April 11, 2011
Governments are bankrupt. Not only has the management of public finances gone off the rails, but bank bailouts, subsidies to uncompetitive industries, and generous aid threaten to enslave citizens of industrialized nations to excessive taxation for decades to come. We seem to forget that the trillions of dollars spent in recent years, coupled with massive national budget deficits, must all be repaid by the citizens.
It is the addiction to subsidies that drains economies, diverts resources from productive and social objectives, and distorts our understanding of competitiveness. While energy is essential, we have clearly lost touch with reality. If and when energy is heavily subsidized—from nuclear and coal to fossil fuels and renewables—then we are not making it cheaper; we are merely delaying payment! What appears to be a discount is only a temporary reprieve. And the repayment period will include interest, and interest on interest. How is this possible? Because our governments are spending more—far more—than they can reasonably earn in revenue.
The culture of subsidy has evolved from a temporary measure to a permanent dependency. In Germany, coal has been subsidized since 1965, and this drain on the state budget only ended in 2018—53 years later. The policy measure intended to mitigate the social impact of the disappearance of coal mines has transformed into a permanent source of revenue for the business world, with the associated costs passed on to the taxpayer. Is this the path that solar and other renewable energies should follow? Let's be clear: solar and wind power need subsidies because they are not competitive. The forced 8% return on investment for 20 years—the standard in Germany—has generated enormous demand for silicon panels, but it has not fostered a creative and innovative solar industry that primarily imports its components and panels from China.
Imagine the latest solar systems that provide both electricity and heat, concentrating sunlight onto a single panel more than three times, utilizing both sides, and reducing wiring by 25%. Just eight units produce enough room heating, cooling, hot water, purified water, and electricity for a five-person household in Sweden, at a cost of around 1.5 cents per kWh. At this rate, solar power requires no subsidies. The faster these innovations are adopted by the market, the faster all energy subsidies will become obsolete, freeing up money to support the good—such as meaningful work and absolute resource efficiency, pensions and the social sector, or funding the phase-out of overly risky nuclear power.
