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-July 31, 2013 -

Green Supply Chain News: Lessons from Europe's Experience with Renewable Energy Sources


Wind and Solar Share of Energy have Soared in Germany and Denmark; US Should Use that Experience to Improve Policies Here, Experts Say

By The Green Supply Chain Editorial Staff

The Green Supply
Chain Says:

The US government should reform subsidies for wind and solar so that they incentivize innovations that would improve the efficiency and reliability of wind and solar, and development of improved energy-storage technologies.

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Europe is well ahead of the US in terms of electricity generation from renewable sources such as wind and solar, and the experience thus far offers some valuable lessons for the US as its is slowly increasing its reliance on renewable sources.

So say Avid Garman and Samuel Thernstrom in an interesting op-ed column in the Wall Street Journal this week. Garman was an assistant secretary and under secretary at the U.S. Department of Energy from 2001-07, and is on the board of directors of the Energy Innovation Reform Project. Thernstrom is executive director of EIRP.

Wind and solar currently generate 3.5% of America's electricity today, but Denmark gets 30% of its electricity from wind, and hopes to increase that to 50% by 2020. Germany produces about 12% of its electricity from wind and solar today, and has a goal of increasing that to 35% by 2020.

But at what cost - and reliability? Those are key questions, Garman and Thernstrom say. They note that Germany has invested more than $250 billion in renewable energy deployment, and its households there pay the highest power costs in Europe, with the exception not coincidentally of those in Denmark. On average, Germans and Danes pay roughly 300% more for residential electricity than Americans do - a very substantial premium.

Are US households and business willing to pay three times current electricity prices for the benefits of renewable sources? Not as readily as the Europeans, we are guessing.

Another major challenge, Garman and Thernstrom say, is that solar and wind energy production is much more variable, since electric energy can still not effectively be stored. At low levels of renewable sources, this variability can be reasonably managed. As the percentage grows, however, it can cause real problems, requiring major infrastructure investments and risking potential "brown outs," a scenario that is of increasing concern in Germany.

"For now, the American picture is different," Garman and Thernstrom write. "Unlike Europe, the US has excess generating capacity and generally adequate transmission and distribution systems, so variability in the small amount of electricity produced by wind and solar in most markets is not a significant problem."

But renewables are growing quickly, as older nuclear plants are decommissioned and new Environmental Protection Agency regulations shut down coal-fired plants. California is passing laws increasing renewable requirements to the point is starts to look a lot like Europe, with the same cost structure and grid-management challenges.

So what are the lessons from the Euro experience with renewable energy sources? Garman and Thernstrom say there are several.

"Lavish subsidies for wind and solar have changed Europe's generation mix, but the costs have been high because the subsidy structure prioritized mass deployment rather than efficiency, reliability and innovation," Garman and Thernstrom note.

This is even sometimes seen in the US when the wind-production tax credit occasionally produces "negative pricing," meaning turbine operators pay grid operators to take their power even though it isn't needed, just so the wind generators can collect tax credits that exceed those payments.

The US government should reform subsidies for wind and solar so that they incentivize innovations that would improve the efficiency and reliability of wind and solar, as well as the development of improved energy-storage technologies, Garman and Thernstrom believe.

"It is not surprising that many Americans share the European passion for wind and solar. But, as with any relationship, once the initial infatuation fades and difficult issues start to emerge, thoughtful action is needed before the relationship sours," they conclude.


Do you agree with Garman and Thernstrom? Do you have any direct experience with how this is working in Europe? Let us know your thoughts at the Feedback button below.


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