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The German government is unlikely to support import tariffs for solar panels made in China despite domestic opposition to their policies. Veterans of the German renewable energy community, such as Hans-Josef Fell, have suggested that the German government’s decision to significantly reduce Feed-in-Tariffs for solar photovoltaic energy would be destroying the German solar industry. While it is true that the entire sector has come under increasing pressure, this is hardly a phenomenon that is limited to Germany. China, in fact, currently seems to suffer just as much as any other country, as the recent bankruptcy of Suntech suggests. And despite the recent stock price surge for First Solar, this doesn’t seem to be much different in the U.S., despite the trade war the country started with China.

It is important to keep in mind, that behind the push for protectionism in the U.S. is a German company, SolarWorld, which has a significant manufacturing footprint in the United States. In a paper published last year by Germany’s Heinrich Böll Foundation as second installment of a series on the German Energy Transition, Craig Morris explains why. The quick answer is, as a leading exporter Germany cannot afford a trade war with China. Morris quotes Fell acknowledging that.

More importantly, however, is the business case behind it. And Morris lays out how Germany benefits economically even if the panels installed are made in China. There are two main reasons for this. Firstly, the German solar industry is strong all along the value chain which leads to the fact that products made in China will likely lead to some value creation in Germany. Germany is particularly competitive in the equipment sector which exports production lines to China which is a more sophisticated technology than producing solar panels. Secondly, the value of services and components that are needed to install and connect the panels is actually higher than the value of the panel, and the services can only be sourced locally. Morris estimates that more than 50% of the total value creation is local.

So far, so good. Morris states that a large solar market helps Germany to secure these advantages. And here is where I would start questioning his very positive assessment of the economic benefits on Germany. The fact is that the solar boom in Germany is paid by all consumers of electricity, with energy-intensive industries paying a much-reduced fee. The size of the German market is driven by the level of Feed-in-Tariffs that the German renewable energy law guarantees. So to answer the question whether Germany really profits from local installations of solar panels made in China, we would need to consider the question whether (a) the subsidies are necessary and (b) efficiently allocated.

It seems to me that while German electricity consumers are doing the world a favor by driving down the cost of solar with the demand created by the Feed-in-Tariffs, they may not profit that much themselves as the total cost is still quite high. Morris is right to call for the U.S. to jump into solar now, because with the more beneficial weather conditions the cheap panels make even more economic sense. The U.S. would only need to brush aside bureaucratic hurdles, and a solar boom may be coming.

As to the question of why Germany is against a solar trade war, I think Morris is right: The question of Feed-in-Tarrifs aside, free trade is Germany’s best option.

In a recent interview with the German business webpage manager magazine online, Arnold Schwarzenegger, the Austrian-born bodybuilder, actor and former governor of California, sharply criticized U.S. energy policy, or, as he put it more pointedly, the lack thereof. Schwarzenegger, a champion of renewable energy during his tenure as governor, says he admires Germany’s determination to switch to (a mostly) renewable energy production in a single generation, while he despises what he sees as a lack of strategy and coordination of energy policy in the U.S.

Schwarzenegger’s endorsement of German energy policy is pretty light on facts. He doesn’t bother to discuss the Energiewende’s issues, which committed readers of this blog may be familiar with. But he is not alone in criticizing the lack of vision and coordination in U.S. energy policy. In fact, both business leaders and environmentalists are united in their criticism of current policies.

Tellingly, Schwarzenegger doesn’t offer any pragmatic proposals. He doesn’t map out which fixes would help the U.S. to become more like Germany in energy terms. He suggests that the German energy transition is better policy altogether because it is a daring plan. While enthusiasm for planning in the realm politics has yielded mixed results in the past, there is an underlying question here which deserves some scrutiny: Is Germany’s approach to energy policy more effective and more politically and economically sustainable (i.e. smarter and cheaper) than Obama’s “all of the above” strategy? I.e., is the Energiewende, which could be dubbed “either/or” in policy terms as it plans to first phase out nuclear and then fossil fuels altogether, better suited to tackle climate change and cheaper than Obama’s approach? Note that this question is asking for actual effects rather than lofty rhetoric and long-term planning objectives.

