Today, far less natural gas is flared off both in terms of volume and, consequentially, as a percentage of our much higher current energy consumption. Oil prices have, of course, risen dramatically over the past 40 years, but environmentalists have also been working hard to get oil and gas companies to reduce gas flaring. Nonetheless, it is estimated that the world still flares off several weeks’ worth of natural gas supply each year.

Left with far fewer resources, future generations will be dumbfounded at our wastefulness. Why did we not take action sooner?

Ask anyone today, and the answer would be that we leave matters up to the market. And for a long time, the market’s answer was that natural gas was a waste product of oil extraction in many cases. We chose to implement legislation banning gas flaring; here, government intervention trumped the market. Another option would have been to mandate a higher price for gas so that the profit margin for oil and gas would have been more equal. Utilities would have at least been encouraged to use gas turbines to generate electricity where gas is plentiful; the higher prices could then have been spread across all power consumers. The market would still have been free — companies still could have done whatever they want — but it simply would have covered more resources.

Here, we see why this option was not pursued: while our resources would have been used more efficiently, electricity rates would have gone up. Rate hikes are politically unpalatable in the Anglo world, even if they help us use resources more efficiently. So we let oil compete with gas, and oil won for decades. And we flared off tremendous amounts of natural gas.

Competing companies: While the proposal I describe above — leveling the profit margins for energy resources — was not implemented for fossil fuels, it has been used successfully for renewables. It is called feed-in tariffs (FITs), and it is the driver behind Europe’s main success stories.

Its detractors in the English-speaking world used the same logic that was used 40 years ago in the petroleum industry: we need competition, and price fixing is anathema to free markets. Of course, the United States has had price fixing in the electricity sector since the 1930s (that’s what is meant when we say that utilities are “regulated”) — but let’s focus on what is meant by “competition.”

Normally, when we think about competition, companies come to mind: GM versus Toyota, Dell vs. Apple, etc. Of course, there is also competition between products and technologies, such as between VHS and Betamax (or, for my younger readers, between Blu-ray and HD DVD). Notice that Betamax and HD DVD disappeared from the market completely — which is itself a considerable waste of effort and investment, though having a single format certainly has its advantages.

If we now look at ways of generating electricity, we see that it would be nice to have competition between companies, but what sense does it make to have competition between resources? If we can leave the resource untouched, then it remains available for future generations — no problem. But if we have to discard one (natural gas) in order to get at another (crude oil), then it makes sense to ensure that the profit margins on the both resources are roughly equal so that it pays to exploit both resources instead of wasting one. The resources need not compete as long as the extraction companies do.

Wind and solar may seem to differ in one respect: we cannot exhaust them. The sun will not be depleted regardless of how many solar panels we have, and no number of wind turbines will measurably reduce the amount of wind on Earth. Nonetheless, the amount of renewable energy we neglect to use can also be considered waste. Each day, we get a certain amount of potential solar and wind power. Were we to use more of it, our consumption of non-renewable resources would be reduced. As a result, the range of our fossil fuels could be extended dramatically.

RPS, cap-and-trade, FIT: If we agree that we would be willing to pay more today in order to use both our renewable and non-renewable resources more efficiently, the question is which policy promotes competition among companies, not resources. Renewable Portfolio Standards (RPSs) are old-school thinking; utilities have to meet a target for “renewables,” and if no further specifications are made, then renewables compete with each other. The cheapest wins, and the rest go nowhere.

Emissions trading is a more recent idea, but it is even worse in a way. Here, large energy producers and consumers are required to reduce emissions. The scheme is praised for allowing decision-makers the flexibility to choose the cheapest way to meet their target: technology overhauls (“clean coal”), investments in third-party offsets (tree plantations funding for technological overhauls abroad), the purchase of allowances from other market players, new low-carbon technologies (renewables), or perhaps just paying a fine. Here, renewables not only compete with each other, but also with all of these options.

