Days of truth for renewable energy

By Benedict De Meulemeester

By Benedict De Meulemeester on 25/11/2010

Renewable energy in Europe is a success. In the past one-and-a-half year, every time I drove through the streets of my hometown, I discovered a new solar panel installation. In some parts of Germany, there seem to be more windmills than trees (is that good for the environment?). Almost all of our clients have approached us with questions regarding some project for producing renewable energy on their sites. The figures are also there. In countries such as Germany, renewables are now producing more than 20% of all the electricity on the grid. They are a part of the power production to be reckoned with.

However, in the past weeks, some serious counter-noises were heard:

1. The German government raised the EEG-umlage for 2011 to a staggering 35,3 euro per MWh. This "Umlage" is a contribution that energy consumers pay that is to compensate the grid companies for the extra costs that they have for buying green electricity at feed-in tariffs. If you mounted solar panels on your roof (less than 30 kW of capacity) in 2010, you could sell the power at a price of 391,4 euro per MWh to the grid company (see http://www.germanenergyblog.de/?page_id=965 for more details). The grid companies can claim the extra-costs of this expensive green electricity through the EEG-umlage. The more green electricity, the higher the cost of this umlage. To give you an idea of the effect of this for the end-consumer. In France, industrial consumers who still enjoy the old tariff system pay less than 50 euro per MWh for electricity, all costs included. Their German counterparts will easily pay twice as much. So it is clear that if Germany is a success-story in terms of development of renewable energy, this comes at a very high cost for its industry and its citizens.

2. In Flanders, the government slashed the financial aid for solar panels, the so-called 'green certificates'. Owners of solar panels got 450 euro per MWh in 2009, this was brought down to 350 euro per MWh in 2010. In 2011 it will be brought down progressively towards 270 euro per MWh as of the first of October. The government claims that it is speeding up the winding down of subsidies for solar panels because they want to avoid that the bill for the energy consumers gets inflated like it has in Germany.

3. A group of environmental NGO's, among them Greenpeace and Friends of the Earth, published a study that stated that the development of energy from biomass as put forward in the European 20 - 20 - 20 policy, would lead to increasing instead of decreasing emissions of carbon dioxide. Environmentalists are increasingly skeptical about the potential of biomass to abate climate change. In Belgium, a big discussion started last weekend, after a newspaper made clear that dominant power producer Electrabel will generate a hundred million euro per year of income on the sales of green certificates awarded to a biomass power station. For this power station green pellets will be brought from Canada to Gent to be burned and produce power.

It is clear that citizens and governments are increasingly critical about green electricity. This is a good thing. Uncritical adoption of whatever technology, just because it is labeled as green, will lead to disillusions, both ecologically ánd financially in the future. It is curious that the debate over green energy is often so emotional and irrational and that there is such limited space for sound discussion over facts and figures. Many actors are such convinced proponents or opponents of this or that technology, that they are willing to interpret the data in whatever direction that fits their story. Two weeks ago, I almost choked in my Sunday Morning "croissant", when I read an interview in the Sunday paper with Flanders' most successful entrepreneur in solar energy. The good man had the guts to declare that subsidies contributed 'only marginally' to the payback of solar panel installations. For installations built before 2010, green certificates make up 90% of all the income that you receive on your PV-installation ! And that same man was the first one to protest on the radio about bringing down the price for green certificates. I'd think he wouldn't really care if their contribution to the profitability is only marginal.

Three renewable energy sources are currently composing the bulk of the growth of green power production in Europe. How should we evaluate them?

1. Wind power is clearly the most developed and most cost-efficient technology currently available. Off-shore is more expensive than on-shore. The biggest restraint on building windmills remains getting permits to build them. A recent study has made clear that after they have been built, the number of neighbors opposing windmills declines. This clearly shows that much of the nuisance of having a windmill is exaggerated. But still, (local) politicians remain sensitive to the loud voices of the 20% of the population that seems to hate windmills. The cost of building a windmill has been brought down by increasing their efficiency. Part of that cost decrease was undone by rising steel prices. However, it will still take you more than ten years to earn back your investment in a wind turbine if you don't have any aid. So without the subsidy systems there wouldn't be much investment in wind power. Still, the same can be said about nuclear power, which, if you include all costs (those of waste disposal also) is more expensive at the moment than building a wind turbine.

2. Biomass is clearly problematic on many fronts. The basic problem is that you need a lot of bio material to produce a reasonable amount of energy. In my opinion, biomass makes sense if it is making use of a local, fatal waste product, e.g. methane produced from a food industry's sewage water treatment plant. But as soon as you start importing biomass, problems arise. If you bring wood pellets with ships from Canada to Belgium, how does the amount of energy that you consume to cut the trees, bring them to pelletizers, dry them, pelletize them, transport the pellets to the port, transport them in the ship, unload the ship, etc. compare to the amount of energy that you produce with the pellets? Moreover, there is a problem with the basic 'CO2-neutral' theory of biomass power production. The idea is that the carbon that you emit when burning the pellets, is compensated by the newly growing trees. How sure are we that all the pellets will come from 'new' trees? Not just replacements of trees that we have cut before? And, as has become clear with palm oil, are we not cutting diversified (tropical or other) forest to make place for our energy crops? Nothing beats the CO2 reducing capacities of a diversified forest. Biomass power production can even clash with other environmental concerns. Flanders plans to burn massive amounts of waste wood to produce green electricity. Now, first of all, in terms of CO2 cycle this is problematic, as I have never seen a waste wood tree growing on the corner of the street. And it even becomes absurd, if we burn wood that we could have recycled by making a chipboard from it. Lastly, with a growing world population, will we use land now used for growing food to grow energy?

3. Solar energy is clean and I must admit that I have panels on my roof also. To say even more, thanks to all the subsidies, it is the best private investment that I ever made! However, I'm not that cynical not to have any doubts about the cost-effectiveness of all this. If the same panels would have been installed 2.000 kilometers to the south, they would have produced twice as much electricity. I'm currently sitting in our office in Barcelona. The sun is shining and it is 15°C. I wish I had brought my solar panels which are now lying idle under the Belgian fog. Is it logical, that most solar panels in Europe are installed in the North rather than in the sunny South? I don't think there is much to be said against the ecological effectiveness of solar panels. Agreed, there is some CO2-emission necessary for producing them, but if we would produce all the electricity in the world with solar panels (yes, I know that this is impossible), our overall emission would go down massively. My biggest problem with solar is its cost-effectiveness.

Renewable energy is a success in Europe, but this is only thanks to the largesse of Europe's subsidies. I can see only two ways of making sure that renewable energy is used. The first one is to drastically increase the price of conventional energy, e.g. by imposing a big carbon tax. This approach would have the benefit of having those renewable energies selected that are most cost-effective. But the economical and social consequences of raising the price of conventional energy are not to be underestimated. Therefore, we took the second option, subsidizing. Subsidies have the bad characteristic that they inevitably blur the economic picture. Producers of wind turbines and solar panels sell their products at a premium in Western-Europe because they know that thanks to the subsidies, their clients still have a reasonable payback even with such higher investment costs. Large power producers buy their turbines and panels through Eastern-European affiliates to circumvent this. Wherever there are subsidies, there will be people that unduly profit from them.

All in all the financial aid of renewable energy is now a considerable amount of public money invested in the greening of our planet. As keepers of that wallet, our politicians have an important moral responsibility in guarding over the cost-effectiveness. In that perspective, it is a very good evolution that the public debate regarding renewable energy has come to this degree of critical attitude.


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