The question couldn’t be timelier, as with last week’s nominations for the relevant cabinet positions, the outlines of Obama’s second term energy policy became clear. It is marked by three goals: (1) Provide affordable energy for a growing economy and a recovering middle class while (2) reducing the United States dependency on energy imports from unfriendly and/or undemocratic nations and (3) pragmatically tackling climate change. While Germany’s Energiewende may tackle the latter more explicitly, and may render Germany more energy independent in the far future, it is certainly failing on the first goal and moreover relying on Russian imports for about a third of its natural gas.

But let’s have a look at the U.S.: Obama nominated Ernest Moniz, MIT physicist, as energy secretary, and Gina McCarthy to lead the Environmental Protection Agency, where she is currently working as assistant administrator. At MIT, Moniz currently runs the school’s energy initiative, a position in which he oversaw research on pretty much any energy source known to mankind. After the Fukushima nuclear disaster, he wrote an influential article in Foreign Affairs, defending nuclear power on environmental grounds: Nuclear power plants don’t emit any CO₂ which is why we need them to tackle climate change. McCarthy may be less outspoken, but her job at the EPA may require precisely that. Coral Davenport reported in the National Journal, that Obama remains quiet about Climate Change for strategic reasons, but his administration is determined to tackle the problem nonetheless: not through legislation, which is currently unthinkable in Washington due to Republican denial of climate science and their determination to kill any relevant bill, but through the regulatory authority of the EPA, and in consultation with industry and other business leaders. She writes:

“Inside Washington, in a warren of back rooms at EPA, dozens of environmental officials are working to craft landmark climate-change regulations that they hope will curb industrial pollution—and withstand a tsunami of legal and political attacks. To help them do it, they’re inviting in heads of the industries and businesses that will soon be forced to implement the rules. Business leaders, although they’re not happy about the coming regulations, are jumping on the opportunity to communicate their concerns and perhaps help shape the rules they’ll have to live by. And the Obama administration hopes that the dialogue will help defuse some of the opposition to come.”

If we accept that Obama will tackle climate change through enhanced regulation by the EPA, two major differences between the U.S. approach and the German approach remain: Nuclear power, obviously, but more importantly shale gas. While Moniz’ nomination was sharply criticized by environmentalists because of his favorable position on fracking (even if DoE does not have jurisdiction over that issue, as some acknowledge), Germany is effectively rendering fracking in the country impossible and is instead using lignite to back-up the intermittent renewable energy production. This negatively affects Germany’s over-all CO₂-emissions, because gas burns cleaner than lignite. While the U.S. is reducing its carbon footprint by switching from coal to gas, Germany is struggling to do the same even though it invests heavily in renewable energy.

This means, however, that despite the lofty rhetoric around Germany’s Energiewende – and Mr. Schwarzenegger’s endorsement, the de facto effects of these policies are not that convincing. The U.S. “all-of-the-above” energy policy may be better policy – if it includes serious attempts to tackle climate change. And it may be politically and economically more viable.

The liberal blogosphere in the U.S. is full of ridicule and mockery of FOX News these days. Not that this is a new thing, but at issue today is a rather funny claim by Shibani Joshi, the network’s business reporter. In a recent show, she claimed that Germany is more successful in developing its solar industry than the U.S. because it is smaller – and has more sun.

