Renewable Energy Coming Under Fire Over Subsidies and Shortcuts

In a global economic scene dominated by continuing uncertainty, one of the few "sure bets" has SEEMED to be the "green tech / cleantech" sector.

But in the last few months, significant bumps have appeared in what has almost universally been considered one of the few relatively unblocked roads to "certain" prosperity - at least according to obsessive enthusiasts like Tom Friedman.

The most notable, of course, has been the brouhaha over 'Climategate', the hacked emails that revealed some notable global warming proponents "conspiring" to massage empirical evidence in a way most suited to advance their thesis.

Unfortunately, cherry picking the evidence is all too common among academics of ALL political / ideological stripes, so while some people are shocked by this, it should a) give them a generally more skeptical attitude towards any claims of "science", and b) not obscure the extent to which corporate "eco-hacks" have been doing the same - and much worse - for decades re the same subject.

But similar sorts of divisions are appearing at the Copenhagen Climate Talks, expectations for which have been progressively diminishing for the past several months.

The most enduring, it seems, are those between the already-industrialized and industrializing countries.

The former want to junk the protocols established by the 1997 Kyoto Conference - which went into effect in 2005 for most countries except, of course, the US under their emissions, while shifting the burden to the advanced world.

Now, there are clearly fissures within the industrializing camp, with rapidly growing - and polluting - China and India in quite a different position than, say, "the 700 million sub-Saharan Africans outside of South Africa [who] have access to the same amount of electricity as the 38 million citizens of Poland".

But there is enough commonality for them to have staged a temporary maneuver on the first day of the second week, when developing countries threatened to walk out in protest, saying that the world's richer countries were not doing enough to cut their greenhouse gas emissions ...
African delegates released a statement declaring they were "outraged with the lack of transparency and democracy in the process."
The move seemed to be tactical … Still, the threat of nonparticipation underscored the tenuous balance between richer and poorer nations.

The final outcome of Copenhagen, of course, is far from clear at this moment, although anyone anticipating something major is likely to be disappointed.

At the same time, two other incidents indicate not just the political obstacles to unblocked progress on the environmental front, but societal and technological as well.

The former is indicated by the already prominent visibility of corruption - due largely to the existence of readily available subsidies - in the emerging and often free-wheeling wind-energy business all over Europe, as an extensive round-up in the New York Times makes depressingly clear.

Wind farm development follows a common pattern in Europe and the United States. It is a complex chain in which, typically, small entrepreneurs strike deals for long-term land leases with farmers and seek local government approvals for wind parks. Then the entrepreneurs sell development packages through intermediaries to large multinational companies or utilities that actually build the wind parks …

Stoking the frenzy in Europe is the vast revenue available through a variety of subsidies, including the European Union's farm subsidy system, which distributes more than €50 billion, or $73 billion, a year to farmers, corporate agribusiness and rural development projects …

… critics like John Etherington, a former professor of ecology at the University of Wales and author of "The Wind Farm Scam," contends that because the industry is so dependent on subsidies, it is highly vulnerable to scams. Mr. Etherington said that he is "not sure that the industry is regulated at all - let alone well regulated."

Police investigators have been busy across the Continent in recent months. This year five Corsican nationalists were jailed and fined for skimming €1.54 million in European subsidies for wind farms. In Italy - where three investigations are unfolding - 15 people were arrested last month in a case the authorities code-named Gone With the Wind. They described it as a complicated Ponzi-style scheme to reap as much as €30 million in E.U. aid.

The reason is that political authorities - anxious to promote the phenomenally eco-friendly image of wind power - have been showering participants in this fast-growing sector with profit margins that make investment a literally no-lose proposition, if handled shrewdly.

Richard Robb, a New York investor in wind parks in France and Germany through his firm Christofferson, Robb & Co., said that even with lackluster winds there was a cushion of revenue for investors because of these [subsidies].
In Germany, he said, his wind farm qualified for a feed-in tariff of about €83.6 a megawatt hour while the free market price ranged between €30 to €70 - helping to deliver as much as a 15 percent return.
"None of this," he said, "would have been possible without government subsidies."

And who ends up bearing the burden of these tidy, "no-lose" profits - not surprisingly, consumers in countries where these operations are taking place. "Last year Spanish incentives, or "premium" prices paid to wind producers above market rates, totaled almost €1.2 billion, a cost ultimately borne by consumers."

Even less surprising, unfortunately, are the well-placed individuals who benefit, as in the Spanish province of Galicia, where "the former head of industry and energy is facing charges of influence trafficking for granting approvals for seven wind parks developed by his brother-in-law".

But even when baser human instincts aren't in play, there are real technological roadblocks as well to the imagined utopia of boundless / cheap / clean energy, as the - literally, earth-shaking - story of initial attempts to tap the geo-thermal energy of the earth's crust.

The company in charge of a California project to extract vast amounts of renewable energy from deep, hot bedrock has removed its drill rig and informed federal officials that the government project will be abandoned.
The project by the company, AltaRock Energy, was the Obama administration's first major test of geothermal energy as a significant alternative to fossil fuels and the project was being financed with federal Department of Energy money ...

And what was the reason for abandoning this seemingly exciting project ??? The fact that it was, literally, causing earthquakes - in a part of the world already shaken regularly by scary tremors.

And it's not just California that was finding the geothermal initiative a bit disturbing.

The project's apparent collapse comes a day after Swiss government officials permanently shut down a similar project in Basel, because of the damaging earthquakes it produced in 2006 and 2007.

Taken together, the two setbacks could change the direction of the Obama administration's geothermal program, which had raised hopes that the earth's bedrock could be quickly tapped as a clean and almost limitless energy source.
Of course, there is always a "cash" aspect to initiatives like this:

In addition to a $6 million grant from the Energy Department, AltaRock had attracted some $30 million in venture capital from high-profile investors like Google, Khosla Ventures and Kleiner Perkins Caufield & Byers.

"Some of these startup companies got out in front and convinced some venture capitalists that they were very close to commercial deployment," said Daniel P. Schrag, a professor of geology and director of the Center for the Environment at Harvard University.

Geothermal enthusiasts asserted that drilling miles into hard rock, as required by the technique, could be done quickly and economically with small improvements in existing methods, Professor Schrag said. "What we've discovered is that it's harder to make those improvements than some people believed," he added.

The existence of these problems - political / societal / technological - in no way implies that the search for clean / green technologies should be abandoned - as the great theorist of technologically-driven economic growth Joseph Schumpeter pointed out, eventual success is always preceded by heart-breaking failure.

But it does indicate that the road to a clean / safe / renewable energy future is anything but a clear, straight superhighway - rather, it's more like a potentially treacherous cliffside path, where progress is slow and a mistake of any sort can result, with even the best intentions, in a lot of pain and suffering for innocent people who have no choice but to come along for the ride.

David Caploe PhD
Chief Political Economist
EconomyWatch.com

Source: Economywatch.com