The Nutella Problem

Sitting down to the breakfast table this Sunday morning I am confronted by a jar of Nutella. It feels very much like a rebuke, as just yesterday I attended a lecture about how the owners of sugar and palm oil plantations in Central America have systematically driven small farmers off their land and instituted a system of poorly paid seasonal labour under appalling conditions. Oligarchs in Honduras, after backing a military coup against a president who began reforms, have used their own militias and the national military in a violent campaign against landless peasants.

The first two ingredients of Nutella: sugar and palm oil.

Let’s be clear that Nutella represents the summit of human achievement. Spreadable chocolate? If cavemen had known about that, they’d not have bothered inventing fire. Unless they wanted toast, of course.

Lab studies have shown that rats with unlimited access to sugar will eat themselves to death. Only the wisdom of education and an unwillingness to look like a pig in front the kids we’re meant to educate separates human adult behaviour from our innate desire to follow our rat brethren to a sweet and early grave. It’s a realistic prospect. Both sugarcane and oil palms are tremendously productive plants. They generate more calories per hectare than almost any other crops – calories that can be turned into food, into energy, or into an astonishing array of consumer goods.The advantages can hardly be overlooked.

Anything desirable, however, will bring out the Gollum in our behaviour. Basic human decency and respect for another person’s rights, the limits of local ecosystem and planetary boundaries; these can fall to secondary importance. They are generally one or more steps removed from a plausible rationale: we’re only destroying this small part of the ecosystem (failing to account for cumulative effects); we signed a contract with that peasant and now his land is ours (failing to account for a vast difference in understanding and bargaining power); we’re creating thousands of jobs (only on the condition that they are filled by people who are as good as expendable).

But then, there is the jar of Nutella on my breakfast table. A table facing the high-efficiency glass window that overlooks a stable of bicycles. What failure of perception, what failure of will, what desire for chocolaty goodness, led to this apparently jarring juxtaposition of jar, organic bread and free-range hard boiled eggs?

The French government hoped to provide consumers a nudge in the direction of lower saturated fat consumption by proposing, unsuccessfully, the ‘Nutella tax’, which would have quadrupled the rate on palm oil, raising the price of a 500g jar by 3 cents – probably neither a hardship nor an effective measure. Other efforts are aimed at the producer end, such as the Roundtable on Sustainable Palm Oil, which certifies adherence to a range of good criteria. To date about 16% of globally traded palm oil adheres to RSPO.

Earlier this year the European Commission published a report on the deforestation induced by Europe’s purchase of imported goods. Contrary to many people’s expectations, palm oil ranked rather low on the list, largely because much of it is used closer to the big producers in Asia. What comes through loud and clear, however, is the huge proportion of the EU’s deforestation impact due to the cultivation of soybeans, particularly in Brazil. These are not the soybeans in the organic fair trade tofu in my refrigerator. No, they are the soybeans used to fatten the vast population of European livestock that feeds our meat-eating habits. It’s the package of bacon incongruously stacked on top of the tofu that is destroying the Amazon. How did that bacon get into my refrigerator?

Unfortunately, the range of issues underlying problems like those experienced by farmers in Honduras, Indonesia, or Brazil goes far beyond what can be captured in a tax, a standard, or European law. People whose land rights or ‘only’ traditional, or who have lost their farms through legal means in which they have no voice, will be tough to capture in statistics. The ‘unused’ land being converted to productive agriculture may have been home to whole villages, who relied on it for subsistence. Add to that the vast flexibility in products derived from these plants, in a system of global trade, and quickly the task of tracking poor practices is hugely complex.

So where does responsibility lie, and where are the solutions?

Like all answers to complex problems, it can’t be capture in one word. It is and-and. Consumers who are provided zero information about the impact of their purchase at the point of sale and must rely on the odd newspaper article for their knowledge can hardly be expected to drive an entire value chain to change its ways. Especially when the Scylla of environmental degradation halfway across the planet stands opposite the Charybdis of children in a grocery store shopping cart forcefully expressing the agony they will experience absent an immediate transfusion of chocolate spread.

Standards may have their failings, but they are gaining ground and making improvements. Efforts like FSC and MSC have long become mainstream, and many others are following in their footsteps. Lawmakers have also shown that they can learn. The European Parliament’s decision last week to back a proposal to limit the amount of first-generation biofuels qualifying towards the renewable energy target is, though too weak, a recognition that better approaches are out there. Clearly far more needs to be done, but never before has their been such widespread recognition that what we do in Europe is inextricably linked to what happens in far away places, to other people.