Anyone who ever visited Germany – or recently looked at a map – knows that the country is not exactly known for a holiday in the sun. Berlin is located further north than Calgary, Munich is roughly on the same latitude as Seattle, and none of these places are known to be particularly sunny. Some of my readers may know that New York City is located slightly further to the south than Naples in Southern Italy, which leaves most of the lower 48 States exposed to much more direct sun and therefore more intense solar radiation than Germany could ever dream of. Phoenix, Arizona, for instance, is roughly the same latitude as Baghdad in Iraq, and a similarly great location to harvest the energy of the sun. To make a long story short, in light of these facts the U.S should be the much better place to invest in solar than Germany.

Yet Ms. Joshi’s mishap and the upheaval it triggered in the blogosphere point to a more relevant and interesting issue: Policy and energy investments. While the entire episode on FOX was apparently designed to discourage the Obama administration from handing-out additional solar subsidies, Ms. Joshi correctly stated that policy plays a major role for any energy source in the U.S.; a point so important that she reiterated it in her correction on the network’s website.

This statement might have actually benefited from a closer look at the German case. As I have previously stated in this blog, the German renewable energy boom is purely policy driven, and as such a great success. Germany’s Energiewende, or energy transition, does however create myriad challenges, such as exploding costs and energy prices, grid instability and volatile (intermittent) renewable energy production, and the urgent need for conventional back-up capacity without a business case to support it. Successful as the German feed-in-tariffs may be in unlocking investment in solar, a serious discussion could point to the fact that even successful energy policies have a downside. But once they are instated are very difficult to change. From there you could draw conclusions for the U.S.

Ms. Joshi unfortunately missed that opportunity.

This is a particular shame because, in light of these facts, she could have discussed new and innovative financing models for solar that are currently being developed, and may prove to be more cost efficient than Germany’s feed-in-tariffs. As the New York Times recently reported, the U.S. renewable energy industry is looking into using existing tax advantages like the master limited partnership and the real estate investment trust to help make financing for solar easier and cheaper. To Ms. Joshi’s point that all energy development relies on policy, these two investment structures would use tax breaks that are usually connected to oil and gas or real estate industries to create a business case for solar. In a similar vein, the Financial Times reported that bankers are currently creating solar bonds that are backed by cash flows generated from leasing solar panels to businesses and homeowners.

Both of those approaches could lead to the U.S. benefiting from its abundant sunshine while protecting taxpayers’ (and energy users’) pockets from the largess of Germany’s feed-in-tariffs.

And American energy consumers could enjoy more holidays in the sun.

Following the Queen’s Speech, today the Government publishes its landmark piece of legislation to reform the electricity generation market in the UK. The draft Energy Bill contains the long-awaited Electricity Market Reforms, which are intended to provide the support necessary to balance future electricity generation over a mix of energy sources in order to reduce dependence on any one source and to meet carbon reduction targets. Against a challenging economic backdrop and with a fifth of existing generating capacity due to be retired from the grid in the next decade, these reforms are critical to ensuring the lights stay on while meeting our commitments to cut carbon emissions.

Overview

The key part of the Electricity Market Reform (EMR) are ‘market mechanisms’ designed to transform our generating capacity. The first of these is the introduction of Feed-in-Tariffs with Contracts for Difference (CfDs), long-term instruments designed to provide stable and predictable incentives for companies to invest in low-carbon generation. This will replace the system of Renewables Obligations (RO), which is due to end in 2017.  DECC has also committed to working with industry on Final Investment Decisions (FID) Enabling to enable some investment to begin in advance of the CfD regime coming into force. The second is an Emissions Performance Standard (EPS) that will limit carbon dioxide emissions from fossil fuel power stations by setting emissions standards for all new fossil fuel powered generation. This will prevent the construction of new coal plants which emit more than 450g/kWh.

Further support for the market mechanisms is the introduction of a Carbon Price Floor. This was announced by the Chancellor in the 2011 Budget and was introduced in the Finance Bill. This provides a clear economic signal to move away from high carbon technologies by increasing the price paid for emitting carbon dioxide. It places an initial value on the price of carbon of around £16/tCO2 (2009 prices) in 2013, which will rise to £30/tCO2 (2009 prices) by 2020. This will be complemented by a Capacity Market that will, if required, provide security of electricity supply by ensuring sufficient reliable capacity is available.

