The data appearing under "key findings" heading for the RWI study, “Economic impacts from the promotion of renewable energies: The German Experience,” study look generally correct to me, but I do not completely agree with the study’s conclusions.  After looking at Germany, the authors have pretty much written off renewable energy mandates altogether. 

I think it is worth it to look at all of Germany, Denmark, Spain, Texas, Connecticut, Massachusetts and California. All 6 jurisdictions have had renewable energy mandates for a decade of more—Spain since 1985 and Connecticut since 1991. I think any reasonably analysts will find the German, Danish and Californian experiences have been pure disasters, while the Spanish, Texas, Connecticut and Massachusetts experiences are, in my view, success stories.

What I find most interesting is that at first glance, Germany and Spain had very similar renewable energy policy regulations from 1995 through 2006. They both implemented renewable electricity mandates and feed-in tariffs. But by the end of 2006, Spain achieved a more significant shift to renewables (on a per capita basis, the largest shift in Europe) at retail electricity prices for residential consumers that are roughly half Germany’s. And, also on a per capita basis, Spanish clean energy technology and services exports exceed Germany’s.

Spain hit a bit of a wall in renewable supply progress in 2006,as did Denmark, and made the mistake of adopting new German-style feed-in tariffs in 2007. The Spanish fell for the hype suggesting that the German feed-in tariff was so successful. However, the substitution of the German-style feed-in tariff in Spain has had disastrous outcomes. In May 2008 (before the global recession hit), Spain retroactively reversed their decision to adopt German-style feed-in tariffs. 

But the 1.5 years since the German-style policy was implemented—and then the market disruption of the policy reversal—followed by the global recession threw the Spanish energy market into a tailspin from which it has not yet recovered.

But what you really want to examine is the pre-2007 Spanish policies and regulations, because they were very, very good.

The Lessons from the German, US State and Spanish Experiences

The bottom line is that we must have a legally-binding Renewable Energy Standard ("RES")—a regulation, not just a BC Hydro policy. Renewable Energy Credits ("RECs") can be banked and traded under an RES. Under the mandate, the obligated party must be the electricity retailer, and the retailer must achieve binding annual % renewable supply targets relative to their total sales (not generation), including sales of imported power. When we account for power imports, for example, BC Hydro’s total GHGs were over 9 million TCO2e in 2007, not just the 800,000 TCO2e discharged from Hydro’s own operations.

After we put an RES into law, we may or may not want to entertain feed-in tariffs. (Spain has both an RES and feed-in tariffs.) But the experiences of other jurisdictions clearly indicate that  implementing feed-in tariffs without the context of a legally binding RES usually results in high prices, job losses and failure to meet renewable energy supply expectations. 

Each region has to determine, once they legislate an RES, whether or not they should also implement feed-in tariffs, but it is a mistake to implement feed-in tariffs without having first promulgated an RES with REC trading. Connecticut’s, Massachusetts’s and Texas’s RESs could not be more different, but all three have been very successful without feed-in tariffs. 

The key to those states’ success is the design of the bankable, tradable Renewable Energy Credit ("REC") market rules that are part of the RES design. Both Massachusetts and Texas ruled, some years ago, that SO2, NOx and CO2 attributes can be stripped from surplus RECs and those pollution credit attributes could be applied towards compliance with long-standing local NOx and SO2 limits. This creation of a back-up market for surplus RECs has been critical to the smooth execution of those states’ renewable energy agenda.

Having said that, Texas is now considering implementation of feed-in tariffs. I am okay with that, but think that they would be better off to first try extending the banking period for RECs.

When it comes to feed-in tariff design, you want the original Spanish design, not the German design.  I attach a little study that compares the two so you can see the difference. This study was written by a feed-in tariff advocate and it fails to identify the role that Spain’s very well-designed RES (and Germany’s absence of RES until recently) played in the differences between the nations’ relative performance. And the author does not appear to believe that the large difference between German and Spanish prices is relevant. But she accurately outlines the differences between the feed-in tariffs.

That the Spanish feed-in tariff design is superior will appear counterintuitive to you, a renewable power producer representative. Remember, when you are reading about the tariff, that the Spanish tariff exists in the context of a strong, long-established (since 1985) Renewable Energy Standard. It is the combination of RES and this feed-in tariff that works—a fact that is not entirely respected by the feed-in tariff proponent author of the study.

Another element that is common to the Spanish, Connecticut and Massachusetts success stories that does not appear in Germany or California is that the state maintains a strong role in transmission system design and financing in the former and not in the latter. In the cases I deem "success stories", the transmission system operator participates in an ongoing process of mapping renewable resources and district heating opportunities. 

Official transmission system maps were created showing existing capacity and proposed capacity identified by priority (A, B or C) where the priority is based on the best current assessment of new capacity to liberate renewable resources. This transparent transmission mapping/planning process encourages but does not oblige renewable energy project developers to align their development plans with the transmission capacity expansion plan. This planning process increases the likelihood that least cost renewable options will be developed first.

