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The USA Must Follow Spain's Lead in Ending Wind and Solar Subsidies
Raymond Richman, 7/7/2012

Spain has cleared the decks for its economic recovery by ending its subsidies to “Green” energy. The crisis in the Eurozone requires Spain to bring its fiscal budget in better balance. Spain has ended its subsidies for building wind and solar plants. New wind and solar plants will have to be financed by investors with no subsidies in the form of cash grants and tax subsidies. The average wind and solar plant built in the U.S. receives subsidies from state governments and the federal government which amount to an estimated 50% of the total costs of the project. This is at the expense of the American taxpayer who, in addition, pays higher prices for electricity and outsourcing of his job. Spanish Associate Professor of Economics, Gabriel Calzada Alvarez, of King Juan Carlos University concluded that the wind and solar plants crowd out two jobs in the economy’s private sector for every job they create in the alternative energy sector. He testified before a U.S. Congressional Committee that the same is true of the alternative energy plants built in the U.S.

More than $69 billion of wind and solar plants have been installed in Spain since 2004. The unreliability of wind and solar energy means that there is no saving in capital since back-up power facilities using traditional fuel sources are required to ensure a continuous supply of electricity.  

To make matters worse, public utilities have been ordered to purchase electricity from wind and solar plants at prices exceeding the costs of electricity from traditional sources, coal, natural gas, nuclear, etc. The same is true in the U.S. The effect is to raise the prices of electricity to households and businesses on whom it acts like a sales tax. It raise the cost of living and it dampens the desire to invest in new factories in the U.S. since it will increase the future prices of electricity.

In addition, the construction of wind and solar plants requires imports which amount on the average to 30 percent of the machinery and parts required for installing the windmills and solar panels. Instead of creating a substitute for imported fuel, our subsidies to alternative inefficient energy actually increase the demand for imports from abroad. The reader should be reminded that a negative trade balance is a subtraction from GDP. GDP  is the sum of the value of all the goods produced for use in our economy plus the goods produced that are exported minus the goods that are imported. So when imports exceed exports, it acts as a drag on the economy. We estimate that our chronic annual trade deficits have cost us upwards of 5million jobs. China is the most efficient producer of the best solar panels. Our production of solar plants creates jobs in China and costs jobs here. At the very least, we should not be subsidizing the importation of wind and solar machinery and equipment.

To accelerate recovery in the U.S., Congress should do as Spain has done and eliminate all subsidies to new wind and solar plants. The prospect of low energy prices in the future would encourage investment in new factories in the U.S. Coupled with balancing the trade deficit, a genuine economic recovery can be expected. Failure to eliminate the wind and solar subsidies would promote economic stagnation such as we have experienced for the past two years. Not only are the subsidies to alternative energy plants not an economic stimulus, they have a negative effect. They cause real GDP to decline.  

Comment by ep, 7/23/2012:

You guys write great articles -- please keep it up!

I actually favor solar and wind as a renewable Supplement to our power grid.  But they will never be a Replacement.  The Green advocates seem to think we can get rid of all nuclear and all coal power plants once we get solar and wind fully established.  This is folly.  Scientific American, which has unfortunately has become quite liberal, recently discussed the science behind the "dirty little secret" weaknes of soalr and wind:  energy storage.  More precisely, the lack of economical storage.  The sun does not shine at night.  Sometimes the wind is not blowing.  What is needed is a way to store the energy Economically, and there are not many candidates.  The only technology that has any merit at this time is pumping water into a natural lake on a nearby mountaintop or from the bottom of an abandoned mine shaft, then running the water back downwards through generators at night or when the wind is not blowing.  In Amarillo, where I live, there are hundreds of huge windmills and lots of wind -- but No Mountains!  So this lone economical energy storage option is only available in a small fraction of the locations that produce solar and wind power.  Other options such as batteries and elevated water tanks or even compressed air are Prohibitively expensive.  The devil is in the details, and engineers and scientists unfortunately have to deal with the actual facts and figures -- not just emotion-based arguments that simply will not work in practice.