Tuesday, March 9, 2010

Monbiot wants solar FITs out of UK - part 3

So what did I mean by the US and the UK being "pro-corporatist, anti-democratic" in energy policy?

The Guardian's George Monbiot is a bit of a freedom fighter with what we Americans would call a "bleeding liberal heart," and that is one of the things I like about him. Unfortunately, he does not realize how feed-in rates are a real threat to corporate control of the oligarchical utility sector. Rather, he repeats an argument I often hear from Americans -- feed-in rates provide safe investments of for the wealthy at the expense of the poor:

If you own a house and can afford the investment, you'd be crazy not to cash in. If you don't and can't, you must sit and watch your money being used to pay for someone else's fashion accessory.

Take a look at this picture I just took from outside my window:

At the bottom left, you can see a social housing complex built by Freiburg, Germany's Stadtbau, the municipal housing association. As you can see, the building is covered with solar panels. And this structure is not unique -- the six adjacent complexes just below those with solar panels are currently being constructed and will also all have solar roofs -- and are all city-owned housing.

There is really nothing special about this project in Freiburg; indeed, municipal buildings are one of the main places you find solar roofs. And when money flows back into the city budget, citizens benefit. When Stadtbau turns a nice profit on solar arrays, it is able to keep rent down and invest in more inexpensive housing -- for the poor.

I'm not surprised that Monbiot didn't think of this himself. I have spoken with a number of urban planners from the UK visiting Freiburg, and they have all basically said one thing: we could never do this because we have to take the cheapest offer, not provide the best affordable housing. I have had to interpret this statement for German officials, and it is hard to express it without sounding like, "It is against the law in the UK to do the right thing." I have written extensively about British amazement at the way Germany includes energy conservation and renewables here and here, including a rebuttal to an atrocious report in the Guardian (not by Monbiot, whose work is generally excellent), so I will not go into that now.

My point is that there are answers to Monbiot's social concerns, and Germany is already implementing them. As Leonie Greene of the UK's Renewable Energy Association once told me, "Social policy should not dictate energy policy." Frankly, I find it absurd when Americans worry about the effect of German-style feed-in tariffs on the poor, and I wonder what sense it makes in the UK. Is Germany not considered a socialist country with a cushy welfare state, universal health care, strong unions, etc.? Do you think we don't know how to protect the poor here?

Monbiot completely fails to recognize that feed-in tariffs democratize power production. Want to put your money somewhere safe, create local jobs, and do something for the environment all at the same time -- and keep your money out of the hands of Anglo bankers, who apparently plan to use it to ruin the economy every 5 to 7 years? Then you want feed-in tariffs. Want to get going now instead of leaving things up to big utilities, who simply drag their feet when it comes to renewables? Then you want feed-in tariffs. Don't own your own roof? Join a community initiative to put up a local wind turbine or a solar roof on a city building (like these four turbines right outside my window). Live in social housing? You may be one of the first to get a solar roof.

If you think that feed-in tariffs are simply too good of a deal, then take a look at Monbiot's (accurate) description:

Buying a solar panel is now the best investment a householder can make. The tariffs will deliver a return of between 5% and 8% a year, which is both index linked (making a nominal return of between 7% and 10%) and tax-free. The payback is guaranteed for 25 years.

And now sit back and watch British power companies not get involved. German power companies were so inactive in renewables over the past decade that a number of visitors to Germany did not believe me when I told them that feed-in rates have always been open to everyone, including all companies. What does that tell us? Power companies have such gigantic profit margins that nominal returns of 7 to 10 percent are completely uninteresting for them, as I recently explained.

Don't believe me? Then you might be interested to hear what Julian Aubert of the UK's Scott Wilson Business Consultancy recently said (PDF) about these ROIs: the "proposed RoI of 5%-8% is low." See, what sounds good to the common man is chump change to real investors -- you know, the ones who have failed to implement renewables up to now because they are making a killing off of all that "cheap" energy.

In the typical Anglo fashion of using microeconomics to discuss macroeconomics, Monbiot also does not look at how the investments in renewables actually offset something. He simply talks about what it will cost:

The government is about to shift £8.6bn from the poor to the middle classes. It expects a loss on this scheme of £8.2bn, or 95%.

(Why does he keep talking about the middle classes and not the rich? Does he believe that the rich in the UK will not invest in solar?)

In fact, the German government has found that the benefits (tax revenue from thriving local businesses, offsets of energy imports, and other factors) outweigh the cost of feed-in tariffs for renewables already (PDF in English). In Denmark, where feed-in tariffs were used to reach 20% wind power on the grid, wind power apparently now even lowers the retail rate (PDF).

Things get a little bit ridiculous when Monbiot claims:

... you'll be paid to put a solar panel on your roof even if the roof contains no insulation.

I would've thought he would know the difference between electricity and heat. I assume that gas heaters are quite common in the UK, whereas not so many people have electric heaters, but maybe I'm wrong. At any rate, with or without insulation, photovoltaics will not lower your heating bill. There is no reason to put insulation on your house before you install photovoltaics (unless your heating is electric).

Finally, Monbiot seems to be concerned that some types of power cost more than others:
The government wants everyone to get the same rate of return. So while the electricity you might generate from large wind turbines and hydro plants will earn you 4.5p per kilowatt hour, mini wind turbines get 34p, and solar panels 41p. In other words, the government acknowledges that micro wind and solar PV in the UK are between seven and nine times less cost-effective than the alternatives.

It's a commonly voiced concern, and it makes sense on the surface.

If I were to sum up Monbiot's principal complaint, I would probably say, "Let's wait for solar to get cheap and use less expensive renewables for now." To which I can only respond, no problem -- Germany and others will be very happy to bring the price of solar down for you, just as they did for wind. But then, you will be importing expensive equipment because you have no manufacturing base.

It doesn't matter where wind and solar resources are cheap. What matters is where the equipment is made.

Mr. Monbiot, the UK has some of the best wind resources in the world (and the best in Europe). The British could be producing very large amounts of incredibly inexpensive wind power. But because the UK missed the boat completely on wind power, you do not have a single major manufacturer of wind turbines. And I believe Danish firm Vestas closed its site on the Isle of Wight last summer. I suppose the UK wind market was not working for them.

And now, you are suggesting that the UK let the solar boat pass by as well. Good luck with that, Mr. Monbiot.

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