By comparison, the German feed-in tariff system compels electricity retailers to respond to renewable power supply proposals with highest priority going to the proposals that demand the most expensive new transmission investments. And the German system is far from transparent, largely because all transmission is privately owned and operated and not fully regulated.

Unfortunately, Ontario’s feed-in tariff regime mirrors Germany’s and not Spain’s. Ontario will regret failing to start off by promulgating a legally-binding RES with REC banking and trading. Nova Scotia, by comparison, appears to be getting policies and regulations down in the correct order.

District Heating

All European experiences show us that we need to commit to district/community heating systems ("DH") as well as new transmission planning processes to achieve our GHG reduction goals at least cost. Complimentary DH systems are critical to the cost-effective operation of low impact renewable power supply. In this context, it is important that we start to think of DH as hot water (as opposed to steam) transmission supply systems.

Europeans have found that they do not have to totally abandon aged power and industrial combustion units. Older combustion units have proved to be cost-effective generators of hot water for direct use and to heat space. Plants that discharged 1.2 TCO2e/MWh burning coal to generate electricity might discharge as little as 0.45 to 0.75 TCO2e/MWh-equivalent burning 70% coal and 30% wood pellets to generate hot water for the DH network (where 10,000 lbs of steam is enough heat to displace 1 MWh of electricity or natural gas demand to heat space and/or water). 

DH systems are displacing in-building natural gas and electricity demand at retail rates under CAD$0.10/kWh, which makes tolerating high electricity rates somewhat more tolerable for families and small business. More importantly, regional commitments to DH create new revenue opportunities for industry while lowering industrial water treatment costs (hot water goes from plants to homes, cool water is recycled back to the industrial sources from homes).

In Canada, when we say "District Heat" most of us think only about generating and transmitting steam. Steam-based DH is great, but we need to start thinking about transmitting hot water over relatively short distances (55 km and less) to achieve least cost DH space heating market penetration over 50% in most Canadian cities.

Water-based (as opposed to steam) DH systems are like large networks of little dams.  Having DH in place enables us to maximize returns on home-based solar and PV and our wind power resources in a way that is not possible in the absence of DH or proximate large hydro capacity.

GHGs and Comparisons of National Performance

National GHG emissions are a function of population, per capita energy, building product and food demand, and the carbon intensity of the energy, building product and food demand. If you were doing objective research, I suggest, you might first start by comparing national per capita energy consumption rates and trends. Then if the data revealed certain nations that appeared to be cutting per capita energy demand rates faster than others, you might ask: "what great demand side management or conservation policies have they implemented?" And if you found nations that appeared to be cutting per capita GHGs for any given level of energy demand, you might ask: "what great carbon content reduction policies have they implemented?"

Only after completing these two analyses might you ask: "among those nations that appear to have demand and carbon content in hand, who has done the best job of retaining/growing employment?"

A very preliminary scan of the available data (very, very simply summarized in the table below) suggests that it might be worth our time to ask whether there is any policy link to the recent environmental and economic performances of Ireland, Spain, Belgium and Finland. All of these nations realized statistically significant industrial (mining, manufacturing, construction, utilities) employment growth since 1996 while cutting GHG emissions.

Denmark and Sweden might be second tier nations of interest. They have experienced real industrial job losses since 1996, but they realized more than 2 percentage points worth of per capita GHG reductions for each 1 point of job loss.

But any first scan of the data tells us, without further research, that::

•     The last thing we want to do is replicate the German, Japanese, Austrian, UK, or US employment trend experiences. Germany has had the 2nd highest rate of industrial job loss in the OECD since 1996 (the German economy was stagnant with near-zero GDP growth for 6 years from 1999 through 2006). German per capita GHGs have not fallen as fast as industrial FTEs.

•      In Canada we should be interested in a number of specific energy and environmental policies that have been implemented in Finland, Belgium, Spain, Massachusetts, Connecticut and Texas

•      Californian renewable energy policies have actually been disastrous, to date.  In 2007, renewable power supply in California was LOWER, as a % of total state power demand than it was in 1990.

•      All we care about in the Danish, Swedish and Austrian stories is the implications of their district heating (largely hot water-based, not so much steam-based) histories.

•      Most nations that have implemented high energy tax/price policies have loaded most of the energy cost increase on non-commercial consumers to ward of industrial job losses.

In fact, pre-global recession, Canada realized more than 5 percentage points worth of industrial employment for each 1 point of per capita GHG growth. Only Ireland, Belgium, Finland and the Netherlands could possibly be described as having done better than Canada in GHG intensity of job creation.

