Switching to wind and solar, a closer look at policies and costs

Global warming has been a major topic of discussion in recent decades, and it has entered the political debate in a big way, both at the national and international levels.  The 2017 decision by the US to withdraw from the Paris Agreement on Climate Change[1] was perhaps the most visible development.

But France has experienced vigorous debates on climate change: in 2011, candidate Hollande promised that, if elected, his government would reduce the share of nuclear in electricity generation from 75% to 50%, and his successor, Emmanuel Macron, is wrestling with the same goal.  It is worth noting that, given its massive nuclear footprint, France already has perhaps the cleanest electricity generation sector, both in terms of CO2 and other emissions.

As part of the public debate on French energy strategy, the ACSPV, a non-profit organization for the promotion of scientific culture, uniting communes from the Alpine region and members from the prestigious CNRS[2] made a very interesting presentation which I summarize below.

It recalls that France started to articulate a program for CO2 emission control in 2003, mainly by providing energy price subsidies in favor of renewables[3] and securing a share of electricity demand for them.  From 2003 to 2017, these subsidies totaled €28 billion, €5.2 billion for 2017 alone (+10% over 2016).  Given that these agreements have a 15 to 20 year maturity, such a policy is very costly.  Presently, wind and solar, in the aggregate, cost €143 more per MWh than the average.

ACPSV contrasts the French cost of switching to renewables with the cost of CO2 emission.  The latter is as low as €11/ton in the European market and as high as €100/ton in Sweden which set a CO2 tax in that amount.  Yet according to the RTE (government operated electricity grid) the cost of decreasing CO2 emission in France in recent years has been €250/ton!  Furthermore, as fossil-fueled power plants disappear, the CO2 gain from switching to wind and solar diminishes, disappearing totally in 5 year time at the current pace.

ACPSV further criticizes the inefficiency of the “switch to renewable” policy by pointing that, with the same €28 billion spent on subsidies over the 2003-2017 period, France could have subsidized the purchase of  4.5 million electric cars (€6,000 per car) reducing CO2 emission at a lower cost of  €190/ton[4].  Or the money could have gone to upgrade the thermal insulation of 3 million homes; this could have saved 1 MWh from fossil energy origin per home, lowering CO2 emissions by 7.5 million tons/year at a cost of only $100/t[5].

While such alternative policies would be more beneficial than mere subsidies and forced renewable energy purchases, the long term nature of contracts makes it very difficult to change tack: current commitments in favor of wind farms extend until 2036 and total €100 billion.

The criticism of current policies by ACSPV extends to the industrial and economic spheres:  The government effort didn’t result in the creation of viable French manufacturers of wind turbines or photovoltaic panels as these are imported[6]. 

As for the sharing of the subsidies which are financed by a tax on all electricity consumers[7], ACSPV notes that it is socially and economically unfair: only the better offs can afford the initial investment needed for solar panels (and they are later reimbursed via the CSPE, but that CSPE is paid by all customers); with regard to wind, ACSPV regrets that the sector is dominated by the industry union (SER) which carries a lot of weight and influence, yet spends very little on research and development, happy instead to live off guaranteed revenues.

In conclusion, ACSPV recommends to acknowledge the failure of current policies and to abandon subsidies and their unintended adverse consequences.  Instead, it recommends redirecting efforts towards the transportation sector and better home thermal insulation.

France is a special case, in that it already has a very clean electric energy sector, yet the French Green movement has been determined to push for a massive shift towards renewables which, in my opinion and that of ACSPV, makes little sense.  Unfortunately, their votes were needed in the previous socialist government and their advocacy for clean energy as appealing as it sounds, is ineffective and potentially ruinous[8].

Clearly the situation in the US is different, but the basic policy issues are similar.  Unfortunately, the public debate is reduced to a simplistic litmus test:”Do you believe in global warming?  If you do, then money is no object as far as remedies are concerned and wind and solar are the only way out.”

Hopefully, this French debate may spread beyond its national borders.

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[1]  Such withdrawal would take effect in 2020.

[2]  Center for National Scientific Research.

[3]  In this article, renewable will refer to wind and solar.

[4]  Assuming non-electric engine emissions of 150 g/km of CO2 and total car life of 200,000 km (124,000 miles).

[5]  Assuming a 20 year depreciation period.

[6]  Leading French manufacturers having either being rescued by EDF, the dominant electric utility, or a financial buyer.

[7]  CSPE.

[8]  Shifting from 75% to 50% nuclear and having  renewables making up the difference means quadrupling the contribution of renewable, doubling the average French utility bill.  The CSPE would rise to €15 to €20 billion per year, and long term commitments would rise to €400 billion, all that for ever diminishing gains as fossil fuelled power plants would soon no longer exist.

When history may rhyme…in Brazil

If you are in your sixties like me, and particularly if you were born in France, you remember 1968.

How did it start?  Sociologists and politologists have come up with involved theories to explain the so-called “Events of May ‘68”.   Call me a skeptic.  Yes, there had been months of student protests in Nanterre, then the most politically “progressive” campus in Paris, but frankly, that was no news.  The temperature rose when the authorities decided to put an end to the disorders, and student unions called for demonstrations on other campuses and in lyçées (high schools).  But that was hardly earth shattering or critical for what turned out to be the most impactful event in France’s last half century.

