Europe's Renewable Romance Fades

Europe's Renewable Romance Fades

High energy bills and threats of blackouts ended the honeymoon. America, take note.

By DAVID GARMAN AND SAMUEL THERNSTROM

Europe has bet big on wind and solar energy, and many environmental advocates would like America to follow. Wind and solar have a role in the U.S. energy economy, but we would be wise to see the cautionary tale in the European experience and adjust our plans accordingly.

Wind and solar generate 3.5% of America's electricity today, but Denmark gets 30% of its electricity from wind and hopes to produce 50% by 2020. Germany, Europe's largest national economy, produces roughly 12% of its electricity from wind and solar today, and it wants renewable energy to account for 35% of electricity generation by 2020.

Clean energy powered by renewable resources is understandably attractive. But the honeymoon with renewables is ending for some Europeans as the practical challenges of the relationship become clear.

The first challenge is cost. Germany has reportedly invested more than $250 billion in renewable energy deployment, and its households pay the highest power costs in Europe—except for the Danish. On average, Germans and Danes pay roughly 300% more for residential electricity than Americans do.

Another challenge of Europe's growing dependence on renewable energy is far more serious: the potential loss of reliable electrical supply. It's one thing to ask consumers to pay more for cleaner energy; it's another to force them to endure blackouts.

Since large amounts of electricity cannot be easily or inexpensively stored, it must be generated and delivered ("dispatched") to meet the constantly changing demand for power. As millions of consumers turn electric lights and appliances on and off, power generators and grid operators must match supply to demand to ensure that current is moving across wires at the proper frequency to avoid power failures, brownouts and other problems.

Normally, this is fairly straightforward. Grid operators generally rely on coal and nuclear plants to meet baseload demand while modifying gas and hydroelectric power output to meet shifting demand. But electricity from wind and solar is variable and intermittent. Nature determines when and how much power will be generated from available capacity, so it is not necessarily "dispatchable" when needed.

When intermittent renewables are small players in the grid, they can be easily absorbed. But as they reach European levels of penetration, the strain begins to show. There are increasing reports of management challenges resulting from wind and solar across the European grid, including frequency fluctuations, voltage support issues, and inadvertent power flows. Anxious operators are concerned about potential blackouts.

In an April 17, 2012, letter to EU Commissioner for Energy Gunter Oettinger, for example, Daniel Dobbeni, the European Network of Transmission System Operators president, said grid operators are "deeply concerned about the difference in speed between the connection of very large capacities of renewable energy resources and the realization in due time of the grid investments needed to support the massive increase of power flows these new resources bring." He also expressed great concern "about the potential destabilizing effect of outdated connection conditions for distributed generation that are not being retrofitted anywhere fast enough."

There are solutions for these problems—upgrades to electricity transmission and distribution and expansions of "dispatchable" generation capabilities, coupled with "demand-response" and other efficiency measures. But the additional cost will be significant. The International Energy Agency has warned that Germany will need to invest between €47.5 billion ($62.9 billion) and €72.5 billion ($96 billion) in transmission and distribution over the next 10 years.

For now, the American picture is different. Unlike Europe, the U.S. has excess generating capacity and generally adequate transmission and distribution systems, so variability in the small amount of electricity produced by wind and solar in most markets is not a significant problem. But renewables are growing quickly. As older nuclear plants are decommissioned and new Environmental Protection Agency regulations shut down coal-fired plants, states such as California that are increasing renewable requirements will start to look more like Europe, with its cost structure and grid-management challenges.

There is also an important lesson in the European experience with energy subsidies: Focus incentives so they reward the right behavior. Lavish subsidies for wind and solar have changed Europe's generation mix, but the costs have been high because the subsidy structure prioritized mass deployment rather than efficiency, reliability and innovation. Even in the U.S., the wind-production tax credit has occasionally produced "negative pricing"—that is, turbine operators pay grid operators to take their power even though it isn't needed, just so the wind generators can collect tax credits.

If Congress insists on subsidizing renewable energy (and to be fair, Washington subsidizes all forms of energy), it should reform subsidies to incentivize innovations that would improve the efficiency and reliability of wind and solar, as well as the development of improved energy-storage technologies.

It is not surprising that many Americans share the European passion for wind and solar. But, as with any relationship, once the initial infatuation fades and difficult issues start to emerge, thoughtful action is needed before the relationship sours. Careful reform of our policies, informed by lessons learned from Europe, could avoid an ugly divorce down the road and help renewables find their place in America's energy economy.

Mr. Garman, an assistant secretary and under secretary at the U.S. Department of Energy (2001-07), is on the board of directors of the Energy Innovation Reform Project. Mr. Thernstrom is executive director of EIRP.

A version of this article appeared July 30, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: Europe's Renewables Romance Fades.