The Green New Deal (GND) pact embraced by scores of US Democrats is chock- full of vibrant ideas and urgent policy considerations. It’s right that with the climate crisis accelerating faster than scientists predicted and our window to curb it narrowing, we have to think big – indeed something at least as sweeping in scope as the New Deal recovery program of the 1930s. Paul Hockenos reports
Yet, the Green New Deal overlooks some of the key lessons from Europe’s renewables revolution – to the detriment of rolling out renewables as fast as possible in the US.
Critically, the clean energy boom here was not ignited foremost by government spending, which the current GND implies is critical for the US to do the same. Rather, in Europe legislation passed by the EU and the national states opened energy markets to renewable-energy producers and revamped the regulatory framework in order to help the private sector and communities to get a foot in the door.
“Laws matter,” explains Toby Couture, director of E3 Analytics, an energy consultancy in Germany, ”and they can be a huge driver of investment, if you get the details right.”
EU members Austria, Sweden, Portugal and Denmark, for example, now generate more than half of their electricity from renewables.
Here’s how it happened:
In 1998, at the EU’s behest, Europeans began breaking up the monopolies of the giant corporate utilities that had dominated fossil fuel power generation and distribution for decades.
The legislation that followed forced the large utilities to make way for smaller, decentralized entrants, foremost those in renewable energy. And it mandated the “unbundling” of generation and distribution functions, which pried the transmission grids from the utilities’ hands, exposing them to competition, too.
Upon the heels of this legislation, national governments, pushed by grassroots environmentalists, introduced rules that prioritized the sale of green energy to the grid, and created price supports for renewables entrepreneurs that helped them recover high investment costs.
“The legislation enabled ordinary citizens, farmers, church groups, and companies to finance their project through bank loans,” explains Couture of E3 Analytics. “The ever-greater sophistication of renewables technology, mostly solar and wind, gave rise to stable cash flows, profitable projects, and investors that could repay large loans.“
Many US states lack the basic legal framework to enable them to triple and quadruple clean-energy growth in the near future, as must happen. The conventional utilities, corporate energy companies, and politicos tied to “big energy” use the existing code to obstruct clean energy’s breakthrough with all their might, just as they once had in Europe.
“State policies need to support community renewables,” says Sharon Klein, an energy expert at the University of Maine, ”rather than actively blocking them or trying to drive them toward a utility ownership model.”
If the federal government is unwilling to do it, then the states need to sweep aside these impediments, for example, with legislation mandating the access of all producers, no matter how large or small, to the grid. Grid operators, preferably ones independent from the utilities, must be compelled to remunerate producers with transparent, competitive prices – the way it is in Europe.
In the same vein, US utilities can’t be allowed to cap the volume of renewables that they accept into their portfolio, which is common practice. In Europe, renewables have grid priority (it’s the first energy in line to be bought every day in energy markets) and there’s no upper limit on supply. “It would be a revolution were the US to remove the limits set by the utilities,” says Miranda Schreurs, a US energy scholar at the Technical University of Munich.
So too must there be bureaucracy-free legal forms to create energy collectives, cooperatives, and community projects, the kinds that have propelled the energy transition forward in Germany, Denmark, and Scotland. Decentralized community energy has the potential to cover half of the world’s energy needs, say experts as the think tank Energy Watch Group and the NGO Friends of the Earth Germany. The people will take care of the rest as people have cheaper, cleaner energy to gain, as well as tax revenues and wealth creation in their locality.
The renewables‘ benefits that currently exist, such as tax credits for investors in renewables, must be reformulated so that they apply to collectives. “Securities laws make it hard to organize projects that are for mutual profit,” says John Farrell of Institute for Local Self-Reliance, a nonprofit group in Washington that advocates for local sustainability solutions. The states, he says, need “laws allowing for the energy produced to be shared as bill credits.”
Farrell opposes the US system’s reliance on tax credits as the major incentive for investing in zero-carbon energy as it implicitly benefits the wealthy — those with a large tax base. In order to qualify at all for renewable energy rebates at all, one has to have a tax base, says Farrell.
“It leads to inefficiency and complex business models,“ says Farrell. “You have middlemen participating largely to absorb the tax credit rather than to develop renewable energy.“
In Europe, on the other hand, incentives are largely based on performance: price supports are paid per kilowatt of renewable power produced. Europe’s renewable-energy price supports, known as feed-in tariffs, are one way to trigger the spread of renewables.
The guaranteed price for producers is often referred to as a “subsidy,” but it’s not, as the European Court of Justice recently ruled. The energy surcharge is tacked onto the retail price paid by the consumer, which has implications for the retail price for end consumers: the price for electricity rises.
With the prices of solar and wind power, as well as batteries, so low, renewables should be spreading like wildfire across the US. But they’re not, although many states such as California, Vermont, Minnesota and New York are forging ahead.
American environmentalists should cast a glance Europe’s way. There’s a quicker way to go renewable than waiting for a tsunami of state spending.