Posted by: bmeverett | August 13, 2010

Portugal beats the US

The Fourth Estate has been pouring out articles lately bemoaning that China is supposedly surpassing the United States in renewable energy technology. At least China is a huge, dynamic country with a new generation of enthusiastic entrepreneurs, so losing out isn’t too humiliating. However, The New York Times rubs salt into this wound with the news that we are now falling behind tiny Portugal (“Portugal Gives Itself a Clean-Energy Makeover,” August 9, 2010). Reading this article will tell you a lot about not only the current state of renewable energy in The Gentle Land of the Algarve, but also about the mind-set of NYT reporters.

The thrust of the story is that 45% of Portugal’s power will come from renewable energy this year, an accomplishment driven by sheer political will on the part of its Socialist Prime Minister José Sócrates. The PM is clearly a man of great courage since his renewable energy drive was at least partly responsible for his party’s loss of 20% of its parliamentary seats in the 2009 election. As we know from our very own health care debate, the more the public hates your policies, the braver you are.

The NYT has a very clear metric for the success of energy policies, noting that “Energy experts consider Portugal’s experiment a success.” Furthermore, government officials really like the renewable energy push since “the energy transformation required no increase in taxes or public debt.” OK, so “experts” and government officials like the program, but the public doesn’t. The article admits that 90% of the local population is opposed to the country’s largest wind farm at Barão de São João, south of Lisbon. Is the Portuguese electorate (like the US electorate) just stupid or is there perhaps some real reason people don’t like the program?

First of all, let’s see what Portugal gets for its renewable program. Here’s the conventional list of energy policy objectives:
1. Reduction in oil imports: zero. Oil is used in transportation, renewable energy is used to generate electricity and electricity plays no significant role in transport.

2. Reduction in natural gas imports: Significant, since renewable energy in Portugal would primarily displace gas. Portugal imports all of its current natural gas consumption of 170 billion cubic feet per year. The gas comes both through the Spanish pipeline and Liquefied Natural Gas (LNG) system and through Portugal’s own LNG terminal at Sines. The main sources are Algeria and Nigeria. Each of these countries has some political and stability problems, but gas trade has been relatively secure and economically competitive.

3. Reduction in air pollution: Not much. Natural gas is a pretty clean fuel emitting little sulfur or particulates. Replacement with renewables is a marginal gain.

4. Carbon dioxide reduction: Some. Portugal uses about 50 billion kilowatt-hours (kWh) of electricity annually. According to the Energy Information Administration, Portugal’s renewable power production has about doubled in the last 30 years from 8 billion kWh (mostly hydroelectric) to 15 billion kWh (mixed hydro and wind with a little bit of solar). The additional 7 billion kWh of renewable energy saves about 2.5 million tons of CO2 per year – about 4% of Portugal’s current carbon dioxide emissions.

Overall, a little improvement, but nothing to write home about. Here’s the downside. First of all, Portuguese pay over 20¢ per kWh for electricity, about twice as much as Americans pay. With consumption at 50 billion kWh, an extra 10¢ per kWh totals $5 billion or roughly $2,000 for a Portuguese family of four. Some of that extra cost will show up directly in consumers’ phone bills, but some will be imbedded in the cost of all the goods and services people buy. According to the International Monetary Fund, Portugal’s per capital income is about half that in the US. Therefore, the burden of higher electricity costs is in relative terms like $4,000 to an average American family.

The current price of carbon dioxide on the European Climate Exchange is roughly $20 per metric ton. That’s the supposed value of greenhouse gas emissions in Europe. A $5 billion annual price tag for a 2½ million yearly reduction is $2,000 per ton. Doesn’t look like much of a bargain to me.

The key to the whole argument is in a quote from consultant Alex Klein of IHS Emerging Energy Research in Cambridge, Massachusetts who claims, “The cost gap will close in the next decade…” Really? Why should we believe that? The US, other governments and many private firms have been researching wind, solar and other renewable power sources for decades, and they are still prohibitively expensive without government subsidies. In the early 1950s, nuclear power was expected to be “too cheap to meter,” rather like cable television. That didn’t work out so well. We have been researching nuclear fusion for 50 years and still can’t build a fusion power plant that generates more energy than it consumes. In fact, subsidies can often retard technological advancement by creating artificial markets for poor products. If you can sell the technology at a profit as it is, why risk more money on further improvements?

So, in what sense is the US “lagging behind”? I guess our renewables program is seriously deficient if our objective is to earn the praise of “experts” and to please politicians and government officials who don’t have to pay for these expensive white elephants. In terms of looking out for the average person, however, the US is leading the industrial countries in renewables efforts by wasting less money than most other countries.



  1. Great blog entries. Thanks for debunking another claim that sounds good, but is not supported by the numbers.

  2. good post..great share, great to read it

  3. I like your posts. Great. Keep going…

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