Neither RPSs nor emissions trading ensures a comparable, reasonable return on investments in both wind and solar. FITs do. Critics of FITs charge that the policy “picks winners,” but the charge only applies to the energy sources promoted — not to any particular companies or technologies. True, those of us who support FITs for solar and wind have picked these two resources as winners — guilty as charged. But we have not, to take the example of solar, picked any particular company, nor have we even picked a particular technology. Who can say whether crystalline or thin film panels (or perhaps something else) will be more popular in 2020? Indeed, if we provide roughly the same profit margin for concentrated solar power and photovoltaics today, we may find that the one or the other is clearly preferable by 2030 — but then, we may nonetheless choose to keep the more expensive one as a niche product despite the price difference. After all, it would have been the sensible thing to do with natural gas 40 years ago.

We have a history of taking only the cheapest energy first. Our children will pay the price that we refused to pay, so they may very well view our old-school thinking as myoptic. FITs are the new school.

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Since the new center-right coalition won the elections a few weeks ago in Germany, onlookers from the U.S. have been expecting the country to drastically cut its support for solar. Proponents of U.S.-style policies, such as tax credits and Renewable Portfolio Standards, have also been hinting that Germany will be yet another example of how the solely production-based “feed-in rates” can overheat a system. (Germany will install close to two gigawatts of solar this year. When Spain installed 2.5 gigawatts last year, the Spanish considered the market overheated and imposed a ceiling of 500 megawatts per year.)

But finally, word is trickling out in English that the new governing coalition does not in fact plan to slash solar. An unnamed source told Reuters that rates might be cut by “around 15 percent,” but not 30 percent in line with the fall in module prices. (The rates would already automatically drop by between 9 and 12 percent, so 15 percent is not much of a jump.)

This news comes as no surprise to those of us who have been following events in German. You might expect Germany’s Energy Consumer Association, a watchdog organization that regularly takes utilities to court for raising prices (and often wins), to oppose FITs because they also raise electricity rates. It doesn’t. In fact, the organization even explains why the rates for solar should not chase after module prices in the following press release (my translation):

October 8, 2009. The Association of German Energy Consumers opposes a drastic cut in compensation for PV arrays. A dramatic reduction in the feed-in rate would be fatal for the PV sector and destroy the momentum of previous years overnight.

The billions paid by consumers to set up the PV sector would have lead nowhere, and the future of the industry would be uncertain.

Over the past few months, prices for PV arrays have fallen faster than manufacturers have been able to reduce production costs. These firms are therefore in financial trouble, and there have already been a number of bankruptcies. In China, two-thirds of PV firms disappeared altogether. Politicians need to deal with this situation responsibly.

The Association of German Energy Consumers calls for the feed-in system to be maintained as it has proven to be successful.

Can you imagine any such watchdog group in the U.S. supporting the most expensive form of renewable electricity? Welcome to Germany.

The reason why Germany has been so successful with renewables is because there is such widespread consent. For instance, if you are expecting the newly elected Christian Democrats to oppose solar, then you obviously missed this statement made in an interview by the CDU politician “tipped to become federal environment minister“:

Any sudden change would be wrong. It is true that solar arrays have become much cheaper because the market collapsed. So we do have some leeway to reduce rates. But we have to be prudent about it — it has to be based on a market analysis. We cannot chase after the market by ramping rates up and down every six months. The solar market still needs proper incentives for people to want to install the systems.

Of course, there are two parties to the coalition, so you certainly would expect the libertarian FDP to oppose not only generous support for solar, but all kinds of government intervention. You would be wrong. A member of an E.U. organization sent me a PDF of the FDP’s documents it is using in negotiations with the CDU for the new coalition. From page two of the FDP’s political platform on environmental, agricultural, and consumer protection issues:

“We will continue to promote the expansion of renewables in accordance with current targets, retain the Renewable Energy Act and the unlimited feed-in priority, and make these subsidies more efficient.”

The “unlimited feed-in priority” means that renewable energy has to be accepted on the grid; if necessary, coal, nuclear, and natural gas plants simply have to be ramped down. (The part about making feed-in rates “more efficient” is a bunch of blah blah blah.)  Most importantly, this paper clearly states that the FDP will retain the Renewable Energy Act.