The far greater struggle, however, is taking place where those people live. Land and ecosystem degradation as well as human rights violations go hand in hand with a lack of sufficient democratic rule, legal process, and political power. The high level of destructiveness wrought by the production of global commodities is inextricably linked to the scale of operations of large concerns and the governments who favour them. Answers to curbing the environmental destructiveness of our consumer habits and their production methods have to start with our support for equity and law. It will never come just from environmental legislation, standards, or my switching to strawberry jam.  The latter is, however, in my power. And once that jar of Nutella is done I won’t buy it again. Or bacon.

Come to think of it, maybe I’ll just go back to bed.

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Knee-deep in you-know-what

It took a major storm striking America’s most densely populated coastline to draw attention to global warming during the recent presidential election, after months of deafening silence. In Europe, the reaction raised hopes that cracks might show in US politicians’ frosty disdain for all things climate.

Impacts of Sandy were initially estimated at up to $50 billion, but will there be real consequences for policy or planning? One isn’t optimistic when media pundit economists bicker about whether this is just a messy form of economic stimulus.

Andrew Guzman’s blog post on Sandy  is informative. Among other consequences of the storm, wastewater treatment systems failed, releasing tonnes of sewage. The damage will cost billions to repair. Not the most high-profile of issues, but indicative of the myriad ways we are vulnerable to impacts, often with hidden costs.

Guzman is an international law professor at the University of California at Berkeley, and has taken a fuller look at climate impacts in a new book, Overheated, coming out soon. It sets its sights low – that is to say, examining what’s already happening, and how this will get worse at 2 degrees, the agreed international limit. Considering we’ll hit nearly 3.5  degrees of warming if countries implement their current pledges, it’s a conservative picture, but still dire.

A deeper awareness of climate impacts will give us an even better idea of why we’re better off trying to head off serious warming. Acting in advance gives you the benefit of all that GDP-boosting investment, without the messy business of destroying lives in tragic disasters – something even a media pundit economist might want to take into account.

 

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Re-energising Europe: the choices are ours

The choices we make about the resilience and sustainability of our energy system are of such central concern to all our lives that they must be informed by more voices than those of the great and the good alone.

That is why WWF launched a report today entitled “Cutting energy related emissions the right way”, assessing the five decarbonisation scenarios presented in the European Commission’s Energy Roadmap 2050. The WWF report shows that the Energy Roadmap only considers a relatively narrow range of decarbonisation options, all with roughly similar levels of renewable energy by 2030, and a significant residual fossil fuel liability through to 2050.

It matters to all of us that the EU’s energy system makes maximum use of energy efficiency to reduce our bills.  We all have a stake in whether enough is being done to secure the new jobs and climate benefits that more renewable energy can deliver.  We are all impacted by the reliance on fossil fuels that mean our nations keep spending hundreds of billions of Euros to import the coal, oil, and gas that pollutes our air.

But how can we access the debate?  How can we digest those dense policy proposals of facts and figures, assumptions and arguments, when in reality we actually spend our days paying our bills, looking for and doing our jobs, and negotiating the polluted environment we live in?  The latest EU strategy is understandably not on the top of many people’s to-do list.

So here are the four key lessons derived from WWF’s assessment of the European Commission’s Energy Roadmap:

1.  Energy savings are the key enabler for decarbonising the energy system;  Unless we do much more to reduce the energy we consume, even the Commission’s conservative predictions for energy savings will not be met.  We can choose either to use power much more efficiently, or we can work out how to pay for the energy we continue to waste, and suffer the consequences of environmental and social impacts.

2.  Now is the window of opportunity for increasing renewable generation;  A significant amount of the EU’s power plants are closing over the coming years.  We can either choose to replace them with job-creating and environment-protecting renewables, or air-polluting and planet destroying fossil fuels.

3.  New fossil fuel infrastructure must be treated with extreme caution; Many people are busy talking up the future role of gas in the EU.  We can either choose to take their arguments for expensive infrastructure at face value, or we can ask ‘how much gas do we really need? and what can we do avoid locking ourselves into unsustainable levels?’

4. Aiming for 95% decarbonisation from the start is a game-changer; Despite the EU’s ambition to reduce emissions by 80-95% by 2050, decision-makers only seem to mention the bottom end of the scale.  We can either accept the risks involved in aiming low, or we can raise our sights and demand the protection we need from the impacts of climate change.

