How to Enter the Global Green Economy

When New York City wanted to make the biggest purchase of subway cars in U.S. history in the late 1990s, more than 3 billion dollars worth, the only companies that were able to bid on the contract were foreign. The same problem applies to high-speed rail today: only European or Japanese companies could build any of the proposed rail networks in the United States. The U.S. has also ceded the high ground to Europe and Japan in a broad range of other sustainable technologies. For instance, 11 companies produce 96% of medium to large wind turbines; only one, GE, is based in the United States, with a 16% share of the global market. The differences in market penetration come down to two factors: European and Japanese companies have become more competent producers for these markets, and their governments have helped them to develop both this competence and the markets themselves.

Let’s take Germany as an example. Even though the sun is not so shiny in that part of Europe, Germany has put up 88% of the PV photovoltaics for solar power in Europe. Partly, this was the result of a feed-in tariff (FIT); that is, Germany guarantees that it will pay about .10 Euro per kilowatt/hour of electricity to whoever produces wind or solar electricity. The average for electricity that is paid for nonrenewable sources is about .05 Euro per kwh, so Germany is effectively paying double for its renewable electricity in a successful effort to encourage its production. Every year, the guaranteed price is lowered, so that the renewable sector can eventually compete on its own, having gotten over the “hump” of introducing new technology.

But Germany’s other advantage is that it is a world leader in manufacturing renewable technology equipment. 32% of the solar equipment manufacturers in the world are located in Germany. In addition, almost 30% of global wind turbine manufacturing capacity is German.

In Denmark we can see the advantages of good policy plus competence in building machinery. The world’s largest wind turbine manufacturer, Vestas, is Danish. According to the Earth Policy Institute, “Denmark’s 3,100 megawatts of wind capacity meet 20 percent of its electricity needs, the largest share in any country.” The Danes have created a fascinating experiment in democracy by building most of their wind turbines through the agency of wind cooperatives, which may be joined by individuals and families.

Spain has undertaken one of the most ambitious programs in wind, solar, and high-speed trains. The Gamesa Corporation is the second largest wind turbine manufacturer, and Acciona Energy is the largest wind-park developer. The Spanish government has very ambitious plans for wind production, and occasionally wind power provides as much as 30% of the country’s electrical power.

Spain is also the world’s fourth largest producer of solar energy equipment, and is a leader in the development of concentrated solar power (CSP). CSP is a form of solar power obtained by using a very large quantity of mirrors, typically, to concentrate solar rays onto a tower that produces steam, which then turns a turbine, generating electricity. They are often built in deserts, and can be spread over several acres. These new solar technologies will probably result in lower cost electricity for long-distance applications than photovoltaics.

Asia is an important producer of renewable energy and train equipment as well. As of 2006 Japan produced about 39% of the solar cells in the world, and has encouraged solar energy in Japan with subsidies for purchasing the equipment as well as generous research budgets. Japan’s Shinkansen high-speed rail network covers much of the country. China is set to take off as one of the world’s biggest solar and wind equipment producers, owing to its rise as a manufacturing nation.

But Europe and Japan’s dominance in renewable technologies is really based in a broader domain of competitive competence. They dominate the most fundamental sector of the economy, namely the production of machinery for manufacturing industries in general (often referred to as the mechanical engineering sector). According to statistics compiled by the European Union (EU), the EU produces almost twice as much industrial equipment overall as the United States; Japan produces almost as much as the US, with about half the population. The split among the EU, US, and Japan, which together produce most of the world’s machinery, is 52%, 27%, and 21%, respectively.

A robust industrial sector is the infrastructure we need for building the tools that will help us to avert climate catastrophe. Think of the industrial sector of an economy as an ecosystem. Instead of the grass and leaves that feed the plant-eaters that feed the meat eaters, a modern economic ecosystem contains industrial equipment that makes production technology that creates the goods and services that people consume.

The different “niches” of an economic ecosystem, such as the various machinery and equipment sectors, thrive as a self-reinforcing web of engineers, high-skill production workers, operational managers and factories. As of 2003, Europe’s manufacturing sector made up 32% of its nonfinancial economy, while the manufacturing sector of the United States comprised only 13% of its nonfinancial sectors. The decline of American machinery and manufacturing sectors, in conjunction with the on-again/off-again nature of American renewable energy policy, explains why Europe and Japan are so far ahead of the United States in the transition to a more sustainable economy.