I could not find the word “solar” or “photovoltaics” in the document at all. Otherwise, the FDP only emphasizes that Germany has made too many mistakes in the field of biomass/biofuels, so support will be increased (again, via feed-in rates), and too little has been done in the heat sector. If you were expecting an attack on solar, the document is disappointing.

Now imagine one of our two parties in the U.S. ousting the other party in the elections but nonetheless maintaining the previous party’s successful policy for renewables. I can imagine them doing so only to protect U.S. jobs — and indeed, North American renewables policies are increasingly protectionist, with support given only to systems made locally. You now might expect Germany to follow suit, but the German Solar Association (DGS) has come out against the idea that some protectionist measures should be introduced in the country’s Renewable Energy Act to protect German companies from unfair competition from abroad, especially Asia. As the DGS put it, “German manufacturers have to compete with quality, longer warranties, and better service.”

Now imagine solar proponents and environmental organizations in the U.S. saying that U.S. solar companies are simply going to have to learn to compete.

So there you have it — the German solar market is apparently not going to collapse like Spain’s did. There simply is no real opposition to renewables over here any longer. Don’t believe me? Then check out this weather report from a few days ago, in which the weatherman starts off by showing a map of Germany and some superimposed wind turbines. He then explains that the overall output was going to increase drastically over the next 24 hours, producing some 11 gigawatts at times.

How much is that? “As much as 11 nuclear power plants,” the weatherman said. (Germany only has 17 left, and one of them doesn’t work.)

Now imagine a U.S. weatherman subtly fighting for wind and against nuclear — and no one bats an eye.

Welcome to Germany.

There has been a lot of talk in the U.S. about the collapse of the Spanish solar market this year, commonly held to have been a solar bubble. However, few U.S. commentators seem to understand the Spanish market enough to go beyond the standard quip that the Spanish were simply throwing too much money at solar — and that feed-in rates were the culprit. A closer look reveals what Spain’s real problems were, and where those problems could happen in the U.S. as well.

With feed-in rates, the extra money required to make renewables profitable generally does not come from a governmental budget; rather, costs are passed on to consumers in the form of higher retail electricity rates. But the particularities of the Spanish electricity market prevented these extra costs from being passed on. At the beginning of each year, the Spanish government sets retail power rates. If, say, the price of natural gas skyrockets that year, the Spanish government later reimburses power providers and grid operators to cover the difference.

In this way, electricity rates are kept artificially low, with part of the cost being covered by taxpayers. And since just about every country, including Spain, is running a budget deficit, the Spanish are having future generations subsidize current electricity consumption. The Spanish are well aware of the problem. As Industry Minister Miguel Sebastián put it, the practice is “irrational and untenable.” Spain has responded by starting to phase out the entire system. By 2013, it is to be done away with altogether.

This “energy deficit” has risen to 14 billion euros since 2000 (around 300 euros per Spaniard), and renewables were not the only cause, with energy prices rising in general over the past decade, but there can be no doubt that the spike in solar in 2007 and 2008, when the solar market grew by a hundred percent each year, took Spanish budget planners by surprise. As the decree that revised the solar rates put it, “Energy sources under this special regime constitute a risk for the system’s sustainability because of their effects on power prices.”

The changes include not only a ceiling on the amount of solar that can be installed, but also the addition of a registry, which will also cover installed wind capacity. Up to now, the government has not kept close tabs on how much is actually put in the ground; that task was largely left up to industry associations. Now, you have to enter your project in the registry so the government can tell you where you are in the line — whether you can connect your project to the grid this year or not and get this or that rate. For instance, the various regions of Spain are quite keen on expanding renewables, and it turned out that they cumulatively had a target for wind power of around 40 gigawatts by 2010. But Madrid has specified a national target of only 20,155 MW for that year. The registry will be one way that the central government will be able to rein in the regions in terms of wind power.

Similarities with the U.S.

Although Spain’s situation is unique, there are a number of overlapping spots. Most saliently, renewables policies in the U.S. often specify either that the investments in renewables must not raise the retail rate or not by more than a certain level. Also, though Americans believe they are living in a freer market than Europeans do, utilities and governmental regulatory bodies also work out retail electricity prices in the U.S. American utilities, whether private or public, are considered “natural monopolies.” As such, the government regulates them to prevent price gouging, but in return the utilities are guaranteed a certain profit margin. Call it price fixing.

