Spain’s move to subsidize solar proved utterly unsustainable
by Peter Foster Financial Post
Some foreign — and even domestic — solar equipment manufacturers are complaining that Ontario’s buy-local policies will cost investment and jobs. It takes some gall to criticize dumb and damaging initiatives when your existence depends on them.
A group of photovoltaic producers — led by Japan’s Mitsubishi Electric Corp. — is complaining that to receive Ontario’s super-premium rates for solar energy, projects must have a 60% local content. This, bleat the solar robber barons, is bad for the economy!
Worldwide, solar companies have been boosted by the policy pandemic of feed-in tariffs, whereby the high costs of uneconomic renewable power are averaged down with much cheaper conventional electricity sources. This is leading to sharp cost increases for consumers.
Takashi Sato, president of Mitsubishi Electric Sales Canada, was reported as saying this week that “We are very encouraged by the FIT [feed-in-tariff] as far as a tariff program is concerned.”
You bet they are! Who wouldn’t want their industry subsidized by having consumers forced to pay multiples of the market price for a portion of their purchases?
“However,” continued Mr. Sato, “the program contains some poison because of the domestic content requirement.”
We beg to differ. The program is pure hemlock all the way through.
Japan has challenged Ontario’s Green Energy Act at the WTO, with the EU and United States cheering it on, but this is sheer hypocrisy, even if the Ontario government’s actions are indefensible (It remains to be seen whether Dalton McGuinty plans to go the Danny Williams route of flouting trade agreements in the knowledge that Ottawa has to pick up the bill).
The U.S. is complaining about China’s renewable industry subsidies, but China has fired back noting that a $60-billion-plus chunk of Mr. Obama’s stimulus package consisted of such subsidies, with “Buy American” clauses attached.
“What America is blaming us for is exactly what they do themselves,” said Mr. Zhang Guobao, vice-chairman of China’s National Development and Reform Commission. “Chinese subsidies to new energy companies are much smaller than those of the U.S. government. If the U.S. government can subsidize companies, then why can’t we?”
Well of course they can. The problem is that such actions are collectively suicidal.
When launching his own campaign of hypocrisy in Ontario, Mitsubishi’s Mr. Sato claimed that the solar industry was set to boom. Au contraire. The solar industry is headed for a crash, and any superficial buoyancy is not due to bright market prospects but to frenzied activity in anticipation of subsidy withdrawal. As usual, Icarus McGuinty appears a little slow on the uptake, still convinced he can bear the Ontario economy Sol-wards on waxy wings.
Spain had a similarly crazy policy that subsidized farmers to plough their orchards under and cover them with solar panels. Supposedly shrewd men of the soil invested to take advantage of a solar tariff of around 44¢ per kilowatt-hour, 10 times that paid to mainstream suppliers (but still way short of Ontario’s top rates of over 70¢).
When he unveiled a solar plant in 2007, Spanish Prime Minister Jose Luis Rodriguez Zapatero declared, “We are a world power in this field, we are capable of exporting our technology and competing across five continents and we are today at the forefront of the renewable-energy industry.”
When Mr. Zapatero took a delegation to Washington a year ago, President Obama (who is to put more solar panels on the White House, just like Jimmy Carter) praised Spain as a model of green-energy-driven economic transformation.
It certainly is: the transformation to ruin.
Typical of such bold moves toward “sustainability,” Spain’s proved utterly unsustainable. Soon Madrid found itself saddled with upward of €126-billion of solar obligations. Investors wound up importing most solar equipment because domestic suppliers couldn’t meet the surge in demand. Studies indicated that each renewable job cost two regular jobs.
Spain, like most countries, has found itself with a surging deficit in the wake of the economic crisis. This in turn has forced it to renege on its commitments to high solar power prices. The response has been outrage from the solar industry, a slump in investment and a sharp drop in the price of solar panels. Critics point out that these government’s policy lurchings have damaged the investment climate more generally.
Anybody with half an economic brain could have seen that the universal policy urge to subsidize green energy was going to lead to both massive oversupply and unsustainable drainage of the public purse. Meanwhile we should remember that the whole green energy thrust is likely based on scientific sand.
As Czech President Vaclav Klaus pointed out in a speech this week to the Global Warming Policy Foundation (which was excerpted on this page yesterday), climate change is far more about political power and rent-seeking than science. The solar fiasco shows that this thrust is not merely dangerous to freedom, as President Klaus indicated, it is also fiscally suicidal.
Back in Ontario, meanwhile, Mr. Sato’s arm-twisting kicker is that unless foreign solar manufacturers get their full section of the subsidy trough, they may have to uproot and head for, well, even more stupid jurisdictions. That means Ontario might not be able to reach its renewable targets! We can only hope so.
Farewell, Mr. Sato. Don’t forget to send a postcard.