The choices are ours…

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Doha COP18 – Fast track to sustainability or careering towards climate catastrophe?

Just like global temperatures, the stakes at global climate change negotiations continue to rise.  Ever since the global negotiators lost their way in Copenhagen in 2009, those who care about saving the planet have been trying to put them back on track.

While there is some evidence that the process is following the signposts of global warming and climate threats, it is also painfully obvious that progress has been pedestrian.  Without wanting to strain a metaphor, the image I have is of the collective spurning an efficient, renewably powered, high speed rail journey to our preferred destination of planetary security, in favour of a rickety horse and cart bumpily herding truculent cows towards the new pastures they want and need, but can’t quite summon the energy and wit to actively seek out.

And so the journey reaches its 18th stop in Doha, still seemingly reading the stars for directions – and certainly a long way from drawing the roadmap needed to show the possible routes, and even further from having conceived of the GPS that might show the quickest and easiest path to protecting both people and the planet.

All this despite, or perhaps because of, many of those lining the route shouting “left” or “right” at every opportunity – the question to be asked both of negotiators and those lobbying them, is where do we want to go?  In WWF’s opinion  the destination must be a planet that is less than 2 degrees hotter than pre-industrial temperatures, and to get there COP18 must set clear rules of the road, including:

  • Be true to science and agree global emissions to peak by 2015 to prevent runaway dangerous climate change
  • Historical emitters must lead a seamless transition to a 2nd commitment period of the Kyoto Protocol (KP)
  • Protect vulnerable people and places by taking measures to deal with existing and future impacts of climate change
  • Save our forests by taking urgent action to stop their destruction and degradation
  • Developed countries should commit immediate funding to the Green Climate Fund from 2013

Taking the right path in each of these areas will lead us to a sustainable future where our needs are in line with the needs of the planet.  The right destination is on the horizon, but there is still a real risk of being distracted by mirages along the way.  These potentially lethal diversions may look like tempting by promises of quick fixes and easy wins – but which will in fact only waste time and leave the bitter taste of failure.

Our path is a long one, and it will not always be easy, but the safe endpoint is clear, and we must work together to get there as quickly as possible.

 

For more information from WWF on COP 18 please visit: wwf.panda.org/cop18

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Mixed-up messages on cutting carbon


In the relative quiet of summer, with many politicians and policy makers off working on their tans instead of their portfolios, Shell’s Climate Change advisor David Hone was still hard at it.  He shrugged off the tempting call of sand and sea and took the opportunity to blog about the US cutting CO2 emissions without EU-style binding targets and timetables to do so.

The Shell man correctly notes that the fall in US emissions are indeed driven by economics rather than policy.  But, to my mind at least, he implies incorrectly that market forces are a sufficient tool for cutting emissions.

For a start, I don’t think any serious proponent of the urgent need to tackle climate change would say that the pain of the recession was worth the gain of emissions cuts.  Furthermore, while greater vehicle efficiency in the States is to be welcomed, the latest Annual Energy Outlook of the US Energy Information Administration makes some worrying projections out to 2035, including that all transport energy consumption will only fall with “extended policies”, but even then only by about 7%.

However, it is the final cause of the US’s emissions cuts that is potentially the most problematic of all.  It is well known that the massive exploitation of US shale gas resources have led to dramatic price falls, which in turn mean that gas has displaced coal as the cheapest generation fuel.  In that context, the EPA air quality regulation and expected greenhouse gas regulation noted by Mr Hone are much easier to get passed.  This new glut of gas fired power generation may be better than coal today, but we have to think about tomorrow, and, hopefully the many tomorrows after that.

Max-ing out on gas today might save US emissions now, but unless you have a strong plan for switching it off, potentially before the end of its economic life, then you are risking lock-in to what is still a polluting fossil fuel.  When that gas comes from shale-beds, with the associated potential for methane emissions, a switch to gas starts to look even less attractive.  With commercially viable CCS still far from being a proven option, this year’s medicine could easily become next year’s poison.  What’s more, gas prices could rise again, bringing coal back into the mix in a way that puts severe pressure on that newly passed legislation.  Look out for lobbyists in search of loopholes.

