Wind turbines in Luxembourg, via Mattia/Flickr
Renewable energy has been on a tear the past few years, with growth in many countries spurred by subsidies for wind and solar power. Now the heads of 10 European utility companies say EU subsidies should end, because they've got more renewable energy than they know what to do with.
The 10 CEOs in question, who refer to themselves as the Magritte group because they first met in an art gallery, represent companies that control about half the power capacity of Europe. The group gave a press conference today—Reuters says that 10 such executives giving a joint public statement is "unprecedented"—to hammer home a message they've been trumpeting ahead of an EU energy summit in 2014: There's too much energy capacity, which has driven prices down so far that they can't make any money.
The crux of the argument is that because wind and solar receive artificially high rates for their production, wind and solar capacity has skyrocketed. That growth has made traditional fuel sources, like natural gas or nuclear, far less profitable to run. Sounds good, right? It is, until the wind dies or the sun goes down. Because utilities still have to keep those traditional sources up and running, they're arguing that they essentially have to permanently maintain far more capacity than they need.
According to Reuters, declining electricity demand since the 2008 economic collapse has added to a perverse problem in which wholesale power prices have been halved, but "retail prices for consumers have remained near record levels."
"In sectors like steel, cars and refining, when there was overcapacity, capacity was closed. But in the energy sector, we have massively subsidised additional capacity in solar and wind, which has led us to the absurd situation in which we find ourselves today," GDF Suez CEO Gerard Mestrallet told reporters.
Any way you slice it, it's a perverse situation. At its core, it largely comes down to renewables' storage problem: as fantastic as clean energy is, it can't totally replace fossil fuels and nuclear just yet. There are certainly innovative solutions already in the real world, such as Arizona's brand new solar plant that's proven it can provide full power six hours after dark. But until storage is improved, traditional power will be required to at least be on standby for when renewable power dips.
In that light, the Magritte group's argument is understandable: whether through subsidies or not, the boom in renewables means power companies can only make income on traditional plants part of the time, and keeping them on standby isn't free. But it also amounts to an argument for slowing the growth of renewable energy, which is far from ideal.
What's the solution? France just straight-up banned fracking, but that's not doing anything to keep traditional power plants cheap enough to run. The Magritte group argues that the only alternative is increased blackouts, as the power grid becomes more reliant on the fluctuations of renewable energy. In the near term, European regulators may indeed decide to help ensure that fossil fuel plants are profitable enough to stay online, perhaps by killing renewable subsidies. But if renewable growth is the goal, how's this for an idea: Why not subsidize solutions to the storage problem instead?