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Obama’s Renewable-Energy Fantasy

Sunday, July 05, 2015

Rupert Darwall, Wall Street Journal

On June 30, one day after the Supreme Court struck down the Environmental Protection Agency’s regulation of mercury emissions from power plants, President Obama committed the United States to the goal of generating 20% of its electricity from renewable sources by 2030. This would nearly triple the amount of wind- and solar-generated electricity on the national grid.

The EPA ran afoul of the law by failing to conduct a cost-benefit analysis before it acted to reduce mercury emissions from coal-power plants. There is no objective cost-benefit analysis that could justify the president’s target for renewable energy.

Recently Bill Gates explained in an interview with the Financial Times why current renewables are dead-end technologies. They are unreliable. Battery storage is inadequate. Wind and solar output depends on the weather. The cost of decarbonization using today’s technology is “beyond astronomical,” Mr. Gates concluded.

Google engineers came to a similar conclusion last year. After seven years of investigation, they found no way to get the cost of renewables competitive with coal. “Unfortunately,” the engineers reported, “most of today’s clean generation sources can’t provide power that is both distributed and dispatchable” – that is, electricity that can be ramped up and down quickly. “Solar panels, for example, can be put on every rooftop, but can’t provide power if the sun isn’t shining.”

If Mr. Obama gets his way, the U.S. will go down the rocky road traveled by the European Union. In 2007 the EU adopted the target of deriving 20% of its energy consumption from renewables by 2020. Europe is therefore around a decade ahead of the U.S. in meeting a more challenging target – the EU’s 20% is of total energy, not just electricity. To see what the U.S. might look like, Europe is a good place to start.

Germany passed its first renewable law in 1991 and already has spent $351 billion (€400 billion) on its so-called Energy Transition. The German environment minister has estimated a cost of up to $877 billion (€1 trillion) by the end of the 2030s. With an economy nearly five times as large as Germany’s and generating nearly seven times the amount of electricity (but a less demanding renewables target), this suggests the cost of meeting Mr. Obama’s pledge is of the order of $2 trillion.

There are other, indirect costs to consider. Germany is the world’s second largest exporter of merchandise, behind China and ahead of the U.S. But high and rising energy costs are driving German companies to locate new capacity overseas.

BASF, which operates the world’s largest integrated chemical facility, is shifting more production to America. “With such a huge difference in energy prices, the decision is clear that the money is now going there,” a BASF executive told a meeting of EU industry ministers last year. BASF has opened plants in Malaysia as well as Louisiana.

Advocates of renewable energy such as Deutsche Bank anticipate that electricity from solar panels will cost the same as electricity from the grid (so-called grid parity) in the not-too-distant future. But none suggest that solar can do so now without subsidies. And as Germany, Britain and other European countries are finding out, overt subsidies are only one part of the cost of renewables.

Most damaging is the effect of renewable mandates on the power stations necessary to ensure the stability of the electric grid and balance supply and demand. Even a modest proportion of wind- and solar-generated electricity prevents gas- and coal-powered stations from recovering their fixed costs. This has led to the proposed shuttering of Irsching in Bavaria, one of Germany’s newest and most efficient gas-fired plants. So unless conventional capacity also is subsidized, at some point the lights will start going out. European politicians have no answer to a problem they created, and it’s a safe bet the EPA doesn’t either.

One unintended consequence of the fracking boom is the displacement of coal by natural gas – a cheaper and more effective way to cut carbon-dioxide emissions. A 2014 Brookings Institution study estimated that replacing coal with modern combined-cycle gas turbines cuts 2.6 times more carbon-dioxide emissions than using wind does, and cuts four times as many emissions as solar.

That’s because generating electricity with low-energy density, weather-dependent technology is very inefficient. It requires far more plant and equipment and land to harvest an equivalent amount of power than fossil fuels. And that’s not counting the investment in fossil-fuel capacity to provide on-demand power when the wind isn’t blowing or the sun doesn’t shine.

There is no rational justification for policies favoring renewables. In 1972 environmentalist guru E.F. Schumacher wrote “Small Is Beautiful,” taking as his guide what he called Buddhist economics, which he’d discovered in Burma. A civilization built on renewable resources, he claimed, was superior to one built on nonrenewable resources. “The former bears the sign of life,” Schumacher wrote, “while the latter bears the sign of death.”

Mr. Obama’s renewable target is a triumph for Shumacher’s Buddhist economics – which amounts to being poor and staying poor. It does not produce jobs, growth or prosperity.

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