’s electricity bill going up by 38 percent in just one year (2007 over 2006), this is hardly a sustainable proposition. If that’s not enough, several years of operational experience have proven what experts have known or feared for a long time: that renewable energy is not only very expensive but also highly inefficient and unreliable. Solar panels, for example, seldom convert more than 25 percent of sun energy into electricity, while wind power’s “load factor” — i.e., electricity produced per installed capacity — seldom exceeds 20 percent in Germany. The intermittent nature of both of these sources makes them completely unsuitable for baseload-grid consideration, meaning that they have to be backed up by conventional energy — which, of course, defeats the purpose of green energy as an alternative.
Nor does the German and overall European experience with cap-and-trade provide any reason to be optimistic about the prospects of Obama’s plan to raise $646 billion through a similar scheme. Four years after its introduction, the EU carbon-trading scheme has failed to create a functioning emissions-permit market, to generate revenues, or to reduce carbon-dioxide emissions as promised, even as it led to large electricity-rate increases and windfall profits for some of the worst polluters on the Continent.
The bottom line is that for the foreseeable future renewable energy will remain a pie-in-the-sky green fantasy, not feasible economically without huge public subsidies.
Engaging in such economically irrational policies may have been understandable on the part of politically correct Western elites seeking to appease their hysterical environmental lobbies, especially when the stakes were small, energy prices were skyrocketing, and economic prosperity seemed assured. But those days are now gone and probably won’t be back for quite some time. Instead, under the perfect storm of collapsing energy prices, the worst economic crisis in decades, a severe credit crunch, and mass unemployment, the green-energy bubble has burst. Around the world, Germany included, green subsidies are being slashed, renewable-energy projects are being canceled or postponed, private capital and credit institutions have abandoned the sector, and many of the once high-flying green companies are on the brink of bankruptcy. Green energy, long touted as our salvation from environmental doom, now appears doomed itself.
This should be a cause for celebration, for out of the ruins of this irrational fantasy, a new, powerful trend toward clean, inexpensive, and reliable power is gathering steam, and it may finally bring some economic rationality to energy policy worldwide. It has taken the form of a remarkable economic comeback–cum–political rehabilitation of the much-maligned nuclear-power industry. Though Americans will hear neither their president nor his devoted claque in the “mainstream” media discuss this, it is already a powerful reality that may yet make the 21st century the century of nuclear power.
What is most remarkable about the nuclear-power revival is that it is a worldwide phenomenon that includes Western countries that until recently were staunch fellow travelers in the anti-nuclear bandwagon. Italy and Sweden, both of which had moratoriums on building nuclear reactors dating back to the 1980s, have now reversed course, and Germany will almost certainly follow shortly. Italy now plans to get 25 percent of its future electricity needs from eight new nuclear plants and has already contracted with a French company for the construction of the first four. Great Britain envisages not only refurbishing eight aging reactors, but also building ten new ones.
France, which never succumbed to the anti-nuclear frenzy and already derives 80 percent of its electricity from 58 reactors, has become a world leader in nuclear technology — eclipsing the U.S. — and is aggressively moving forward with third-generation reactors at home and abroad. Farther east, Ukraine, despite its Chernobyl legacy, plans eleven new reactors by 2030, while Russia, an exporter of nuclear technology, wants to double its electricity output from nuclear power by 2020. Not to be left behind, Poland, Finland, Lithuania, Bulgaria, and Romania are either planning or already building new nuclear plants. In short, Europe, until recently a citadel of anti-nuclear fervor, is being transformed into a gigantic nuclear-power construction site.
Elsewhere, the nuclear-power steamroller is making even more impressive inroads. India and China, likely economic superpowers of the future alongside the U.S., have both opted for nuclear energy in a decisive way. India, which today produces a meager 4,100 megawatts, or 3 percent of its electricity, from nuclear power, aims to boost that 15-fold, to 63,000 MWs, with 40 new reactors by 2032. It is already constructing five new plants and has just signed a contract with the French company Areva for up to six more third-generation reactors. China, which currently has a nuclear-generating capacity of 9,000 MWs, plans to increase that to 40,000 MWs by 2020 and 63,000 MWs ten years later. Finally, Japan, which alongside France is a world leader in nuclear-electricity technology, is fully committed to nuclear power and intends to double its share of electricity production from the current 30 percent by mid-century.
So where does this leave the U.S., and President Obama’s energy agenda? It leaves us in the unenviable position of being the only major economic power led by a president dogmatically wedded to yesterday’s make-believe universe of green energy that has already been debunked by reality in the rest of the world. Much as in Europe, renewable energy in America is in a dire predicament. By the end of 2008, American solar- and wind-power stocks had lost some four-fifths of their value — twice the loss rates of the general market — inflicting catastrophic losses on investors who had bought into the green hype. Investment and credit have both dried up and, despite the brave rhetoric of President Obama, there isn’t enough government money to make much difference in the absence of private capital. In just one example of the parlous state of renewable affairs, California, where sunlight is nearly as abundant as lack of environmental common sense, produces but 0.2 percent of its electricity from solar power after three decades of heavy subsidies.
Worse may be in store. If Obama’s dubious energy agenda is rammed through Congress, as seems likely, not only are Americans going to be saddled with a crushing tax burden, courtesy of the bogus cap-and-trade scheme, but the country’s economic competitiveness could suffer lasting if not irreparable damage. Such are the wages of our renewable delusions.
– Mr. Alexiev is an adjunct fellow at the Hudson Institute in Washington, D.C.