And America’s decline can be traced to one overriding factor: a military budget that comprises nearly half of the world’s military spending. For decades, as the late Professor Seymour Melman showed in many books (such as After Capitalism) and in numerous articles, the Pentagon has been draining, not just money, but also the engineering, scientific and business talent that Europe and Japan have been using for civilian production. As Melman often pointed out, the U.S. military budget is a capital fund, and American citizens can use that fund to help finance the construction of the trains, wind and solar power, and other green technologies that will help us to avoid economic and environmental collapse.

That economic collapse, if it comes, will be caused by two major factors: the end of the era of cheap oil, coal and natural gas; and the decline of the manufacturing and machinery base of the economy. Both problems can be addressed simultaneously, as Europe and Japan are showing, by moving the economy from one based on military and fossil fuel production to one based on electric transportation and the generation of renewable electricity.

Jonathan Rynn, Ph.D., is a frequent contributor to the Grist environmental blog and a contributor to Foreign Policy In Focus.
  • serious joe

    This article was by Jonathan Rynn. Edited by Miriam Pemberton, June 13, 2008. It is now 2014, a good time for a review. The author and editor were, essentially, lecturing the rest of us, emploring us to follow Germany’s lead. Go solar, go wind, get your energy from the weather. How is that working out? (bad!)

    The author goes on and on, citing how other countries are doing things “right” (by building cool stuff like trains, windmills, solar panels… you can plainly see the bias). Is it so wise to be a country that makes windmills and solar panels? In 2008, maybe it seemed so. The powerful bias of governments, manipulating the markets with guarantees and subsidies, passing out huge amounts of green money… so if you wanted to suck on the teat of the taxpayer and make yourself rich, sure, it seemed like a great thing. So let’s take a look at Germany now:

    Much of what is reproduced, below, comes from:
    http://srsroccoreport.com/germany-death-of-renewable-energy-bring-on-the-dirty-coal-monsters/germany-death-of-renewable-energy-bring-on-the-dirty-coal-monsters/

    Germany’s Vice Chancellor, Sigmar Gabriel, declared Germany’s ‘Energiewende’ to be on the verge of failure. Gabriel is a devout believer in global warming and in Al Gore’s Inconvenient Truth; Gabriel was the country’s environment minister, before he became the national economics minister and vice chancellor. He is also head of Germany’s socialist SPD party.

    Gabriel: “The truth is that in all fields we under-estimated the complexity of the Energiewende.” He said this to a select audience, employees of SMA Solar… Germany’s leading manufacturer of Solar technology.

    “Those who are the engines of the transformation to renewable energies, that’s you, you don’t see how close we are to the failure of the energy transformation.”

    The solar energy audience reacts with dead, stunned silence. That can’t believe what they just heard. Many in attendance seemed unable to fathom what Gabriel was unloading: the heady days at the green energy feeding trough are over.

    This announcement crushes the aspirations of the advocates of weather-power. One of the major problems with weather-power is that it isn’t financially viable, without huge government subsidies and long-term contracts that pay 2 to 4 times more for wether-power, compared to what is paid for energy from fossil fuels. It’s just too damned expensive.

    SRSrocco: “Since the introduction of the “Renewable Energy” law (EEG) in 2000, the household price for electricity has jumped by more than 200%.

    German customers now pay the second-highest electricity prices in Europe.

    At the same time, the task of stabilizing the grid against the massive erratic influx from solar and wind power plants that produce without regard for actual need has pushed the [electrical grid] operators to their limits. … [Germany’s] … [weather power amounts to] 13% of total electricity production, … [but weather power’s] unreliable input is massively imperiling the stability of the grid.

    Another major problem with Wind & Solar is the [replacement] of … [electrical power generation capacity] on the grid when wind stops blowing and the sun goes down.

    This wasn’t much of a problem when solar and wind were only a small part of the electric power generation pie. However, now that the total amount of generated solar and wind power account for 13% of Germany’s electricity, it’s become a BIG PROBLEM…. and will only get worse as more renewable sources are added.”

    Monsterous solar facilities, like Germany’s, conveniently come on-line as the sun comes up, which matches up pretty well with the rise in demand, as the day starts. Peak power is produced as the sun is high in the sky, which nicely matches the heavy air-conditioning demand that comes with a hot day in Southern California. But what happens when a few clouds cross the marvelous photovoltaic cells? … a sudden and unpredictable reduction in output power. A decent sized storm cloud can cut output from the solar panels to a very significant extent… just when peak afternoon demand hits… But what happens on a nice spring morning, on a Saturday or Sunday, when the wind is blowing and the sun is shining, and nobody is using electricity? Well, at least not using as much as those wind turbines and solar cells are cranking out… Wind turbines don’t throttle back, and we don’t have window-blinds over the photovoltaic panels to moderate the sunshine hitting them. Excess solar and wind power generated in Germany has been such a problem for them that they have actually PAID other european countries to take their excess power (lest the grid frequency soar, and the grid collapse.)… they PAID to get rid of their excess power! How is that for a “return on investment”?