The situation is even more worrying when you look at the global perspective…  climate change is, after all, a global problem and a ‘fix’ in one place is not necessarily a fix everywhere.  Cheap gas in the US might be effectively displacing coal there, but the modern day coal barons have not just shrugged their shoulders and shut up shop.  Of course not, in in globalised world they simply looked for another market.  This American coal, cheaper because of competition in the US, is now finding a more lucrative market in Europe, where it can now undercut gas and displace it as the cheapest fuel. So what may be perceived as good for America, is not necessarily good for the planet, or for Europe.

If ever we needed a reminder of the hugely urgent need for action far beyond that which can be delivered by economic drivers alone, Andrew Simm’s recent blog gives a sobering summary of the situation.  As he so succinctly puts it; “The problem is that where climate change is concerned, gallons matter more than miles per gallon.”  We have to make absolute reductions in energy consumption, starting now.  Is that really possible in an economic system driven by the demand for incessant growth?  We need fundamental change if we are to break the cycle that is digging us ever deeper into the mire.  Ideas on how to do this will not be found in the offices of those who benefit so greatly from the status quo.  

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Adapt or die. The all-natural approach to climate change

It was widely reported in June that Exxon’s CEO said we will adapt to climate change: ‘As a species that’s why we’re all still here: we have spent our entire existence adapting. So we will adapt to this.’ It’s an opinion with mainstream appeal because it’s true – ‘we’ always adapt (The ‘we’ who are still alive, that is).

Perhaps we should look at recent performance to get a sense of how well we manage. The Dutch have certainly wrested control of their land from the sea successfully for many years. And, after $15 billion in earthworks the levees mostly held during the recent storm over New Orleans. More success. Of course the 1,836 people who died during Katrina are still dead. Chalk it up to learning. And how well did we manage the conflict in Darfur - where drought played an aggravating factor, as will happen more in future due to climate change? Not well, to put it mildly: as many as 300,000 people distinctly failed to adapt.

On current form, it looks like heavy dependence on adaptation to the exclusion of real mitigation action will be exceedingly risky. Still, even if we do get things wrong, what are the consequences? Here’s where Exxon is on safe ground again in some sense – after all ‘we’, broadly speaking, will pull through. Richard Watson notes in his popular book Future Files; a brief history of the next 50 years that ‘the climate/carbon/water debate is really about how future change will affect those who are too poor to adapt…Periodic environmental crises have been part of the earth’s history for as long as the planet has existed. In fact there are a few people who think the odd mass extinction is good because it allows the evolutionary process to start again.’

Our genetic heritage is one of mass death, at the hands of nature and of each other. If we hadn’t been under pressure, we wouldn’t have evolved as we have (which includes being able to roll with the punches. It’s human nature to more or less ignore the suffering of complete strangers, and to endure our own. Otherwise life would be unbearable). Humankind has at times been reduced to very small numbers indeed – perhaps 5,000 people after a prolonged dry period in Africa 50,000 years ago. Tough times no doubt, but we adapted, as evidenced by our later invention of agriculture, and football. So, all in all things turned out nice.

It takes work not let the moss of time grow over bitter scars to the point of obscuring the lessons, which are all the more needed when resulting from human actions. The middle of the 20th century was so traumatic that it gave rise to stabilising institutions, and generated cultural memes that retain their power, like the horror of the holocaust. This should help prevent future students skimming economics texts and coming away with the idea that the war was just a good way to boost manufacturing.

Exxon and its ilk appeal to a deep instinct about our inherent abilities to overcome. But there’s a catch: adapting after the fact is an admirable human trait. Anticipating, and indeed causing, tragedy – using our ability to cope with the consequences as a justification not to avoid it – is an atrocity.

Recognising that distinction is, fortunately, another definingly human capacity.

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Update – EU renewables manufacturing – Terminal decline or simple shake-out?

Below is a great link to a recent article in the European Energy Review which reinforces the points made in my original blog posting.  The Author, Craig Morris, provides clear examples of how Germany continues to benefit from its domestic solar boom, despite the fact that most of the panels are now being made in China.

The case is neatly summed up as follows:

“The public eye may focus on the middle of the value chain – [manufacturing] panels – but Germany clearly reaps benefits all up and down it.

And below is the killer graphic:

Figure 1: Domestic and foreign content of solar rooftop system in Germany, 2010 and 2012 (c) Data from Solarpraxis and own research. Created by Petite Planète. Design by HBF.In 2010, a rooftop array in Germany with an installed price of 2,900 euros per kW would have had nearly 50% domestic content even with panels imported from China - assuming that all other components and services were domestic. Now, that figure is likely to be closer to 60% (estimate as costs vary from one array to another).