So while critics of feed-in rates do not seem to like the idea of the government setting prices, we see that governmental pricing did not start with subsidies for renewables. It was there all along both in Spain and the U.S. (but not Germany).

We also clearly see that feed-in rates were not the sole cause of the problem in Spain. Rather, Spain attempted to combine feet-in rates with inflexible, a priori government pricing of retail rates.

What to do?

So how do we stop the U.S. from repeating Spain’s mistakes? To my mind, there are two different ways of addressing this question: the first assumes that feed-in rates will be implemented; the second, that they won’t be.

Assuming that feed-in rates are adopted, costs would have to be passed on to consumers — today’s consumers, not tomorrow’s. And if you want to keep the retail rate in check, you can do what Spain failed to do, but other countries with feed-in rates have done: have the rates decrease not only every one or two years, but also in volume increments.

We all know the policy from car warranties: five years or 50,000 miles, whichever comes first. Assuming that you want the rate paid for newly installed solar arrays to drop by, say, five percent each year, you could also have that rates kick in earlier if, say, 500 megawatts had been installed. If you are paying 30 cents per kilowatt-hour for solar, you can get a rough estimate of how much 500 megawatts in good locations are going to cost you. Weather conditions will vary, but your estimate will be accurate +/- around 10 percent for a given year.

You can then also do what Spain has now done and further subdivide those 500 megawatts if you want to ensure that a small number of projects do not take up the whole pie. Go ahead, set aside a couple of hundred megawatts for the countless roofs of Joe the Plumber and his friends.

When companies and homeowners register their systems, they can be told up front where they are on the list. They can be given a window within which they have to connect to the grid, and if they cannot complete their projects on time, those further down in the list will be happy to learn that they will be trading places and getting a slightly higher rate. Planning is thus not only still possible under such a scheme; the surprises it produces are also mostly pleasant.

If you don’t want to have feed-in rates, of course, you can simply set aside a budget for solar, wind, and whatever. When that budget is full, you can decide whether you want to devote more money to renewables.

You will then certainly not only prevent a bubble from occurring, but in all likelihood also fail to meet whatever ceiling you set for yourself. Ask any solar advocate in the U.S., and they will tell you that there is a tremendous amount in the pipeline. So why is it not going in the ground? What is holding up solar in the U.S.? What do our policies fail to do that feed-in rates get right?

While Americans are understandably excited about a couple of high-visibility projects for hundreds of megawatts of solar, the Germans I talk to fail to understand what the excitement is about. “We are going to put up a couple of thousand megawatts in 2009, and a large part of that is loads of rooftop systems with just a couple of dozen panels each,” one German industry insider told me recently.

So yes, the U.S. does run the risk of repeating Spain’s mistakes if feed-in rates are implemented. The conclusion does not, however, have to be that feed-in rates are dangerous. Instead, we need to look at the entire energy policy context and see where Spain and the U.S. are similar — and remember that the policy of feed-in rates was not itself thrown out in Spain. Only the rates were adjusted, and even that only affected solar. Spain still has feed-in rates.

The problem in the U.S. is, ironically, that so many U.S. renewables advocates actually oppose the idea (because it wasn’t theirs), and even now that everyone seems to have accepted the empirical evidence that FITs simply are the most successful, one major challenge remains: getting advocates of renewables in the U.S. to understand what FITs are.

This article, for instance, about a new proposal in California is a terrible assessment. No layperson who reads it will have a good understanding of what FITs are when they are finished with the article:

… utilities would rank bids by price and accept all of the cheapest proposals that their budgets allow. The auction would be repeated twice a year, with the eventual goal of bringing an additional 1,000 megawatts of solar capacity online.

