HIGH NOON FOR SPANISH LIES ABOUT NEW ENERGY AT MARKEY HEARING

Original reporting on testimony at the "Solar Heats Up" hearing of the House Select Committee on Energy Independence and Global Warming
Herman K. Trabish, September 28, 2009 (exclusive for NewEnergyNews)

Reports began emerging early this year questioning the claims made by the New Energy industries about the net gains in jobs their growth will provide.

The questions were based on Study of the Effects on Employment of Public Aid to Renewable Energy Sources by Gabriel Calzada Alvarez, Ph.D., Professor of Economics at King Juan Carlos University.

To confront Dr. Calzada Alvarez about his paper’s findings, Representative Ed Markey (D-MA), Chair of the House Select Commttee on Energy Independence and Global Warming invited the good Professor to testify at a Committee hearing.

Before relating the events of the hearing as they pertained to Dr. Calzada Alvarez, it is necessary to describe what happened when people began taking a closer look at his paper.

After reports about the study’s claims appeared in mostly business and conservative media sources and the claims found their way into debates about pending U.S. energy and climate legislation, the truth about its flaws were authoritatively and conclusively revealed in NREL Response to the Report Study of the Effects on Employment of Public Aid to Renewable Energy Sources from King Juan Carlos University (Spain) by Eric Lantz and Suzanne Tegen of the National Renewable Energy Laboratory, a U.S. Department of Energy research facility.

The essence of Dr. Calzada Alvarez’s paper was his finding that the federally subsidized Spanish feed-in tariff (FiT) that drove accelerated growth in Spain’s solar energy industry and other New Energy industries eliminated 9 Old Energy jobs for every 4 New Energy jobs it created. On the basis of this statistical finding, which turned out to be of dubious merit or accuracy, Calzada Alavarez concluded federal spending to drive New Energy growth is unwise because only the unfettered marketplace can effectively drive sustainable growth.

Setting aside recent reports conclusively indicating that worldwide subsidies of Old Energy far outstrip those to New Energy (see OLD ENERGY DEPENDS ON FED SUBSIDIES and OBAMA CALLS FOR END TO OLD ENERGY’S EDGE), the question remains regarding job creation.

A thorough analysis by the American Solar Energy Society last year demonstrated enormous job generation in the New Energy/Energy Efficiency area. (click to enlarge)

The most glaring inconsistency between reality and Dr. Calzada Alvarez's statistics is that Spain’s Ministry of Labor reported its New Energy industries have created 175,000 jobs while the Calzada Alvarez study never shows more than 110,000 jobs created and bases most of its calculations on a much smaller total.

As to prospects going forward, the European Commission’s prediction is that strong New Energy incentives will create a net gain of 400,000+ jobs in the European Union by 2020.

Last year, the U.S. wind energy industry alone created 85,000 jobs without noticeably compromising Old Energy employment in any way and the U.S. Department of Energy finding is that the wind industry will create a half million jobs by 2030 in the process of achieving its potential to generate 20% of U.S. electricity. (See NEW ENERGY BEATS OLD ENERGY BIGTIME FOR JOBS)

A recent Greenpeace/EREC study showed support for New Energy will produce 4 or more times as many jobs over the next 2 decades as business-as-usual and Old Energy. (click to enlarge)

The NREL critique of Dr. Calzada Alvarez’s study carries decisive power because it comes from academic peers who not only have University credentials but hold positions in a highly respected cutting edge research facility. Lantz and Tegen indict not only Cazada Alvarez’s numbers but his methods as well. They point out that his assumptions are poorly documented and his methodology incorporates little specificity. The only well-documented concrete fact he uses is total investment. Without specifically identifying the types or categories of jobs counted, the paper’s conclusions about what that spending produces in the way of jobs are little more than arbitrary.

This is the Global Wind Energy Council’s summary of the Calzada Alvarez study’s flaws: “The underlying assumption is that public investment in renewables would otherwise have been spent for employment creation by the private sector, but this claim is entirely unfounded. In Spain, the support for renewable energy came out of existing tax revenues, so it did not take any money away from the private sector, so this logic does not hold. In addition, the study does not identify the jobs allegedly ‘destroyed’ by spending in renewable energy. In Spain, renewable electricity accounted for 15% of the country’s power demand in 2008, a high share, which would otherwise have been produced by a different electricity generation technology, probably fossil fuel based. It is a well known fact that labour intensity of these technologies is far lower than renewable energy.”

