In a speech in May, President Obama pushed for our nation to transition to renewable energy and pointed to Denmark as an example of proof it can be done:
[U]nfortunately. America produces less than 3 percent of our electricity through renewable sources of energy like wind and solar — less than 3 percent. In contrast, Denmark produces 20 percent of their electricity through wind.”
But according to a new study from the Danish Centre for Political Studies (CEPOS), commissioned by the Institute for Energy Research, the road to increased wind power is less traveled for a reason. The study refutes the claim that Denmark generates 20 percent of its power from wind stating that its high intermittency not only leads to new challenges to balance the supply and demand of electricity, but also provides less electricity consumption than assumed. The new study says, “wind power has recently (2006) met as little as 5% of Denmark’s annual electricity consumption with an average over the last five years of 9.7%.” Furthermore, the wind energy Denmark exports to its northern neighbors, Sweden and Norway, does little to reduce carbon dioxide emissions because the energy it replaces is carbon neutral.
The study goes on to say that the only reason wind power exists in Denmark is “through substantial subsidies supporting the wind turbine owners. Exactly how the subsidies have been shared between land, wind turbine owners, labor, capital and its shareholders is opaque, but it is fair to assess that no Danish wind industry to speak of would exist if it had to compete on market terms.”
But there’s a cost involved. When government spends more money, it necessarily diverts labor, capital and materials from the private sector. Just like promises are made in the United States about green jobs creation, the heavily subsidized Danish program created 28,400 jobs. But “this does not, however, constitute the net employment effect of the wind mill subsidy. In the long run, creating additional employment in one sector through subsidies will detract labor from other sectors, resulting in no increase in net employment but only in a shift from the non-subsidized sectors to the subsidized sector.”
And because these resources are being diverted away from more productive uses (in terms of value added, the energy technology underperforms compared to industrial average), “Danish GDP is approximately $270 million lower than it would have been if the wind sector work force was employed elsewhere.”
The entire study is available here.
This is very similar to what we’ve seen in Spain. Research directed by economist Gabriel Calzada, at King Juan Carlos University, analyzed the subsidized expenditure necessary to create the green jobs in Spain. It compared those funds to the private expenditure needed to support the average conventional job. Supported by other data as well, they conclude that each subsidized green job in Spain eliminated over two conventional jobs.
And it will be very similar to what we see in the United States if we move forward with cap and trade and a renewable electricity standard that mandates a certain percentage of electricity come from wind and solar. The intent of a subsidy is to increase the production of a good or service if it is underprovided by the market for some reason. This is not the case with energy. The market, not the government-funded industries, can provide the most affordable energy for consumers. Mandates, subsidies and other preferential treatment simply benefit few at the expense of many. Denmark and Spain are learning the hard way.