The measures are set to increase consumer bills, although the Government argues the rises will be less than if the UK carries on without reforms. The Department of Energy and Climate Change estimates the average bill will increase by GBP160 by 2030 instead of the GBP200 rise predicted if the market is left as it is. The costs of this investment will preoccupy media interest today and in the coming weeks, especially as consumer bills continue to rise and incomes tend to fall. One aspect of energy policy that will be critical to ensure that the cost increases stay within Government targets is the drive to improve the energy efficiency of the UK’s housing stock, and therefore reduce energy usage. The Green Deal is not part of the Energy Bill, but will be very important to achieving the Government’s affordability ambitions.

In addition to EMR, the Energy Bill also aims to ensure that Government and regulator Ofgem are aligned at a strategic level through a Strategy and Policy Statement (SPS). The Bill also establishes a new nuclear regulator, the Office for Nuclear Regulation, to regulate the building of new nuclear power stations. Finally, the Bill contains provisions that will enable the sale of the Government Pipeline and Storage System (GPSS). The Parliamentary Under Secretary of State for Defence Equipment, Support and Technology, at the Ministry of Defence provided a separate Written Ministerial Statement about this.

Gas

The Government have said that gas will continue to play an important role in the transition to a low-carbon economy, to provide flexibility and help maintain security of supply. A separate strategy on the role of gas will be published in autumn 2012. This is the subject of a public consultation and the deadline for submissions is 28^th June 2012. Also the Government announced earlier this year that the Emission Performance Standard for gas fired power stations in the UK that will allow them to continue to operate until 2045. Gas may well play a critical role in filling any gaps in supply created by a delayed roll out of the EMR.

Nuclear

The introduction of CfD for nuclear, together with other forms of low-carbon generation, is an important part of the Government’s plans to support the construction of new nuclear capacity. Some commentators have suggested that the EMR has been designed firstly to accommodate the nuclear consortia that are bidding to build new nuclear reactors, to the detriment of other energy sources. This is primarily because the Government have stuck to their no subsidy line for nuclear. This appears to provide very positive reading for nuclear and DECC appear very ready to engage with project developers in the short term before CfD comes into force. This will be welcomed by EDF Energy, who today suggested that they may apply to extend the life of their existing nuclear power stations.

Renewables

The CfD is seen by many commentators as favouring developers of larger renewables projects, but as an industry the EMR will be welcomed as a first step to providing the investment certainty required to build new capacity, especially the third round of offshore wind. For developers though the devil will be in the details and there remain some questions about issues like the tenure of CfDs, the details about contracting parties on CfDs, but perhaps most importantly around the proposed timeline for implementing EMR. The industry suggests these timelines look ambitious. The CfD must be in place to support investment decisions before the end of the RO, which currently expires in 2017.

While the Chancellor’s freeze on fuel duty is likely to grab the headlines, on deeper reflection this afternoon’s Budget announcement is indicative of the Coalition Government’s struggle to fulfil its goal of reducing emissions at the same time as it looks to squeeze spending.

With DECC and the Treasury having fought a running battle over the Green Investment Bank’s ability to raise funds, it looks – as had been anticipated – as though the Treasury has got its way. This will undoubtedly be viewed as a setback for Secretary of State for Energy and Climate Change Chris Huhne, and his Liberal Democrat colleagues.

So much for ducks quacking and banks borrowing eh?

Worries about rising energy prices are also behind the decision to slash the CCS Levy, while the Government has clearly taken note of the need to incentivise the Green Deal at a time when most consumers are more concerned with making ends meet than lowering their carbon footprint (a subject that Huhne spoke about at the launch of the CBI report ‘Making the Consumer Case for Low Carbon’ which was held at H&K 2 weeks ago)

In this context, green campaigners and investors in green technology look set to be disappointed. Many have already begun to argue that the carbon floor price will not drive investment into the more conceptual forms of clean energy or improved efficiency at the proposed level. Nuclear looks like the winner in this regard at the moment, but events in Japan may well put the brakes on the new build programme in the UK as they have elsewhere.