In other words, this system, described as “somewhat reminiscent of feed-in tariffs,” is in fact very much like the bidding processes common in current Renewable Portfolio Standards used in the U.S. FITs differ crucially on two accounts:

• the price is specified in the law, not set by utilities (who may not want the competition from distributed power anyway)
• and under FITs, utilities do not get to decide (twice a year, for example) when meddlesome little competitors can set up their systems; rather, if you want wind, a solar roof, or whatever, you get it — utilities cannot refuse grid connection

Under the California proposal, your proposal can apparently be rejected, in which case I suppose you don’t get to put solar on your roof, and your community may not get to put those two wind turbines up on the hill outside of town even though the community itself came up with the investments. Instead, economics of scale will mean that giant investors, who can install some giant project in the middle of nowhere at a fraction of a cent cheaper per kilowatt-hour than your local community systems would be, will get most, if not all, of the pie. Power production then remains to domain of monopoly utilities (though U.S. policy is strangely held to be market-driven), whereas FITs democratize power production.

From my cursory reading, I do not see that the California proposal has anything to prevent this concentration of renewable power, but feel free to post a comment if I have missed something. As California solar advocate Adam Browning points out, “mid-size solar and other renewable energy technologies of 1 to 10 MW” are the focus of this new proposal. FITs do not, however, focus on midsize systems; in fact, their main selling point is that they ramp up everything, including small, distributed rooftop systems that you, dear reader, can own yourself — after all, there is no dearth of large projects and project proposals in the U.S. But the tiny German state of Baden-Württemberg had some 25% more solar electric installed than all of the U.S. at the end of 2008.

Mind you, I have no problem with people thinking about other ways of doing things, and it is always possible that someone will come up with a better way than FITs. What I do mind is a misrepresentation of the facts. Our blogger is totally off the mark when he writes about the alleged main drawback of FITs (in which prices are set by the policy, i.e. by policy-makers, not utilities):

Picking prices is hard. Too low, and the incentive won’t work. Too high, and consumers overpay. Also, because different rates apply to different technologies, certain industries can become unfairly advantaged.

Browning agrees: “The difficulty with this approach is finding the right price.” Somehow, even solar advocates, who must realize that we would already have renewables if utilities were genuinely interested in them, believe that the same utilities can price renewables better than policymakers. Of course, utilities are going to price things with an eye on their bottom line, not yours, so if you are interested in a solar roof, do you want the price you get for the solar power you generate to be dictated by the people who see you as a competitor?

Furthermore, the idea that applying different rates to different technologies produces an “unfair advantage” is patent nonsense. If anything, applying a single price to all renewables — the common approach in U.S. policy and apparently what would happen under the legislation proposed above — means that wind competes with solar, geothermal, biomass, and other fringe technologies like ocean power. Since wind is the cheapest, wind almost always wins the contract. Part of the magic of FITs is therefore that the same rate of return is calculated for each type of system, which produces (roughly) while level playing field for all technologies — an investment in wind power will probably not be more profitable than an investment in solar, etc. Will the California proposal do that?

Nonetheless, we hear that pricing is hard. Somehow, the spectacular market crash of solar (but not of wind, and therefore not of FITs!) in Spain completely overshadows the roughly 50 success stories in the same number of other countries. Actually, it isn’t that hard to get prices right at all. Here’s the formula:

total system cost / expected kWh + 6-7 percent profit margin

You then build in a review to take account of changes in system cost (the expected kWh depends primarily on weather conditions, not market conditions). Since prices can be expected to drop anyway for emerging technologies, you can also include an automatic reduction (say, x percent lower rates each year) to be on the safe side.

So why do we not have such things in California already? Because they work, and they will cut into the profit margins and planning processes of U.S. utilities, which are accustomed to acting as monopolies. And unlike Germany, the U.S. does not have a government strong enough to stand up to the business world and say, “these are the rules, and our citizens want renewables”

Naturally, U.S. renewables advocates are proud of the compromises they have reached with the very utilities who have failed to implement renewables up to now. As Browning himself puts it:

We’ve spent a year on this docket, and will spend a lot of time going over the details of the proposed program to guide our suggestions for further development…

So there we have it: the proposed legislation is Browning’s baby, in part. Again, if his policy is more successful than proper FITs, I’m sure all of FIT countries will be happy to copy what California does. But for the time being, I would simply like for folks in California to refrain from calling this proposal an FIT, which it ain’t, for the reasons I describe above.

