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Propped Up
Denmark Rethinking Wind Subsidies

Wind and solar energy have a lot of things going for them—they’re renewable and they don’t emit greenhouse gas emissions—but they come with a hefty price tag. So far they’ve only managed to be bit players in national energy mixes, but countries like Germany and Denmark have attempted to jump-start the fledgling clean energy sector by offering up elaborate government support. Unfortunately, the costs of these subsidies are inevitably passed on down to consumers in the form of high power bills, and that has Copenhagen considering a repeal of its generous wind power subsidy regime. The WSJ opines:

The Danes are the world champions of wind farms, getting some 42% of their energy from wind last year. But that power hasn’t come cheap, since Danish households pay the highest electricity charges in Europe mostly thanks to Copenhagen’s green levy on electricity bills, the Public Service Obligation (PSO). […]

So some politicians have jumped at a chance for a rethink courtesy of the European Commission, which in 2014 ruled the PSO violates European Union subsidy rules. In addition to illegally subsidizing local green-power firms, the PSO also dragged on Denmark’s economy. […]

As a result, Parliament is preparing to end the PSO instead of mending it. The plan is to pay some green subsidies from general government revenues, to be raised by increases to income or other taxes once the PSO tax on electricity bills disappears. But with taxes already high, Copenhagen will struggle to raise them enough to replace the revenue lost when the PSO ends. This has triggered a long-overdue debate about cutting some of the subsidies…The proposal to delay construction of some coastal wind farms will save an estimated seven billion Danish krone ($1.06 billion) over 12 years. If approved by Parliament, this would mark a welcome step toward economic and fiscal sanity.

It’s no coincidence that Germany and Denmark pay the highest costs for their electricity in Europe, and this has an insidious social cost to it, too: expensive power is a kind of a regressive tax, felt more keenly by poorer households than richer ones. Moreover, there’s an opportunity cost to subsidizing the current generation of renewables: wind turbines and solar panels can’t out-compete fossil fuels on cost (hence the subsidies), and by propping them up policymakers are keeping the focus on a generation of technologies that don’t quite cut the mustard. A far better use of governments’ time and money would be the research and development of the next generation of turbines and panels capable of flourishing without subsidization.

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  • CosmotKat

    The amount of subsidies going to wind and solar in the United States is frightening. The winners are the politically connected. They get their investment subsidized by the government by favorable loan terms subsidies to offset the high cost of their products. the losses are collectivized and they never, ever pay taxes.

  • Fat_Man

    “research and development of the next generation of turbines and panels capable of flourishing without subsidization”

    You keep writing this like it is something intelligent to say. It isn’t. No conceivable changes in those technologies will make the wind blow steadily or the sun shine 24/7. Wind and solar will never be economical.

    • JR

      But saying wind and solar gives you warm fuzzy feels.

      • Fat_Man

        But, not energy.

    • CaliforniaStark

      Agree. An intermittent energy source is always going to be expensive, not only because they are part-time power sources and therefore have a low energy production capacity, but also because they requires the funding a secondary energy source to back them up. Germany relies on coal, and Denmark relies on Scandinavian hydro power, to back up their wind and solar. Wind and solar will only economically survive with subsidies.

      Even if effective, large scale storage is developed (which will be later than sooner), its funding as a secondary energy source increases the price of energy. Research funding for renewable energy should be directed at potential technologies that provide energy 24/7.

      The fact that both Denmark and Germany are now pulling back from the generous subsidies of wind and solar should be sending a strong message to the rest of the world.

      • Fat_Man

        Thank you for fleshing out my argument. I have stated it more fulsomely on past occasion, but I am getting tired of making the same comment to TAI, every time they reflexively utter their cliche about research.

        • LarryD

          I’ll also point out that wind and solar (PV and thermal both) are not new technologies, haven’t been for decades. All the R&D that they’ve had for decades, and they still aren’t competitive on their own, except in niche markets.

          Intermittent and diffuse, the albatross of the “renewable”. Funny how Greens never let hydro be classified as “renewable”. I’m not sure Space Based Solar Power (SBSP) would be economical, even granting cheap, clean access to orbit. And in orbit, you get quadruple the insolation, no weather, and (depending on the orbit) the Earth gets in the way only nine hours a day during the equinoxes.

        • CaliforniaStark

          Actually what TAI is advocating as the next generation of turbines and panels is very straightforward: (1.) solar panels that work in the dark; and (2.) wind turbine that work when the wind is not blowing. Simple.

        • f1b0nacc1

          Yes, it always seems like all that is necessary is just more ‘research’ and then everything will be fine. There is no basic understanding of simple economics here

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