Dr. Calzada Alvarez, confronted with the truth and looking none too honored. (click to enlarge)

In his opening statement, Representative James Sensenbrenner (R-WI), the Ranking Minority Member on the Markey Committee, repeated the claims in the Spanish study and then left the hearing. In his own opening statement, Dr. Calzada Alvarez once again asserted that federal spending to subsidize energy is inefficient and cited his claim that in Spain the federal subsidy eliminated 9 Old Energy jobs for every 4 New Energy jobs it created. He added the now widely known fact that Spain’s feed-in tariff (FiT) was implicated in a New Energy “bubble.”

The Professor also made mention of corruption that accompanied the bubble. While he is correct that there are numerous reports of corruption, he failed to mention that there were reports of corruption among small-time Spanish officials in other industries where there was loose money before Spain’s effort to add momentum to its New Energy industries began, and there have been reports of such corruption in other areas of the economy since. It will always be possible to associate corruption with money. The Professor offered no evidence that New Energy creates new levels of corruption and there probably is no such evidence.

Representative Earl Blumenauer (D-OR) was the first to question Dr. Calzada Alvarez. Representative Blumenauer asked the Professor to identify the jobs that Spain’s FiT caused to be created and lost. The Professor was unable to do so. He tried to hide the absence of an answer with elaborations on his econometric method. No doubt his method was academically respectable, though his peers at NREL certainly found his application of it questionable. In any case, his method did not excuse his inability to identify the relevant details of job gains and losses. If he could not identify the kinds, or even the categories, of job losses, how accurate could his study be?

It's hard to sit still for lies. Reps. (from left) Markey, Blumenauer and Inslee. (click to enlarge)

For some time after Mr. Blumenauer’s questions, the Committee ignored Dr. Calzada Alvarez and talked with other hearing witnesses who testified with authority and at length about the potential of the U.S. New Energy industries to contribute electricity, revenues and opportunity.

When Representative Jay Inslee (D-WA) returned to Dr. Calzada Alvarez, he asked the Professor to compare the results his paper described in Spain with the results obtained with the same kind of FiT program in Germany.

Germany’s FiT is recognized internationally as the ideal application of the concept. Worked out carefully since 1999, its FiT is credited with having made Germany the world leader in photovoltaic installed capacity and, until recently, the world leader in wind power capacity as well as having created hundreds of thousands of New Energy jobs.

The Professor’s answer was that he hadn’t studied Germany’s program.

Germany's use of subsidies is widely regarded as wise and effective. (click to enlarge)

It is now widely recognized that while Germany’s FiT was carefully designed and tremendously successful, Spain’s was hastily and over-ambitiously designed, haphazardly applied and ran into the unique phenomenon of the global financial downturn before it had the opportunity to work out its kinks. (See HOW TO MAKE MORE WITH NEW ENERGY and SPAIN’S F-I-T FALL WREAKS WORLD SUN TROUBLE)

The good news: Spain's subsidy drove growth. The bad news: Spain's subsidy didn't manage growth and it got out of hand. (click to enlarge)

Calzada Alvarez’s paper is an unabashed indictment of the FiT, yet he neglected to consider why Spain’s program had been such a qualified success while Germany’s is widely regarded as an unqualified success. It almost seemed like the Professor, for some reason, wanted to intentionally ignore the FiT’s success and emphasize its failure.

As Representative Inslee pointed out, a comparison of Germany’s experience and Spain’s experience cannot help but demonstrate that the issue is not so much the FiT itself as the way it is structured, regulated and managed.

Much was learned from Germany's growth and Spain's missteps. (click to enlarge)

In his closing statement, Professor Calzada Alvarez attempted to assert that the problem with federal subsidies is that they are impotent in the absence of the marketplace’s enthusiasm for the product being subsidized and unnecessary when there is free market enthusiasm. In doing so, he made reference to the fact that as far back as the 1976-to-1980 Carter administration, there had been federal subsidies for solar energy in the U.S. but the marketplace has continually failed to respond.

That was High Noon.

Representative Markey, who was elected to Congress in 1976, interrupted and corrected the Spanish professor's faux history with his own personal account of exactly how the Carter administration's commitment to solar energy and the other New Energies had gone awry not because of a misapplication of federal funding but because of the Reagan administration’s sabotage of everything good the Carter administration had set in motion.

Markey then spontaneously and eloquently recounted with the authority of first-hand observation how Old Energy's shortsighted opposition to New Energy over the last 3 decades drove the U.S. and the world into a dangerous and destructive dependence on dirty, expensive and imported energy.

Representative Markey ended his brief eloquent correction of Dr. Calzada Alvarez's misdirection by assuring the professor that this time, under this President, with the fate of the earth and the world economy hanging in the balance, things will be different.

This time there will be New Energy and a New Energy economy because this time there are leaders like Representatives Blumenauer, Inslee and Markey in positions of power, ready to call lies like those of Professor Calzada Alvarez what they are.