If the Dow fell 85 percent, most folks would call that a depression. So why doesn’t that apply to the “sustainable” energy business — mainly solar and wind power — where shares have fallen an average of 85 percent to 90 percent, even excluding the bankrupt Solyndras, Evergreens and Solons? This depression is global, hitting Chinese Suntech, the world’s largest producer of solar panels, as well. Suntech has seen its shares plunge 88 percent.
As in other depressions, scads of real money has been lost, sustained by the snake oil that global warming is such a threat to us all that we should not just encourage, but legally compel,people to install the most economically inefficient form of electrical generation on the planet — solar photovoltaic, and its sibling in inconstancy, wind power. In various states and around the world, these are legislated by “renewable portfolio standards.” What we get is a sustainable depression.
The impetus for this originated in Germany with the 1990 Stromeinspeisungsgesetz, which sort of translates as “Law on Feeding Electricity Into the Grid.” This law initially required utilities to purchase “renewable” (i.e. solar and wind) energy at the market price.
It didn’t exactly shock the electricity world that this would not work. Solar and wind were too expensive, so in 2000, the law was changed to become a welfare program for anyone who put a solar panel on a roof. Now called the Act Granting Priority to Renewable Energy Sources, it guaranteed an ultimate profit, sort of like buying your own slot machine and inviting the neighbors.
In the beginning, Germans paid a “feed‐in tariff” of 65 cents per kilowatt‐hour for power from the roof; the total comparable cost for power from a new gas plant in the United States is about 6 cents. Solar panels sprouted everywhere. Q‑Cells Corp. became the world’s largest producer. Investors piled on. Q‑Cells rose from $30 a share in October 2006 to a peak of $97.60 in 13 months. Today it is trading at 55 cents.
A grand total of 1.9 percent of Germany’s power comes from solar.
Germany gradually reduced the tariff by about 50 percent, which substantially lengthened the time in which a panel will pay for itself. A huge supply of solar panels glutted the market, and the carnage is industrywide. A person who invested $2,500 in the Guggenheim Solar Energy Fund in 2008 (symbol: TAN) would have $267 today, typical for this sector.
Seeing rich Germans sunning in Cadiz gave Spain the idea, so Royal Decree 661 in 2007 provided a feed‐in tariff to the owner of a solar panel or a windmill of about 58 cents per kilowatt‐hour, guaranteed for 25 years. Hey, why work when you can just populate your pasture with cash cows? Massive solar farms sprang up in sunny Spain. Land prices escalated, and the Spanish government realized that many of the facilities simply would never pay for themselves.
Spain’s massive subsidy program soon got out of hand, sending the country further and further into hock, and Spain finally cut it back, which further tanked the solar industry, which never should have expanded so much.
But didn’t all this sprout “green jobs”? After all, someone has to go up on the roof in Germany, and someone has to keep the panels clean in dusty Spain.
Robbing Peter, in fact, did affect Paul, at a cost of about $800,000 per “green,” job, according to King Juan Carlos University economist Gabriel Calzada. Two people got fired for every one who was hired.
Then the sustainable contagion spread to the United Kingdom, which has done for wind what Spain did with the sun. It slapped utilities with a “renewables obligation” of 15 percent of their power in a little more than three years (current contribution: 4 percent). Consumers pay both feed‐in tariffs for the windmill down the road and capital costs for transmission and backup power. The political rebellion in the United Kingdom is palpable, and in response, Prime Minister David Cameron, who promised the “greenest government ever,” recently cut the solar feed‐in tariff in cloudy Britain by 50 percent.
The bottom line is that wind and solar power are simply uncompetitive. Because of the inconstancy of the wind and the rotation of Earth, backup capacity of more than the average power production from “renewables” must be in place to preserve electrical stability.
This capacity increasingly is in the form of natural‐gas generation. The discovery of hundreds of years of natural gas in worldwide shale deposits guarantees that solar and wind will never produce much of the world’s power. Natural‐gas‐fired electricity now costs about 84 percent less than solar, and it cuts carbon‐dioxide emissions compared to conventional coal by 30 percent to 50 percent.
The sustainable depression of “renewable” energy is likely to be permanent.