The article’s facts are illuminating and include:

“Germany need not worry about domestic content anyway. Even if the country uses imported panels, more than 50 percent of the array’s value can still be domestic. Back in 2010, a rooftop solar array would have cost around 2,900 euros per kilowatt in Germany. Berlin’s Solarpraxis broke down the figures as shown in the chart above. Here, cabling, the installation substructure, and the inverter (BOS components) would probably be made locally, so nearly half of the system’s value would be domestic even if the panels are from China. Today, panels from China cost closer to 700 euros per kilowatt, whereas the other prices have not dropped as much. Asa result, the share of domestic content continues to increase as (imported) panels make up than ever smaller share of the installed price.” 

Craig also makes clear the extent to which the failure of a number of solar firms in Germany and the States is not simply about competition from China but more about the degree of general overproduction that has been seen in recent years: “The problem globally is that production capacity (estimated at around 60 gigawatts) far outstrips demand, with less than 29 gigawatts installed in 2011″

However, he ends with a confident prediction that: “The future is bright indeed for solar firms that can survive the current consolidation phase”

Enjoy!

http://www.europeanenergyreview.eu/site/pagina.php?id_mailing=292&toegang=1700002963a49da13542e0726b7bb758&id=3791

 

The original post is below and at this link:

http://blog.wwf.eu/2012/06/04/eu-renewables-manufacturing-terminal-decline-or-simple-shake-out/

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Profit of doom: it’s the end of the world as we know it, and BP’s doing fine

It must be rewarding to present the BP annual statistical review of world energy, as their chief economist did in Brussels yesterday. For all of the impressive data gathering and authoritative explanation, he is basically describing what happened last year, but it’s blown up to seem like pronouncements from the Oracle at Delphi. Predicting the past is notoriously easy; Brussels however is a city focused creating the conditions of the future. This endeavour came in for a sound pooh-poohing from BP, particularly regarding any attempt to reconcile energy trends with a desire to avoid dangerous climate change. Fighting against the status quo (which by some remarkable coincidence is exceedingly profitable for his industry) is just wild-eyed irrelevance.

Renewables, he declared, are probably like nuclear energy, which plateaued in places like France as soon as the subsidies were pulled. The United States is doing more to fight climate change by using shale gas than the EU with its ‘so-called good intentions’ on climate. Like any good lie, these have truths buried within them. Nuclear took off in France on the back of massive subsidies, and has indeed stalled. Not least of which for the simple fact that with every passing installation the technology gets more rather than less expensive: negative learning. Or rather, learning about the negatives, and what it costs to avoid them.

Renewable technologies on the other hand are top of class learners: every doubling of PV capacity cuts costs by more than 20%. Last year the price of a PV wafer fell 70% and of a module by 50%; installations jumped 65%. In a single year. Subsidies have sped this process by increasing volumes sold, but the success is so dramatic that countries are speeding up declines in support: when done in a rational way, this is a process that even the PV industry backs. Competition is already fierce internationally and is forcing European manufacturers either to go out of business or to innovate – this the energy equivalent of the internet revolution (a government-sponsored invention), and last I checked, the fact that many a dot com went belly-up in 2000 doesn’t prevent me from watching funny cat videos on youtube.

It’s unsurprising that BP is going around the world trying to push the genie back in the bottle. But over time they will seem like the guy trying to sell us a 100-volume set of encyclopedias while the rest of us use wikipedia.

Of course BP would love to rebrand gas as a low-carbon fuel. So the US story, where shale gas is pushing coal out from electricity generation, is attractive. Emissions have indeed fallen by a few percent. If the US continues at this rate they may even get back to 1990 levels (a goal they signed up to back in 1992). The UK went through a similar transition years ago, in the ‘dash for gas’. It had a head-start on many other countries in reducing CO2. But that head start has played itself out, and the decarbonisation debate is only really beginning in earnest, with renewable energy and efficiency front and centre (and nuclear waiting in the wings for illicit subsidies). Gas can buy you time, much as replacing the first three bullets from a revolver with blanks can, before aiming at your foot. But the day will come when we ask ourselves, did we just fire two shots or three? Are we feeling lucky?