    Power companies must have dispatchable generation capacity reserves to make up for the wild variations of power production caused by including weather power on the grid. The best available technology is natural gas turbine power plants (it’s the practically the only kind of power plant that can be dispatched – that is, it can ramp up, and ramp down, rapidly enough to compensate for fluctuations in output from solar and wind).

    At any point in time, at all points in time, the electrical generation of power must exactly match the power being consumed on the grid… no more, no less. The grid cannot store electrical power (well, some grid systems can, and do; that storage capacity, where it exists, is a tiny fraction of the grid capacity, and is already allocated, and jealously coveted, though. Likely the best is called “Electric Mountain” in Wales. http://www.electricmountain.co.uk

    See http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=2&pid=82&aid=7&cid=regions&syid=2004&eyid=2008&unit=MK for others).

    WSJ: “Energy storage is one of the key missing elements in integrating high levels of renewable energy from variable sources like solar and wind,” said Colton Ching, Hawaiian Electric vice president for energy delivery.

    http://online.wsj.com/article/PR-CO-20140505-901204.html

    Invests.com: “The stability of the grids depends on a delicate equilibrium of demand-supply chain called frequency regulation. Draw more than the plant can produce and the system will collapse…”

    http://invests.com/energy-storage-is-the-next-killer-app/20140512552916302

    An excess of electrical power will cause generation facilities to be “turned down” or “throttled back”, or if that isn’t rapid enough, “dumped” off the grid (lest the frequency of the grid soar above 50 Hertz, for the Europeans, like Germany). If that facility is a significant percentage of the power generation, disconnecting it may then create another situation where load exceeds generation capacity. A mismatch between load and power available on the “grid” will cause loads to be shed; to some homes, this means that the “smart” equipment switches off non-essential stuff like electric hot water heaters or air conditioning equipment… If that isn’t enough, blackouts happen (lest the frequency of the grid dip below 50 Hertz; for the USA, Canada, and others, the frequency is 60Hz.).

    These “Frequency Responsive Spinning Reserves” end up consuming about the same amount of fossil fuels that the grid system saved by bringing in weather power. A new Combined Cycle Gas Turbine power plant (run at steady power levels) is very efficient… but if you make it dispatchable, (make it compensate for variations from weather-power) then it is less efficient (just like your car, if you have a steady foot on the gas pedal, you get good economy, but if you floor it, then brake hard, then floor it, then brake hard… your economy suffers).

    It takes about ten thousand dollars’ worth of natural gas, and about eight hours, to take a gas power plant from “off” to “on” and ready to connect to the grid… so it becomes cheaper to just keep them on-line, burning gas, generating little to NO electricity, so that, at any moment, they can jump in and pick up load from slacking wind or solar facilities… in order to keep the grid stable.

    With any technology we have today, or for the next decade, a weather-powered electrical grid is absolutely impossible (if the grid is to be kept stable, that is, at the correct frequency, and the appropriate voltage, within specifications).

    Germany broke the bank on weather power! What are they doing now? They are dumping the subsidies for weather power, and bringing COAL POWERED electrical generating facilities on-line as fast as they can… Why? weather-power (solar, wind) has taken the cost of electricity from 0.20 (2000) to 5.28 (2013)… twenty-six times more expensive, and, at 13% weather-powered, they faced the grid instability discussed here. Germany does not have easy access to natural gas, and has a tiny amount (0.699GW) of pumped hydroelectric grid storage to counterbalance the 25GW of solar and 29GW of wind (2011 figures).

    http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=2&pid=2&aid=7&cid=r3,&syid=2011&eyid=2011&unit=MK

    Sunshiny O’ahu-based Hawaiian Electric Company has STOPPED allowing any more solar-paneled homes to connect to the grid.

