EU governments struggle to fund green transition, the FT reported this week, subheading this with “Investors in Czech solar parks threaten to sue Prague over planned cuts to subsidies for photovoltaic installations” and if you feel like popping the champagne at this point, go ahead. Seriously, go ahead. Because the transition narrative is crumbing faster now.
The story below that heading and subheading is a story of a revelation that many of us here and elsewhere have been harping on about for years now. Cheap, green solar, besides not being very green, is not cheap at all. It literally cannot survive without government support in the form of taxpayers’ money. The Czech Republic is simply the latest that has been forced to admit it openly.
The problem: the Czech government is cutting solar subsidies and because it’s really out of money, it’s cutting them retroactively, which has prompted a great big, loud wail from the solar industry.
““This is a big canary in the coal mine indeed,” said Walburga Hemetsberger, chief executive of the industry body SolarPower Europe. She added that the move could set a dangerous precedent for other governments and that it was “paralysing future projects”.”
All right. So. Dangerous precedent. Got it. What we have here is an industry lobby group chief who essentially admits that there is no such industry. There is a government-sponsored attempt at an industry, which is failing on all vital signs. An actual industry often needs government support during hard times but this government support is never the only thing keeping it alive. An actual industry develops around demand for its products or services. Even if some or even all of this demand is artificially created (nobody needs soft drinks or luxury watches), the industry develops because the demand is viable and can survive. On its own.
The solar industry is not, in fact, an industry because most of the demand for it is artificially created with one important distinction: the size of that demand is unsustainable in a natural, market-determined way. The natural demand for solar power is niche demand for households and businesses that want to complement their electricity consumption with their own generation capacity and maybe even save some money on their bills by generating their own electricity during periods of favourable weather.
They do save money, by the way. Small factories, greenhouses, and various other energy-intensive businesses up to a certain scale can see their solar investment pay back in a matter of a few years — but they still need grid electricity for the long dark winter nights. And nights in general. It is these businesses, some households and off-grid places which don’t really have a choice that make up the viable source of demand for solar power. That’s it. That’s the natural market for solar power.
But no, the Brussels brain trust wanted to turn solar into a major part of every member country’s energy mix, whatever the cost… until France, Germany, and now the Czechs said that’s not going to happen because it would just bankrupt their populations and leave them in the dark either because they won’t be able to afford the light or because an overdependence on the sun is only as good as the day is long.
Yet because governments were throwing billions at solar developers, these crawled out and multiplied, and gorged themselves on those billions believing the stream would never end, which just shows that they’re not very smart. “This is a signal for investors that . . . the laws of the game can be changed at any point during the match,” the head of the Czech solar power association told the FT.
What investors, one might wonder. The people who pay for the construction of large-scale solar installations safe in the knowledge that the government would be covering their costs and guaranteeing their returns? Those are not investors because investing, I gather, involves a certain amount of risk and in the above set-up there is virtually no risk — until “the laws” change, that is. These are not investors. These are “segmented parasitic or predatory worms that comprise the subclass Hirudinea within the phylum Annelida”, per Wikipedia. And now they’re up in arms because the host is about to run out of blood.
Now, I must make a point of excluding present company, not only because I’m polite and I like you, wherever you put your money, but because I’d bet serious investors do not go all in on a utility-scale solar installation in Slovakia, for example. Or the Great British Solar Subsea Cable to Morocco.
No, the people who do go all in on utility-scale installations are people looking to profit from self-destructive government policies — while the policies last. Which is the part these people seem to have forgotten about, ignoring the risk part of the risk-reward investment equation. Because it’s not a match, as that head of the Czech solar power association suggested. It’s the energy system. And the laws governing that system don’t bend to governments’ — or developers’ — will.
“Such changes could lead to bankruptcies and yield far fewer savings than the ministry of finance expects,” the head of asset management at solar developer and “investor” Enery told the FT, referring to the subsidy decision of the Czech government. What is Enery?
Well, per their own website, “Enery is leading the green energy transition through the acquisition, development, construction, and operation of large-scale renewable energy plants. With a sustainable long-term vision, we deliver clean electricity at affordable prices to create a more sustainable energy landscape.”
It is ironic how they talk about a sustainable long-term vision when that vision is fully, entirely and, in case I haven’t made it clear enough, completely dependent on the continued flow of government cash. Meaning taxpayer cash. But they assure us that their vision involves cheap electricity.
Indeed, solar electricity is cheap during the sunny days. It’s so cheap, producers must either pay to have the grid accept their output or curtail it, meaning waste it. Which only makes those taxpayer money all the more vital for the survival of the non-industry of utility-scale solar. By the by, “Czech households struggle to pay some of Europe’s highest electricity bills,” per the FT. That’s how cheap solar is when you include every relevant factor rather than just the ones you like. Unbendable laws and all that.
The fact that solar leeches are going the litigation way speaks volumes about the state of their non-industry. It’s doing so badly, they have no choice but to force the government by any means necessary to keep pumping those subsidies into solar installations that nobody really needs and that are only making life more expensive for the average voter — and for the subsidy dispenser also known as the government. It is an unsustainable situation and it is not going to be sustained for much longer.
Consider a win in court for the plaintiffs. What happens next? Well, the government is forced to continue subsidising their eye sores. Electricity bills keep getting higher because the subsidy money has to come from somewhere. Demand for electricity falls because people can’t afford it. Supply, however, grows during the sunny months. Negative prices increase in frequency. Calls for even more subsidies ensue because negative prices kill profits. Just how long before the Czech take to the streets to break the vicious circle? They do, after all, have a history of not taking kindly to oppression.
What’s happening in the Czech Republic right now is symptomatic of the solar situation across Europe and the sooner everyone at the top realises it, the sooner we can start fixing this situation. By suspending all subsidies for utility-scale installations. With solar, smaller is better. Large solar has never made sense outside China — because China has all that cheap coal — and it never will. Keep solar on rooftops. Leave the land for the farmers.
Disclosure: We have a 5 kW solar system on our roof. We put it up because, one, we suspect grid electricity prices are going to go much higher, thanks in no small part to utility-scale solar plans by whatever government is in office at the moment, and, two, we get lots of sun for about eight months in the year. We do not sell excess output to the grid. We have principles. And a fireplace.
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