The purpose of such BP statements on renewables and climate, none of which is the focus of the annual report or the subject of rigorous analysis, is to sow the seeds of doubt – a global roadshow of pessimism masked as information. It is true that like any good business they are hedging their bets – they have a commitment to spend about $800m a year on alternative energy between 2005-15 (largely biofuels – not uncontroversial themselves). Of course, once numbers get big you lose a bit of perspective. In 2010 they incurred a $37bn charge associated with the Gulf of Mexico oil spill. In 2011 alone they committed to $14bn of new exploration in the North Sea, they bought part of an Indian oil company for $7bn and they had profits of $40bn. Their alternative energy guys are probably lucky to get invited to the office Christmas party.

Yesterday, BP had particular disdain for the idea of ‘backcasting’ exercises like the EC’s energy roadmap 2050. The notion of ‘starting out with where you want to be’ was spat out like a dirty epithet. Of course where we want to be is a world not suffering from 6 degrees of warming, the EU almost fully reliant on external energy suppliers, and fossil fuel costs draining our pocketbooks. The oil industry’s long-range outlooks, of which I’ve seen presentations from BP, Shell and Exxon, are uniformly presented as ‘realistic, fact-based, business cases.’ None of them foresees solving the climate problem.

BP’s chief economist, who travels the world presenting the report, says the only two places that climate gets mentioned is Berlin and Brussels, a change from a couple of years ago. He stated it in a manner that seemed to say – ‘well, that’s put that issue to rest.’  Perhaps this is indicative of a corporate culture that only seems to pay serious attention to something once it blows up. His industry is definitely the cat that ate the canary at the moment – production dropped 4% last year and profits jumped 75%: what a deal! Gas is giving them a half-story about carbon reductions, and they can afford to dabble in renewables while they focus on milking the petroleum cash cow.

Somehow though, just under the surface, is the nagging sense that, with the help of new technology deployment and a democratic process that has the power to make choices about the consequences of our actions, they may just yet be blind-sided by history.

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Europe has three days to help save your money… and the planet’s future

Wednesday will most probably see the final round of EU negotiations on a proposed law to reduce the EU’s energy use (the so called EU Energy Efficiency Directive).  A good result would pave the way for lower energy bills, more efficient homes and businesses, new jobs in Europe, and fewer climate change causing greenhouse gas emissions.

A protracted back and forth between a reasonable position from the European Parliament and an unreasonable one from the Council of the EU, with the ring being held by the European Commission, has been a perfect illustration of the saying:  “There are two things in the world you never want to let people see how you make ‘em: laws and sausages” (Leo McGarry – The West Wing… oh, and also Otto Von Bismark)

While it may be slim, we must still hold onto the hope that the Parliament (Led by Green Party Rapporteur Claude Turmes) will prevail.  WWF will continue to work hard over the next three days to convince all involved to include our key asks in the final text:

  •  A legally binding target on all EU countries to achieve their share of a 20% reduction in Europe’s primary energy consumption by 2020, with a clear trajectory.
  • A requirement on all EU Governments to renovate their buildings in order to cut energy use by at least 75% ( = ‘deep’ renovation) and to develop long term strategies to cut energy use in all buildings by 2050.
  • An obligation on energy retail and distribution companies to achieve ongoing annual energy savings equal to at least 1.5% of their sales, through schemes which could also create a stable source of revenues to finance energy efficiency investment in homes.

So please join us by making a strong final call to national and EU policy makers to lead the way towards an Energy Efficiency Directive that is strong enough to be a vital tool to boost Europe’s sustainable economy and put it a strong path out of the crisis.

 

See below for social media resources you can use in your member state:

Twitter:

@xx Dear minister, Save Energy, Save Money. @wwfeu asks you to lead the way #EED  http://tinyurl.com/c372g6w  #efficiency #eu #climate #energy“

 

Facebook

Short version: Dear Minister, It is your last chance to lead the way! Support a strong EU Energy Efficiency Directive. Save Energy. Save Money.

Long version: Dear Minister, Wednesday will most probably see the final round of EU negotiations on a proposed EU Energy Efficiency Directive.  A good result would pave the way for lower energy bills, more efficient homes and businesses, new jobs in Europe, and fewer climate change causing greenhouse gas emissions. It is your last chance to lead the way! Support a strong EED. Save Energy. Save Money.

 

The link to the cartoon:  http://tinyurl.com/c372g6w

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EU renewables manufacturing – Terminal decline or simple shake-out?

Reading the frequent headlines of solar manufacturing bankruptcies and factory closures, it is easy to see why many have come to the conclusion that austerity driven cuts to solar support schemes have pushed the sector to the brink of collapse. 

