A few years back, I had a chat with a reporter who had recently moved to Calgary from Europe, where he covered energy issues. In a discussion about renewables, he gave the oft-heard opinion that Europe was, of course, “ahead” of Canada. His eyes widened with admiration for how Europeans were greening their power grid.
He soon hopped from his media job to a communications position with the Alberta government to promote green energy. The career change made sense. If one drops objectivity in favour of advocacy, it’s best to jump to that career or to a government receptive to one’s enthusiasms.
That chat often reminds me of the mistake some casual observers make about a hoped-for technology, one heavily subsidized by citizens through their taxes or power bills: That the existence of a massively taxpayer-subsidized sector is somehow proof the underlying technology is viable and perhaps one day profitable. (In the short term at least, it’s proof of the opposite: If an industry or business was viable, it wouldn’t need subsidies.)
In the case of Europe and its electricity sector, heavily tilted to renewables as policy, consumer and taxpayer subsidies come at a heavy price. Consider Germany: The New York Times reported last autumn that Germany spent €189 billion on green subsidies since 2000 (that’s about C$300 billion). But greenhouse gas emissions are stubbornly stuck at 2009 levels.
You’d think with such massive subsidies, electricity would be cheap for consumers. But subsidizing wind and solar projects to replace hydrocarbon fuel sources is not the only cost. There’s an ongoing higher base price of green energy and the question of efficiency. And there are significant problems with storing electricity generated from wind and solar, which means produced power must often be sold at a loss (Ontarians are familiar with this).
In a 2016 MIT Technology Review piece, Richard Martin argued that Germany “is giving the rest of the world a lesson in just how much can go wrong when you try to reduce carbon emissions solely by installing lots of wind and solar.” Problems include producing too much power, paying customers to use more and not less electricity, and selling surplus power at a massive loss. Ironically, this overproduction also boosts carbon emissions.
The European average for household electricity prices per kilowatt hour in the first half of 2017 was 22 euro cents, or 31 to 33 Canadian cents (depending on the day and exchange rate). In Germany and Denmark, with the highest proportion of renewables in Europe, prices for household electricity in the first six months of 2017 averaged 30.5 euro cents per kWh, or between 42 and 46 Canadian cents.
In contrast, in the past year, residential power prices in high-price Ontario ranged from 6.5 cents to 13.2 cents depending on the time of day. In Alberta, electricity rates have ranged between three cents and 6.4 cents depending on the month and the type of plan chosen (regulated, fixed or variable). It should be noted that in both Alberta and Ontario, many green-power subsidies aren’t baked into power prices but show up elsewhere, i.e., through government payments to producers (Alberta) and/or debt financing (Ontario).
Are renewables responsible for higher European power prices?
To answer that, in 2015 Willis Eschenbach overlaid installed renewable capacity by country with electricity prices. Unsurprisingly, he found that countries with the highest levels of installed renewables also have the highest electricity costs. “Per capita installed renewable capacity by itself explains 84 per cent of the variation in electricity costs,” wrote Eschenbach.
Germans know this and one lawmaker, Sandra Weeser, when arguing with Green party advocates who asserted wind power was cheap, asked the obvious rhetorical question: “If that is really true, then why do they need subsidies? Why are we paying €25 billion annually for their feed-in?”
One hears the same claims on this side of the Atlantic – that wind, solar and other renewables are now competitive. It isn’t true. If it were, green energy would not be subsidized through higher power bills (Europe), provincial taxes (Alberta) or borrowing (Ontario).
To be clear, no sector should receive taxpayer funding or other disguised subsidies.
No matter what eager journalists or politicians claim, and no matter how the latter try to hide power costs via back-door taxpayer subsidies, by paying part of today’s power costs through government borrowing or tacking costs directly on the bill, unprofitable energy comes at a significant cost to consumers.
Mark Milke is an author, policy analyst, writer for Canadians for Affordable Energy and author of the 2017 report on green and traditional business subsidies, Corporate Welfare Cash: 21st Century Justifications and Billion-Dollar Bills to Come.
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