Browing’s wording shows one thing: those of us in the FIT camp seem to have won an important battle, for no one can dismiss FITs as a policy success. (Browning has never supported, and probably never even properly understood, FITs.) Now, we must make sure that the policy design behind the acronym FIT is not misrepresented. Otherwise, proposals that are not FITs will benefit from the hype around FITs without actually producing the desired outcome.

Proponents of clean energy have long argued that investment in solar, wind, and other renewable sources creates domestic jobs. In the past few years, however, critics of renewable energy have responded — with considerable success — by arguing that the net effect is actually negative.

The concept of “netting” the effect of investments (including government subsidies) on the job market is legitimate when used correctly; when not used correctly, it is disingenuous.

Take the case of the F-22 fighter plane. You may have heard the current debate over the decision to discontinue production of this aircraft. One argument against the proposal held that jobs in the aviation production sector would be lost. The other camp countered with the net-effect argument: we are talking about the allocation of a portion of the military budget, not additional funding for new F-22s, they pointed out, so the question is whether the same amount of money could be better used on other things — including on other aircraft. To the extent that other planes can be built by the same companies that would manufacture the F-22, the net job effect may be negligible. Aircraft will be built anyway. We are comparing the production of one plane to the production of others.

With renewables, the question of net effect is also related to other, similar investments. Since renewables generally produce electricity, not investing in them would mean investing in electricity from other sources. What, then, are the effects on the labor market when we invest in renewables rather than in fossil fuels or nuclear?

I would love to give you the answer to that question, but to my mind, few sound studies have ever been conducted on the issue (I note one exception below) — which has not stopped a growing number of critics of renewables from using the net-effect argument.

The study that’s received the most attention is entitled “Study of the effects on employment of public aid to renewable energy sources” (PDF), made available March of 2009 by Professor Gabriel Calzada Álvarez and his team at Madrid’s Rey Juan Carlos University as a “draft: bibliography pending.” Interestingly, as of this writing at the end of August, we are still waiting on the bibliography.

Although the paper is merely a draft and did not undergo any peer review, it has received media attention at the highest level. “Saving the planet and creating jobs may be incompatible,” wrote the British Economist in a review of the study. In the U.S., Fox News surmised: “Americans shouldn’t be depending on green jobs to help the U.S. economy.” And the New York Times wrote, “Alvarez posits that the programs creating those jobs resulted in the destruction of nearly 110,000 jobs elsewhere in the economy.” Word has it that the paper is being circulated in the US Congress; it was also cited favorably in a Michigan white paper opposing the implementation of European feed-in tariffs (FITs) in the US.

The same net-effect argument has also been used by a group of economists associated with the Cato Institute, led by Prof. Roger Meiners of the University of Texas at Arlington. In the last year, the group has published a 97-page report “Green Jobs Myths” and the shorter (21 pages) “7 Myths about Green Jobs,” both of which aim to prove that almost nothing said positively about renewables and job creation is true.

The Spanish and the US reports share a common flaw: they do not say what would otherwise be done with the money invested in renewables. But remember the F-22 decision above — you cannot talk about the net effect unless you say what the alternatives are.

When Álvarez does mention an option, he unwittingly uses an example most Americans consider unattractive: the “unseen cost” of renewables is “all the hamburgers not cooked … as a result of the state directing resources to windmills or solar panels” — a nonsensical example (are we supposed to believe that Spain does not have enough hamburgers?) that he may want to reconsider, for “flipping burgers” is synonymous in the US with poorly paid, unskilled labor.

The formula used in these reports is astonishingly simplistic: take the amount invested in a sector and divide it by the number of jobs created; you get the cost of each job. Now take overall investments in the general economy and divide that figure by the number of jobs created overall, and you get the cost of each job in the general economy.

Álvarez found that 571,138 euros is invested in each green job in Spain, compared to only 259,000 euros per job in the general Spanish economy. He therefore concludes that 2.2 jobs are not created for each green job. I have no idea if these figures are accurate, because he does not provide his sources or define his terms, but no matter — we will take him at his word. The argument collapses all the same.