Thankfully, the hype does not tell the whole story.  There are reasons for optimism, despite the bad news.

Firstly, we have to separate out manufacturing from the rest of the solar value chain.  Even with no manufacturing at all, there would still be a strong renewable energy economy in Europe.  Only about a fifth of all ‘solar’ jobs are in manufacturing.  The other 80% of workers benefiting from the growing solar sector include those who are planning the projects and/or distributing, selling, installing, and maintaining the panels (1).  Those in non-manufacturing solar jobs, whilst still dependent on the overall health of the sector, are not as vulnerable as their factory-based colleagues, who have produced PV units at such a rate in recent years that there is chronic oversupply – massively depressing prices and jeopardizing even some of the biggest solar panel making companies (2).   Even then, there are some early signs that the oversupply problem is starting to work its way out of the system (3) – giving those strong enough to survive the chance to thrive in a growing market (4),(5).

Secondly, closures of European PV manufacturing facilities cannot be said to be simply ‘because of the Chinese’.  Instead, these are just as likely to be part of the natural shakeout that happens in any nascent industry.  Plenty of ‘dot-coms’ went bust, many quite spectacularly (6), in the early 2000’s, but no one suggested that the sector as a whole was in terminal decline.  Indeed, with the fat well and truly trimmed, internet based business has been booming.

While the context is different, the truth remains that the closure of some solar manufacturing facilities does not spell doom for all.  Many of the failures are in the ‘home’ of PV panel production in eastern Germany.  For example, the now bankrupt Q-Cells’ production facilities were located in the city of Bitterfeld-Wolfen, in a former lignite mining area in the eastern German state of Saxony-Anhalt (7).  Such facilities enjoyed generous subsidies to locate in former East Germany, as part of Germany’s, and the EU’s, continuing work to develop the those parts of the region that had so much catching up to do since 1989.  Coming on top of feed-in-tariff subsidies, it can be argued that this public support made German manufacturers complacent. Over-insulated from harsh market realities, they failed to either innovate or deliver products that responded closely enough to customers’ needs.

Thirdly, in response to this weakness, and seemingly never ones to miss an economic opportunity, Chinese manufacturers set about developing technologies more suited to European conditions, and offered them at a lower price than German competitors.  While it is true that the product quality is often considered inferior, and Chinese companies have certainly enjoyed support at home, this development has not simply followed the model of the low-wage, export-driven Chinese economic phenomenon.  Indeed, Chinese solar businesses are set to beat the competition in its own back year by setting up manufacturing bases in high-wage Germany in order to benefit from skilled workers to improve its products and to avoid the transaction costs of import/export.  No wonder the German manufacturers are hurting – just ask the Bayern Munich football about the agony of losing the big prize when you’re playing at home.

Fourthly, as with all business, it is impossible to take the politics out of it completely.  The principle of reducing public support as manufacturing costs fall is one long supported by all sides of the debate, including environmental NGOs like WWF.  Indeed, this practice was written into the German feed-in-tariff system whose regular and predictable price decline in line with the falling costs of a growing market were considered a model to be replicated by others.  However, rapid PV cost falls of about 50% in 2011 (8) created pressure for a quicker response and the German government accelerated cuts (9).  No doubt these tariff reductions were a blunt tool, the wielding of which was somewhat indiscriminate, clearly hurt some undeserving victims and certainly killing off a number of those least able to resist.  It should be remembered, however, that the German move was a far cry from the devastating retroactive (Spain) or rushed and over-corrective (UK) cuts seen in other countries.  While companies elsewhere have greater cause for complaint, it has been argued that some of the firms threatening bankruptcy in Germany were uncompetitive enterprises trying to hold their government to ransom for protection from the effects of an over-supplied marketplace.  If it was a bluff, it was well and truly called.  History will be the judge of the outcome.

While one would rarely want to see any company go to the wall, market economics is a tough world, and only the fittest will survive.  It should, therefore, be well noted that some German solar companies clearly had significant management problems – losing huge amounts of share value even before the recent cuts to support regimes.  The fact that Chinese companies can flourish, including by opening factories in Germany, while benefiting from the same level of support that German companies considered to be too low, suggests that the Chinese were simply doing it better.