From my own perspective, a key factor was that May was the month that preceded life-defining tests for millions of French youths: the dreaded baccalaureat which is the necessary key to enter university, the concours (competitive exams) to enter the top universities (so called grandes écoles), and the year-end university exams.  We were all stressed and apprehensive, and for many, the possibility of postponing these scary trials, even temporarily, AND having fun in doing so, was appealing.

Sure, student protest had gained international visibility, mostly in the US against the Vietnam War, but many American trends and influences came to France without threatening the stability of the country.  

It is also true that the French may have been tired of the quasi-regal leadership of President de Gaulle and at first may not have minded students poking him in the eye so to speak.  The initial government reaction lacked coordination, and the authorities quickly second-guessed themselves, thus increasing confusion.  None of that is very unusual or likely to trigger what turned out to be a quasi coup.

But when the French government started to look and act weak and disheartened, and its leader failed to appear (he even disappeared for a while), then several dissatisfied groups and political opportunists felt emboldened to act: unions called for national strikes and some of them for industrial sabotage[1], opposition parties called for large demonstrations and even tried to force a change in government at the famous Charlety mass meeting.

As we know, all the disorder came to an abrupt end when President de Gaulle reappeared and forcefully declared on TV that he wouldn’t leave power.  Overnight, political and social calm were restored.  But as we also know, de Gaulle resigned the following year and the fallouts of May 68 endure to this day.

In retrospect, I still believe that the huge upheaval of May 1968 didn’t have to happen.  It all started with students defying authority and trying to postpone dreaded exams, and enjoying what at first was frat house partying and horseplay.

History doesn’t always unfold according to vast socio-economic Marxist trends.  More often than not, it does, but now and then major tremors and changes can be traced to the acts of an individual or to an improbable chain reaction.

Which brings us to Brazil.  What is happening in Brazil today is not a repetition of May 68, but as Mark Twain once said, history rhymes. 

The unexpected uncovering of the so-called Lava Jato corruption scandal and its consequences have dealt very severe body blows to Brazilian democracy and I would say it is weaker than it has ever been in the last half-century.  To wit:

-         One president was impeached and forced to resign[2], her successor is currently in jail and the current president is under a corruption cloud and commands a record low 6% approval score;

-         Dozens of congressmen have been indicted and jailed, including both leaders and rank and file, governing coalition and opposition members;

-         While the judiciary branch, in the end, did allow justice to be done, the heavy lifting (investigative work and sentencing) was carried out by the Federal Police and state-level judges, and the highest federal judicial instances vacillated more than once.

The public is rejecting main stream political parties and their leaders, it rejects the president, it is divided about the judiciary system as many either distrust it or positively reject its condemnation of ex-president Lula.

In the middle of this rising chaos and polarization, some actors are starting to test the system.

One is the PT, the party of ex-President Lula.  It is interesting to remember that Lula has often believed that a chaotic situation would help the PT take power.  As Lula still leads all opinion polls by a wide margin, Gleisi Hoffmann, the president of the PT, this week warned that keeping Lula in jail would lead Brazil to chaos.  The PT is also launching a Lula presidential campaign despite him being ineligible.

In doing so, she sets on a direct collision course with General Villas Boas, the Chief-of-Staff of the Brazilian Armed Forces, who twice publicly warned[3] the Supreme Court that the law must be respected and nobody is above the law.  The general’s Twit received the support of several high ranking generals, some in active duty others retired.

Truck drivers have been the second, unexpected, and much more immediately damaging force.  As Petrobras had won the right to set prices daily in accordance with world markets, truck driver unions organized massive road blockages last May to protest diesel price hikes[4].  The government quickly capitulated, forcing a price freeze by Petrobras, then offering gas price cuts to be financed by the government, then backtracked again, then offering truck drivers a pricing table for the freight that they carry.

In the span of a few weeks, the PT and the truck drivers have exposed the extreme weakness of the government, the former by brazenly demanding immunity for its leader, the latter by strong-arming it and hurting the economy.  In the meantime, criminality has surged in Rio de Janeiro and elsewhere, and no high caliber presidential candidate has risen from the field to offer people hope that the turmoil will soon be over.

There might be a respite in the above struggles, but I doubt they will end well.  The pricing table proposed by the government to the truck drivers and the compensation offered to Petrobras (but not to other fuel importers) have little chance to work in a country as vast and an economy as segmented as Brazil.  To make things worse, the drivers threw the first punches and clearly hit their mark.

As to the PT, it has the most popular leader (Lula) and the most effective organization of any Brazilian party.  As I wrote above, I think it is convinced that it will fare better than anyone else should chaos develop; it also sees that the current government can be pushed around with impunity.

Brazilians have a culture of moderation, but events can unwind faster than expected, or take an unexpected direction.  In the current climate, the system offers little in terms of guardrails, so that an unlikely possibility can quickly become reality, a moderate skid can develop into an uncontrollable crash.

History doesn’t repeat itself, but it does rhyme.

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[1]  Interestingly, the communist-affiliated CGT union was proactive in safeguarding equipment and machinery that other unions wanted to damage.

[2]  President Dilma Rousseff was impeached for public accounting faults but she was also widely criticized for the endemic corruption at Petrobras while she presided over its board of directors and afterwards while she headed the government.

[3]  The first warning came on the eve of the Supreme Court’s decision as to whether to incarcerate or not President Lula.

[4]  It is ironic that taxes represent a higher percentage of gas prices than Petrobras’ profit margin.  As such, they were the main factor in pushing gas prices to high levels.