    Scientific American: “HECO, in September [2013] told solar contractors on Oahu that the island’s solar boom is creating problems. On many circuits, the utility said, there’s so much solar energy that it poses a threat to the system and a safety issue.”

    http://www.scientificamerican.com/article/a-solar-boom-so-successfull-its-been-halted/

    Why? Grid instability. Unstable power from weather-power generation… HECO is unable to dispatch its oil-fired generation facilities adequately to compensate for solar and wind power variations. Dispatching, to the extent that they are able to do it, reduces efficiency, and drives up the costs of generated electricity. They are working on new specifications that will require home solar panels to automatically disconnect themselves from the grid when the grid frequency rises (some of the old ones could do that, too, but their settings were too high; the new ones disconnect sooner). HECO has also put up a “wanted, dead or alive” poster; that is, a Request For Proposals, asking for anybody with an electrical energy storage system capable of 60 to 200 MW for up to 30 minutes. It’s a sign of desperation, as HECO’s government regulator has demanded that they accommodate more homeowners’ requests to tie in their solar panels to the grid.

    This grid-instability-dispatching problem will thwart any attempt to implement weather-power beyond single-digit percentage of generation baseline.

    Charles Wang, with the Hawaii ECO Project, at a solar conference in San Diego earlier this month warned people from other states that Hawaii is a “cautionary tale” and “something that you will face down the road in your marketplaces.”

    http://www.scientificamerican.com/article/a-solar-boom-so-successfull-its-been-halted/

    Honolulu Star Advertiser: “Such a [storage] system would help offset the volatility of solar and wind energy that can negatively affect the quality of power on HECO’s power distribution grid.

    “http://www.staradvertiser.com/news/breaking/20140502_HECO_pursues_energy_storage_system_so_it_can_take_more_PV.html

    • serious joe

      “…wind generation has been the fastest growing form of renewable energy in Europe and the United States in the past decade. Like other forms of generation reliant on underlying weather conditions, wind generation output is variable, i.e. the output of these units depends upon weather conditions that cannot be controlled by the operator of the generator. As well as being variable, wind generation also faces a challenge of being relatively unpredictable. Since the underlying energy source cannot be directly controlled, the renewable generation is high when conditions are favourable and low when unfavorable.”

      http://erc.ucd.ie/files/theses/Eleanor%20Denny%20-%20A%20Cost-Benefit%20Analysis%20of%20Wind%20Power.pdf

      Go solar, go wind, get your energy from the weather. How is that working out for ya?

      03Apr12 German solar panel manufacturer Q-Cells bankrupt

      http://www.renewableenergyfocus.com/view/24937/germany-s-q-cells-to-file-for-bankruptcy/

      08Nov12 German offshore wind farm developer Bard goes bankrupt

      http://www.renewablesinternational.net/bard-is-bankrupt/150/435/74916/

      26Nov12 German wind-turbine manufacturer Fuhrländer has filed for bankruptcy

      http://www.rechargenews.com/news/policy_market/article1298448.ece

      08Mar13 Germany: SIAG Rescued from Bankruptcy

      http://www.offshorewind.biz/2013/03/08/germany-siag-rescued-from-bankruptcy/

      05Jul13 Germany’s Gehrlicher Solar AG went bankrupt, has found a new investor

      http://www.renewableenergyfocus.com/view/33803/gehrlicher-solar-ag-finds-investor/

      10Jul13 Conergy AG has opening of insolvency proceedings at the district court of Hamburg.

      http://www.sunwindenergy.com/news/conergy-ag-files-bankruptcy

      11Sep13 Windreich GmbH, the largest German offshore wind farm developer, is insolvent.

      http://www.germanenergyblog.de/?p=14260

      23Jan14 Xtreme Power, Grid-Scale Energy Storage Startup, Files for Bankruptcy

      http://www.greentechmedia.com/articles/read/xtreme-power-grid-scale-energy-storage-startup-files-for-bankruptcy
      15Apr14 Xtreme’s assets acquired by Younicos, a Berlin-based grid battery & energy management startup.

      http://www.greentechmedia.com/articles/read/bankrupt-grid-battery-alert-xtreme-power-bought-by-germanys-younicos

      23Jan2014 Prokon Regenerative Energien GmbH, based in Itzehoe, Germany, went bankrupt.

      http://www.bloomberg.com/news/2014-01-23/germany-zeros-in-on-financial-products-as-prokon-fails.html

    • serious joe

      One of the major problems with weather-power is that it isn’t financially viable, without huge government subsidies, and long-term contracts. Germany has the “Feed In Tariff (FIT)” and contract-guaranteed payments to weather power.

      As an example of a huge government solar subsidy, the US state of Oregon, in 2010, offered 65 US cents per kWh, guaranteed for fifteen years, while the cost of electricity from the grid was six to nine US cents per kWh. Fortunately for the rest of us, the offer was limited… and all the available commitments were “sold out” quickly.
      http://www.greentechmedia.com/articles/read/oregons-feed-in-tariff-sells-out-in-15-minutes

      In Texas, Austin Energy has agreed to a long-term purchase agreement to pay US $10 million a year for 25 years, for the electricity generated by the Webberville Solar Farm. That works out to more than 15 US cents per kWh just in the long-term purchase contract (no mention of tax breaks).