Fifth, it appears that for much of the reporters of these developments, not all solar jobs are equal.  Job losses in German solar PV manufacturing businesses are estimated to be up to 5,000 last year and 10,000 this year.  While bad, especially for those made redundant through no fault of their own, this is far from being the full picture.  For instance, these figures do not account for jobs being created in non-German PV manufacturing companies in Germany – perhaps those Chinese factories are not looking so threatening now!  Also, from the European perspective, Spain and Italy have added almost 50,000 new jobs in PV manufacturing and installation.

Sixth, challenges for european solar panel makers should not cast a pall over the European renewables sector as a whole.  While the Chinese and other Asian companies may be winning in one sector (which, it should be noted, is closely linked to their comparative advantage in high-tech and electronics) European companies continue to rule the roost in precision engineering related wind-turbine manufacturing.  So much so, that Chinese wind companies have seen profits plummet even before the Chinese government opens up its domestic market to foreign competition (10).

Seventh, some EU solar manufacturing closures have very specific drivers.  For example, the US company First Solar is the world leader in thin film technology, so naturally, they wanted to set up in the EU and take advantage of a rapidly growing market.  However, thin film solar power is particularly suited to large, ground-based arrays, which have not been popular in space constrained Europe, which prefers its panels on its roofs.  So First Solar took the pragmatic choice of closing manufacturing in Europe and opening it in regions where it can sell its products because they suit the market better, namely Asia, Africa, and the Americas.  Indeed, almost everywhere except Europe… so why would they stay?

The fact is, that despite the doom mongering, we are still early in the Solar boom.  There is plenty of room for growth, including in European-based manufacturing.  As any market matures, so it becomes more refined and its consumers more discerning.  Surely the home of viticulture can appreciate that.  To succeed, any maker of solar panels, or other renewable technologies, will need laser-like focus on providing quality products tailored to the market demand while also staying ahead of the competition by innovating into the myriad possible new applications and technologies.

Renewables are nascent technologies, and as they seek to compete with the entrenched advantage of fossil fuels (that continue to receive many times the subsidies directed to renewables (11)) they will need support.  As the economic context for renewables becomes more complex and varied, support schemes will have to continue to adjust. The strong progress towards the 2020 renewable energy targets are testament to what can be achieved when support is matched with ambition.  To build on what has been won so far, it is vital that the 2020 targets are met in 8 years time, that a high and binding renewables target is set for 2030, and that support schemes continue to be fine-tuned and complemented by increased cross-border co-operation.

The race for renewables to become Europe’s energy supply option of choice is on the right track – which competitors win in each sector will simply depend on which are fittest.

References

  1. http://www.euractiv.com/climate-environment/solar-industry-pushing-anti-dumping-case-china-news-512895?utm_source=EurActiv%20Newsletter&utm_campaign=51e0a077aa-newsletter_climate__environment&utm_medium=email
  2. Re-considering the Economics of Photovoltaic Power, May 2012 (Bloomberg New Energy Finance – Morgan Bazilian, IjeomaOnyeji, Michael Liebreich, Ian MacGill, Jennifer Chase, Jigar Shah, Dolf Gielen, Doug Arent, Doug Landfear, and Shi Zhengrong)
  3. http://www.bloomberg.com/news/2012-05-02/oci-rises-on-speculation-solar-oversupply-may-ease-seoul-mover.html
  4. http://www.digitimes.com/Reports/Report.asp?datepublish=2012/1/11&pages=PD&seq=205
  5. http://www.bloomberg.com/news/2012-01-26/solar-ceos-predict-boom-in-china-will-ease-glut-in-2012-energy.html
  6. http://www.wisegeek.com/what-was-the-dot-com-bubble.htm
  7. http://www.spiegel.de/international/business/q-cells-bankruptcy-heralds-end-of-german-solar-cell-industry-a-825490.html
  8. http://www.reuters.com/article/2012/04/13/solar-prices-idUSL2E8FAD0X20120413?feedType=RSS&feedName=technologySector&rpc=43
  9. http://www.spiegel.de/international/germany/inflated-incentive-environment-minister-retreats-on-solar-subsidies-a-811530.html
  10. http://www.rechargenews.com/energy/wind/article311741.ece
  11. https://mail-attachment.googleusercontent.com/attachment/u/0/?ui=2&ik=28ebc3dc5b&view=att&th=137a1d0303d9ff72&attid=0.1&disp=inline&realattid=71c865e26ac64364_0.1&safe=1&zw&saduie=AG9B_P9HArKYTuHre8aB2-zkR0ik&sadet=1338469815376&sads=cNMipmRxCQz0CLiXa91xevJeRC8
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