Ultimately for all those involved in the energy sector, whatever their sentiment towards today’s announcements, the 2011 Budget serves as a stark reminder of the difficulties that lie ahead for the Coalition in its quest to become ‘the greenest government ever’ in an age of austerity.

Expanding unrest in the Middle East has jolted the oil market, sending crude to $119 a barrel since Egyptians first took to the streets in January. The oil market doesn’t like uncertainty, and nothing could be more uncertain than the volatility spreading to Libya, Africa’s third-largest oil supplier, and Tunisia. Some analysts are even concerned about Saudi Arabia.
Rising oil prices mean rising gasoline prices, which have surged to an average of about $3.13 a gallon at the pump in the U.S. This comes on the cusp of the summer driving season, when prices usually peak as Americans hit the roads.
Some analysts say oil could reach $220 a barrel if Libya and Algeria halt exports. The U.S. Energy Information Administration said Feb. 8 that the monthly average retail price for regular gasoline could exceed $3.50 a gallon during summer 2011. And that was before the Libyan situation developed.
What typically follows these price upticks is a round of Congressional hearings as indignant constituents’ wallets are squeezed.
Surging oil prices usually bring a fresh look at renewables too, so green energy companies should be prepared to seize the moment. Companies involved in alternative fuels such solar and wind can use this time of high oil prices to once again showcase their offerings.
This would also be an opportune time for oil companies to press for Gulf of Mexico drilling permits, long stymied by the ghost of Macondo.
Times of unrest often call for times of new beginnings.

So following Larry Hagman’s (Dallas’ JR Ewing) switch to alternative energy with American solar panel company, SolarWorld, it seems solar is the hot topic of the summer!

Everywhere I look this week in the media there is a story on solar and its benefits, but is it really a friend for the future or will it turn and bite us?

A neighbour of mine has had solar panels fitted for a while now and seems quite content with them. I can see the benefit of using such a powerful natural resource as a source of power but would I put solar panels on my roof? Not likely to be fair and I’m sure I’m not alone in this view, although reports from BBC show that more than 2,000 homeowners have already had solar panels installed and are using electricity for free.

Now it seems the government has chosen solar as its new ‘thing’ and is creating cash incentives for people who generate their own power. As we saw with the car scrappage scheme, cash incentives seem to work in this country so I’m sure we’ll see solar panels popping up left, right and centre in the near future. But as they say, you don’t get anything for free!

Whilst we’re all basking in the warm glow that solar panels will give us free electricity and reduce our reliance on fossil fuels, folks across the other side of the pond are asking questions about the long-term environmental impact of disposing of solar panels. Erica Gies’ piece on The Guardian’s website discusses what impact making and disposing of solar panels has on the planet and our health and it’s quite an eye-opener. I hadn’t realised that solar modules contained so many potentially dangerous materials.

I guess there’s two ways of looking at this – we either embrace solar full on, knowing that there are risks but that solutions for recycling are being investigated and that we need to have alternative fuels for the future or we wait, see how solar progresses in the next few years and hope that manufacturers find safer ways to make and dispose of panels and probably get left behind the rest of the world. Whichever way you go, it looks like solar is here to stay – all we need now is the sun!

 Now this is clever. Get the actor most associated with oil to front an ad campaign for solar energy.

J.R.Ewing

Launching last week, SolarWorld make quite a splash with an ad fronted by Mr Oil Baron himself, J.R. Ewing. The ad campaign, with Larry Hagman’s most famous alter ego, has proved a coverage generating hit getting a largely positive and amused response to his perceived u-turn. http://tinyurl.com/33rxxa7

The knowing nod to the bygone days of ‘glamorous’ oil  made me think how hard it actually is for most big energy companies to reconcile the traditional parts of their energy business with the new energy side.

