Good economic news comes, finally, from Spain. The number of workers without jobs fell in December for the first time in 5 months. At 4.1 million, it was down by a quarter of a percent, according to the Labor Ministry. But that won't much help the unemployment rate, which in October, according to Eurostat, was 20.7%.
A country widely regarded as a leader in development of renewable energy should not, in the popular view, have a joblessness rate twice the euro-zone average. Governmental spending on energy other than commercial hydrocarbons is supposed to create green jobs. And all that green employment is supposed to compensate for the lavish government aid on which renewable energy depends. Or so the argument goes.
The argument is wrong. Other countries aspiring to clean-energy leadership should learn from Spain's woes.
Standard mistake
The country began with the standard mistake. It set a numerical target for energy-market penetration by solar, wind, and other renewable energy: 20% by 2020, the European Union goal. Consumption targets, whether they're market shares or absolute energy amounts, create the impression of policy resolve. But they're inevitably arbitrary and nearly impossible to enforce. Example: the increasingly messy fuel ethanol program in the US.
Spain pursued its targets aggressively by allowing above-market prices for producers of renewable energy while controlling electricity prices to consumers. The government covered the resulting tariff deficit by selling bonds, a practice that became especially problematic after the global financial crisis of 2007.
Producers responded enthusiastically to the price incentives. By 2005, growth rates of installed solar and wind capacity in Spain were among the highest in the world. Now, however, the tariff deficit has reached an estimated $26 billion while economic recession has lowered tax receipts and threatened overall fiscal health. In 2009, Spain's public-sector debt rose to 53.2% of gross domestic product from 39.8% in 2008. The maximum specified for euro-zone countries is 60%.
The financially strained Spanish government last year trimmed subsidies for wind power generators and photovoltaic solar projects. The moves came after months of deliberation, during which investment in renewable energy projects faded. Renewable-energy market shares may have stalled at about 2009 levels, estimated in a recent report by the Wharton School of the University of Pennsylvania at 25% of Spanish electric power generation and 12% of gross energy consumption. But adjustment to the cost of subsidization continues. In December, the government announced a 9.8% increase in the price of electricity for 17 million households still buying power under controlled prices—tough medicine for a struggling economy.
The Spanish government's lunges and reversals illustrate the problems of managing energy by fiat. And current unemployment numbers throw doubt on promises about creating green jobs by spending public money on uneconomic energy in a recession.
Gabriel Calzada Alvarez, associate professor at King Carlos University in Madrid, in August 2009 testimony before the US Senate Committee on Environment and Public Works, summarized findings of a study he and colleagues conducted of employment effects of the Spanish renewable energy program. His said:
• For every green job financed by Spanish taxpayers, 2.2 jobs were lost as an opportunity cost.
• Only 1 of 10 green job contracts were in maintenance and operation of installed plants; the rest were working positions sustainable only in an expansive environment related to high subsidies.
• Since 2000, Spain had committed $753,778 for each green job.
• Those programs resulted in the destruction of nearly 110,500 jobs.
• Each green megawatt installed destroyed 5.39 jobs elsewhere in the economy.
Core insight
Methods of the King Carlos study have been criticized by renewable energy supporters. But the critiques ignore the core insight: that the costs of subsidies for noncommercial energy must be paid with money that would support jobs in more economically efficient activities elsewhere.
Heavy spending on renewable energy that can't otherwise compete hurts more than helps the economies in which it occurs. Just look at Spain.
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