      “Gemini Solar president, Kristina Peterson, said the tax credits that were initiated by the 2005 Energy Bill, and extended by Congress last October for eight years, have already been factored into the price the firm submitted to Austin Energy. Such tax credits amount to 30 percent of a project’s development cost, but she declined to disclose the ITC [input tax credit] amount [that] Gemini is expecting to receive from the Webberville project.”

      http://www.bizjournals.com/austin/stories/2009/03/02/daily49.html

      “The output power [of the 30MW Webberville Solar Farm] is priced in at 16.5 cents per kilowatt-hour. That was just a few years ago. The typical residential customer in Austin currently pays about 10-11 cents per kilowatt-hour.”

      http://www.texasobserver.org/texas-solar-power-day-sun/

      Willem Post writes more about USA subsidies and breaks: “2.3 cents per/kWh ‘production tax credit’; its pre-tax value is about 3.4 c/kWh, depending on tax rates. This credit is not trivial, as the USA average grid price is about 5 c/kWh …

      - accelerated depreciation to write off the entire project in 5 years, 50% in the first year, just for wind turbines, plus
      - the 2.3 c/kWh production tax credit, PTC, for 10 years, or
      - in lieu of the PTC, receive a 30% investment tax credit, ITC, or
      - in lieu of the ITC, receive a 30% CASH GRANT at commissioning of the project, in case the wind turbine owner claims he has no taxes due against which to apply the ITC; “1603c clause of ARRA”, plus other
      - government grants, low-cost loans, and loan guarantees, plus
      - the socializing, via rate schedules, of various other costs that are mostly hidden/not-easily-identified, as explained in detail in the ATI report by George Taylor, Ph.D. and Thomas Tanton, each with decades of experience analyzing the economics of energy systems. http://eelegal.org/wp-content/uploads/2013/09/Hidden-Cost.pdf

      http://theenergycollective.com/willem-post/310631/more-realistic-cost-wind-energy

      Warren Buffett told Fortune Magazine, May 6, 2014 – “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.” http://canadafreepress.com/index.php/article/63122

      • serious joe

        Germany’s laws essentially require that weather power must be used when it is produced. Some say wether power has a ‘priority access to the grid’, others say the laws require that Germany “must use” weather power. Curtailment of weather power production is just not done, apparently because the law requires it to be that way. Somehow, the variable nature of weather power must be dealt with, to keep the power grid stable and within specifications. Methods to deal with that are: Export & import, Storage, compensation by other electrical generation facilities, or, as a last resort, curtailment of weather power input to the grid. Oh, there is one solution that is a bit more extreme, but is growing ever more likely – shut it all off. That’s called a blackout.

        Germany’s grid is tied to France, Bénélux, Denmark and Sweden; in turn, to other countries’ grids; some buffering of supply and demand can take place across these inter-ties, so Germany’s grid does not operate in isolation. Sunshiny O’ahu-based Hawaiian Electric Company (HECO) does not have inter-ties with other countries, so it has fewer options. HECO is used as an illustrative example, several more times.

        Excess production can be exported to other grids, to the extent that they can accept it. A shortfall in production can be met by importing power across the inter-tie from a grid that can produce it. Unplanned shortfalls in generation capacity, met with purchases from other grids, across the inter-tie, are generally transacted at higher prices. Unplanned exporting of excess production, across the inter-tie to other grids, can sometimes be at negative prices, paying the other grids to take the power. Planning and scheduling production is the most economical way to produce power.

        Excess production can be passed into a storage facility, and excess demand can be met by withdrawing energy from a storage facility. Germany has a tiny amount (0.699GW, about 2% of total capacity) of pumped hydroelectric grid storage, where water is pumped (using the excess electricity) into the reservoir of a hydroelectric facility. Later, the water can be run through the hydroelectric generators, recovering about 80% of the energy stored by pumping water. 99% of the world’s grid storage is pumped hydro. Germany does not have much hydroelectric generation capacity. Hawai’i does not have any storage facilities. Hydroelectric generation is often subject to other conditions and restrictions, such as stream flow minimums and maximums, water storage and release requirements for droughts, lower reservoir water levels before anticipated heavy rainfall, for flood control, and conditions required to be maintained for the benefit of non-human life, humans-be-damned, so not all hydro capacity is available for storage.