If we compare Meiners’ figures with those from Spain, we have some interesting results. Meiners and his colleagues put the figure at “$107,000 per new job” in the renewables sector. At this point, a disingenuous critic of Meiners and Álvarez might point out the discrepancy in their figures and calculate that the cost of a green job calculated by Meiners offsets only 0.3 jobs at the general costs calculated by Álvarez. In other words, you create three more jobs in the renewables sector than you would in the overall economy. But throwing together figures calculated in different ways is not honest scholarship. Nonetheless, Álvarez and Meiners cobble together their statistics in this very way.

To their credit, Meiners and his colleagues highlight the lack of a clear definition of the term “green jobs.” Unfortunately, they do not define what they mean by it and use that definition to collect and compare a fresh set of statistics. Rather, they cite a wide range of other papers and studies — with no attempt to adjust for the discrepancies behind all of the figures.

Since the work of Álvarez and his colleagues has not been peer-reviewed, I did them the favor on behalf of Germany’s photovoltaik magazine, which published the peer review. Of the four reviewers asked to participate, three said the paper was not sound; the dissenting voice was Meiners himself, who said he supported publication of the paper because, “I oppose censorship.” Unsurprisingly, Meiners seemed pleased with the paper’s approach — which, indeed, is his own: “If we push billions of euros in one direction rather than other, something else must be given up. So the explanation made sense.” Meiners agreed that the calculations in the paper were not explained in full, but that did not bother him: “as usual, we presume people do not lie as their reputations are on the line.”

Another reviewer was Jochen Diekmann, deputy head of the Department of Energy, Transport, and the Environment at the German Institute of Economic Research (DIW), a “leading research institute involved in basic research and policy advice.” Dr. Diekmann’s response sums up those of the other two reviewers who opposed publication: “The study is not based on the researchers’ own calculations about labor market effects,” but rather on previously published figures, such as from the EU’s MITRE study. But this combination concerned Diekmann because, “In all likelihood, combining figures from different scenarios and time frames leads to inconsistencies, which is generally also the case for the combination of MITRE results from 2003 and the more recent data the study uses elsewhere.”

The very wording of these two responses — one from an American and one from a German — are revealing. The American produces complete non sequiturs (What does censorship have to do with a peer review? And what planet do you have to live on not to realize that people whose reputations are on the line lie all the time?), while the German produces objective, dispassionate criticism that slices right to the heart of the matter.

No wonder the best study, to my knowledge, on the net job effects of investments in renewables is from Germany. In September 2006, the German Ministry of the Environment, Nature Conservation, and Nuclear Safety published a study entitled “Impact of the Expansion of Renewable Energy on the German Labour Market” (PDF), which concluded that “the net impact … is also a clear and sustainable positive employment stimulus.”

Other studies in the US — as long as we are throwing around disparate figures — support the idea that a lot of well paying jobs will be created by renewable investments. Robert Pollin, co-director of the Political Economy Research Institute at the University of Massachusetts, has estimated that most “green” (again, definitions vary) workers — from engineers to construction workers to marketing staff — will earn more than 20 US dollars per hour on the average. At that rate, you might actually need 2.2 jobs flipping hamburgers to earn as much.

Perhaps such studies could be considered biased; in each case, the conclusions were amenable to the authors’ politics. But have the statistics been calculated or collected to produce a desirable outcome? The author of the Michigan White Paper mentioned above has accused me of “pre-existing bias” — a strange formulation, as though an ex post facto bias would be preferable.

A person is not biased simply because they disagree with you. They may have reached their conclusions based on the facts. In contrast, you are biased if you get the facts wrong in order to strengthen your argument — which the author of the Michigan White Paper does when he writes that, “Germany and Spain have had huge percentage increases in solar energy production, but solar accounts for less than 1% in both countries after 15 years of FIT [feed-in tariff] subsidies.” Actually, Germany started offering its FITs less than nine years ago — but no matter, 15 years it sounds better if you want to argue that the subsidies are of no avail. What do the facts matter?