Further, in 2006 the German Department of Trade and Industry officially reported that 100% of all of the 1.25 million "new jobs" created in Germany between 1995 and 2006 were "economically insignificant".  In German statistics, an "economically insignificant" job is one that relies entirely on government subsidies and is deemed to have no prospect of continuing if/when government subsidies are withdrawn. Under German tax law, employers do not have to remit payroll taxes on jobs that are rated "economically insignificant". And to accept the assertion that German policy created 1.25 million "new jobs" between 1995 and 2006 we have to conclude that the traditional economy also lost 1.7 million jobs over the same period (because net job losses were reported overall).

Please note, when you are looking at employment statistics, that you need to track both the job count and the number of hours per year the average employee is paid. The table below shows you that there are large differences in  "average hours of paid work" trends among OECD nations. The average German and Norwegian full time job paid for 1,433 and 1,408 hours of work, respectively, in 2006, while the average Canadian and US jobs represented 1,738 and 1,737 hours of paid work, respectively.

On Energy Demand

But when you compare per income-weighted capita energy consumption to climate-weighted (heating and cooling degree day) population density, and trends in these factors, you will discover that there is no statistically significant difference  in energy demand among OECD nations that is not entirely explained by the differences in average household income and population density. So research that actually looks at data can legitimately suggest that any OECD nation has actually implemented superior modern policies in respect to conservation and/or demand-side management.

That look at data does tell us, however, that energy demand increases with income no matter what culture we are talking about, and we must focus on the creation of nodes of population density to achieve our conservation goals (the European nations established their dense nodes more than 300 years ago.)

In fact, from a straight numbers perspective, BC appears to have one of the most successful demand-side management/conservation programmes in the western world.  I am of the view that Power Smart is a superior utility-administered DSM program (I am not so sure about Resource Smart). But BC’s great numbers have more to do with the development and densification of Vancouver’s downtown area over the last two decades than anything else.

On Carbon Intensity of Energy Demand

Once you scour the shifts in GHG intensity of energy demand in Europe, it appears that the keys to GHG intensity reduction are:

•     District heating and co-firing wood pellets with coal and/or gasifying wood waste with natural gas to generate at least 50% of the hot water supplied to the DH system.

•     Mapping transmission capacity before committing to develop renewable supply—this applies both for renewable electricity and district heating (in which case we must inventory the heat supply options and map the steam/hot water transmission systems before plunging into heat supply project development).

•     Nuclear.

•     (on the transportation side) shift the single passenger vehicle fleet from gasoline to diesel, preferably biodiesel blended, fuel.

The Medium-Term Big hit?

Modify Canadian petroleum product refineries to max diesel/distillate output, not gasoline output. Capture surplus heat and CO2 from petroleum refineries and natural gas processing plants to feed into algae-based biodiesel refineries that should be co-located with the diesel refineries. Run the algae-based biodiesel through the petroleum refinery hydro-cracker to make it fuel that is reliable in cold weather. Algae-based biodiesel demand displaces petroleum-based fuel demand, but all Canadian refiners are generating revenues on both sides of this equation. Waste CO2 sunk into algae-based biodiesel is still released to the atmosphere, but tailpipe CO2 emissions from blended fuel end-use substantially decline, especially if the new blended biodiesel is being substituted for gasoline in the single passenger fleet. Feed surplus hot water from the algae-biodiesel refinery into a district heating system that heats local homes and buildings.  Recycle cold water back from the DH-connected buildings to partially address water demand from the refineries. DH cuts local electricity and natural gas demand for space and water heating.  Max out biomass, wind. solar and PV power generation to supply electricity and heat to the industrial, commercial and residential complex, with can be achieved most cost-effectively if the DH system is in place.

Key Policies?

1.  Legally-binding Renewable Energy Standards, where all distributors of electricity, natural gas and petroleum products shall comply with obligations to acquire and surrender Renewable Energy Credits, where 1 Pj of fossil fuel sales equates to 277.778 MWh-equivalent, for purposes of determining common standards for the energy types (level of government: preferably federal, but can be provincial)
2.  Legally-binging Renewable Energy Project certification, registration and REC issuance procedure, where building efficiency ("megawatt-hours") and biofuels (1PJ = 277.78 MWH-equivalent of 0-emission energy) are included as REC-earning projects (preferably federally-administered)
3.  1-year depreciation for capital investments that lead to compliance with the RES or otherwise might lead to the desired future, where CCA credits are not transferable but bankable for 7 to 9 years. This means CCA credits are potentially valuable to not-profit-making entities, but drives those entities towards profitability. (only the federal government can do this)
4.  100% exicse and sales tax exemption for any fuels employed to co-generate electricity, steam and/or hot water and feed steam and/or hot water into a district heating network (both levels of government should do this)
5.  Given a federal RES and federal renewable project certification (REC issuance) and registration procedure, provincial guidance re:REC use and trading, feed-in tariffs, etc. (provinces only).