We should be celebrating investment in the world of solar energy and I find it extremely rewarding to work with companies who can communicate positive achievements in renewables. However, the hard fact is that on their own renewables don’t yet provide the solution to all our energy needs. Whilst it would be great to decrease our dependance on the traditional energy sector and completely embrace solar, wind, geothermal etc. etc. we do have to accept that energy companies need to provide energy for today as well as tomorrow. Sadly, renewables don’t yet have all the solutions.

Perhaps instead we should be doing more about our own energy consumption habits so that we can be in a better position to deliver the energy we need to tomorrow.

Perhaps.

It would be good though to know what J.R. has to say about that.

Things are looking bleak. As the Government continues to predict that it will become ‘the greenest ever’, it is increasingly realising that – as Liam Byrne so eloquently put it – ‘there is no money left’.

Yesterday afternoon the Committee on Climate Change (CCC) released details of a new report that claims the UK risks failure in its quest to pioneer a low-carbon future unless it takes measures to protect and increase spending.  Low-carbon initiatives, it said, must continue to get Government support or risk falling into the ‘valley of death’ where they never reach the market.

The timing of both announcements is sure to grate on Chris Huhne and co, who, just last week took steps to cut £34m from the country’s low-carbon technology programme. Difficult questions are sure to be asked.

But this perceived ‘lack’ of investment is nothing new. The CCC claim that Britain already lags behind other developed nations in terms of the proportion of GDP spent on projects to help the country meet its carbon-reduction targets. While Japan invests 0.9% of GDP for example, Britain invests just 0.1%.

Last week I visited the Sustainable Futures exhibition at London Design Museum and witnessed first hand the role innovation and creative thinking has to play in developing the next generation of green technology.

Focussing on using local, natural resources to create and maintain a low-carbon footprint, designs range from those focussing on large communities – such as city developments in Abu Dhabi and Brazil – to ideas that help you monitor your own carbon footprint (Carbon Ration Book anyone?).

(My personal favourites include the ‘Virtual Water Footprint’ and ‘Changing Habbits’ initiatives – worth checking out)

Notably, designs from the UK were in relatively short supply. Those that did begin life in British brains remain pretty much unknown – coincidence? Perhaps. But surely this is a chance we can no longer afford to take.

As Buckminster Fuller once said, ‘the best way to predict the future is to design it’. Britain’s green future rests on giving those with innovative solutions the tools they need to make them fly. Only time will tell whether the Government’s recent cuts will damage its chances of developing a sustainable future for the UK.

You can’t escape the media’s preoccupation with energy at the moment, if it’s not new trans-continental pipelines, it’s wind farms, solar, Carbon Capture Storage and our ‘old friends’ coal and nuclear. On a daily basis we’re presented with a full gamut of energy solutions that will power our ever busy lives.

Energy is even dominating media coverage of the World Cup – from the hot air blasted out by the eardrum splitting and nausea-inducing Vuvuzela to the huge power surges during the half-time of England matches. The Bangladeshi government has even allegedly asked factories to stop production during the evenings to save electricity so that their football-mad countrymen can tune into the World Cup.

Renewables are also playing a part in this World Cup. Some Ghanaians are using solar energy to power their World Cup coverage and a new wind farm has been launched to provide energy for the Nelson Mandela Stadium in Port Elizabeth. More is expected of London in 2012. A key indicator of whether we are able to move to a low-carbon future is our capacity to produce renewable energy for major sporting events as well as for industry and private households.

So as I write this with the next England match only hours away when millions of televisions and radios will be switched on and fridges rammed with six-packs of beer, I’d be interested to know how much energy is used directly or indirectly as a result of the World Cup. Do these figures exist?