While Álvarez and Meiners are both free marketeers who believe that the market knows best, the Spaniard writes that Spain’s support for renewables will leave the country “saddled with and further artificially perpetuating obsolete fixed assets, far less productive than cutting-edge technologies.” So governments do not know which technologies will prevail, but economists do? Meiners seems to think so: “Some technologies preferred by the green jobs studies are not capable of efficiently reaching the scale necessary to meet today’s demands.” Which ones? How does he know? Why doesn’t he tell us? Do Álvarez and Meiners base their assumptions about how the market gets everything right on the financial sector’s performance over the past four quarters?

In “7 Myths About Green Jobs,” Meiners and his colleagues correctly write, “Wind plays an increasing role in electricity generation, but electricity is only a fraction of energy production in the U.S., which is why wind is such a tiny share of energy” (italics in original). But only one page later, we read that nuclear “produces about 20% of U.S. electric power” — with no further reminder that nuclear also only produces electricity.

Álvarez’ study, allegedly about economics, contains much that is outside of economics — and false. He writes of wind, “The rate of development of this technology has remained comparatively quite calm,” though he does not explain what he means. Is he not aware that standard turbines have grown from 55 kilowatts to more than 5,000 kilowatts in two decades? He writes elsewhere, “solar failed even to reach 1% of Spain’s total electricity production in 2008.” But solar grew by around 100 percent in Spain both in 2007 and 2008. So next year, would he have complained that it failed to reach 2 percent had Spanish policy not been changed?

Finally, while the Spanish study quotes the CEO of Acerinox complaining that retail electricity prices had increased by 10.6 percent in just two years, that quote comes from April 2002. At the time, Spain only had a fraction of its current installed wind capacity — and practically no photovoltaics to speak of. Back then, renewables could not have been the main culprit. And Acerinox left Spain for a “free economic zone” in Indonesia, where it can escape much more than high energy costs.

Most tellingly, the net-effect argument proves to be a dismal failure when it is actually applied. For instance, one semiconductor manufacturer has set up several production plants in Europe and has just announced that one will be built in the US. For one of its European plants, it received 545 million euros in subsidies; eventually, some 1,000 jobs were created there, putting the cost of each job at 545,000 euros according to the simplistic calculation commonly used in the Spanish paper. But we now see that, by the same simplistic formula, investments in the semiconductor sector also offset some 2.2 jobs (if the figures for Spain roughly hold true for Germany). And the figures are getting worse: the company’s new U.S. plant will employ some 1,400 people and receive 1.2 billion dollars in subsidies — some 857,000 dollars per job.

Here, it becomes clear how much the Spanish study leaves out. Does the value of the semiconductors from those plants make these subsidies seem negligible? What does the state stand to get back in corporate and other taxes? If local jobs are created and foreign jobs offset, the overall effect is positive anyway. Renewables offset foreign resources in most cases. Spain gets roughly half of its energy from coal, but has imported more than it produces domestically for years. The situation is similar in Germany, and energy independence is a buzz word in the US. But the Spanish study does not take domestics jobs offsetting foreign jobs into account.

An estimate of the net effect of investments in renewables might be enlightening, but it would require, as Meiners points out, an agreed definition of what constitutes a green job. It would also, however, have to include take into account how the investments are spent otherwise and how we are going to get the amount of electricity that would have come from renewables. Anything else is twisting the facts.

But my favorite calculation is this one: the last annual budget of the University of Rey Juan Carlos, where Álvarez teaches, was 22,889,932.93 euros. With a staff of around 2,000 people, that comes to some 416,180 euros per job, according to his own method. In other words, Prof. Álvarez’s calculation would seem to suggest that shutting down his university would create 1.5 jobs (416,000 euros divided by 259,000 euros per job in the general Spanish economy) for each job lost. I wonder if Mr. Álvarez would prefer, to take the example he gave, flipping burgers 60 hours a week to his cushy job that allows him to upload draft papers to the web.

These days, it seems that misleading information is a legitimate option in public debate in the US (it is not in Germany). Until I see a sound study to the contrary, I will view the net-effect argument right up there with “death panels” and Obama’s Kenyan birth: a nefarious attempt at winning by any means possible.