Mish's Global Economic Trend Analysis

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Governments Don't Really Want Clean Energy; Economic Madness In US and Spain Posted: 10 Aug 2015 04:14 PM PDT A curious thing is happening in the battle on carbon. Solar panels are finally becoming cheap enough and efficient enough to warrant usage, without government subsidies, at least in sunny places. Everyone should be happy. Right? Instead we have tariffs, fees, and taxes on those who use solar panels. In effect, when solar energy made no economic sense, companies received subsidies, now that solar makes sense, many governments want nothing to do with it. Solar Energy Storage is Worse Than Nuclear Spillage In sunny Spain, Solar Energy Storage is Worse Than Nuclear Spillage Storing solar energy in a battery in Spain is more criminal than spilling radioactive waste. That's the implied message written between the lines of a recently drafted law poised for fast-track approval by the government of Spain. Proposed fines for residential and SME use of solar energy self-consumption will be as high as €60 million ($67.7 million). Spain's "Ideological Campaign Against Solar" Speaking recently to PV Tech, Union Espanola Fotovoltaico (UNEF), the PV Association of Spain, stated that "this would be the only self-consumption law in the world created only to prohibit the development of self-consumption." UNEF added that Spain's new law is "retroactive" because if projects do not fit within the new parameters they will become illegal, even if already legally approved. Specifically, the new law requires that the owner and consumer must be the same person, and installations may no longer exceed 100 kW. Infringements will be treated very seriously, resulting in the maximum fines of up to €60 million ($67.7 million). This amount is twice as high as the penalty for causing a leak of radioactive waste in Spain, currently set at €30 million ($33.85 million). The new levy on solar energy self-consumption from a grid-connected owner's storage unit will have a seriously negative impact on the solar installation payback period. SMEs using self-consumption are expected to have a lengthening of payback time from four to seven years. PV Tech also notes that taxation on "residential self-consumption of solar energy in Spain could increase payback time from around 16 years to 31 years." Solar Madness Arizona Style Sunny Spain does not want solar, what about Arizona? In sunny Arizona SolarCity Relocates 85 Workers, Citing Solar Fees In the wake of Salt River Project's recent solar rate hike, SolarCity Corp., the largest rooftop solar installer in the state, is relocating at least 85 of its 900 Arizona workers out of state, with more to come. SolarCity CEO Lyndon Rive said Wednesday the SRP fees approved in February are too restrictive and eliminate the potential to save money with solar for nearly all customers. "That is bad for the economy," Rive said. "Arizona is the state with all the sun. All the other states (where we operate) are doubling their solar capacity, and Arizona is shrinking, which makes no sense." SRP officials in February approved a new rate plan for any new customers installing solar under which they will pay a monthly "demand charge" based on their highest 30-minute average demand of power from the grid during peak hours. US Tariffs Arizona depicts state level madness. Inquiring minds may be interested in what's happening with recent events in solar energy the US national level. For the answer, please consider U.S. Revises Tariffs and Duties on Chinese Solar Imports. The U.S. revised some taxes on solar products from certain companies in China to help thwart dumping amid a renewable-energy spat between the two nations. Some units of Yingli Green Energy Holding Co., the second-largest solar manufacturer, received the lowest so-called anti-dumping rate, 0.79 percent. The rate for another group of companies including Canadian Solar Inc., JinkoSolar Holding Co. and some other Yingli units was set at 9.67 percent. Other companies will pay 239 percent. "Economically counterproductive tariffs have artificially made solar panel prices in the U.S. the most expensive in the world," Shah said. CASE was formed to represent most of the U.S. solar industry against the petition. Economic Madness Does the Obama administration want clean energy or not? All tariffs are economic madness. But 239 percent tariffs and even the average rate of 20.94% is especially inane. Do we want to reduce independence on carbon-based energy or not? If China gave us free solar panels we would be crazy not to take them. At a cost of zero, they would truly be affordable. Numerous businesses would spring up installing them. Hiring would increase. GDP would rise. Instead, we have tariffs and additional fees on solar-based energy just as the technology is beneficial enough to use, on its own accord, without subsidies. This is economic madness. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Germany Isolated as Greece Near €86 Billion Deal With Creditors; Ambitious Yes, Feasible No Posted: 10 Aug 2015 10:17 AM PDT In reaching a deal with Greece, Germany is the last remaining holdout. Even Greece-skeptic countries like Finland have shifted 180 degrees to become true believers in mathematical nonsense. And after bitter fighting and infighting, Greece nears €86bn Accord with Creditors. Significant concessions by Alexis Tsipras and his negotiators in the past month have encouraged other hawkish eurozone members such as Finland to break with Berlin, which wants to hold out longer to squeeze more reforms from Athens. Even previously sceptical EU diplomats now say that a full agreement could be reached by the August 20 deadline, when Athens must make a €3.2bn debt repayment to the European Central Bank. The cautious optimism contrasts sharply with the acrimony at last month's eurozone summit, which came close to ushering Greece out of the currency bloc before agreeing to negotiate a deal. The main elements of the proposed deal include spending cuts, administrative reform and privatisations. Remaining sticking points between Athens and its creditors include details of a €50bn privatisation plan and proposals for raising the planned budget surplus, excluding debt interest, to 3.5 per cent of gross domestic product in 2018 from zero this year. Officials in Brussels said an early deal was "ambitious but feasible". But they emphasised that while this was the "preferable" way forward, the option of a €5bn bridging loan to give negotiators more time, championed by Berlin, was still on the table.  Germany, the biggest creditor, was late last week still holding out for more reforms from Athens, arguing that a two- or three-week bridging loan was better than hurriedly striking an inadequate three-year deal. Jens Spahn, deputy finance minister, tweeted on Friday: "It is better done thoroughly than hastily." An EU official said that even if Wolfgang Schäuble, Berlin's hawkish finance minister, dug in his heels, chancellor Angela Merkel would not want Berlin isolated. Ambitious Yes, Feasible No The plan certainly is ambitious. And it appears increasingly likely everyone will sign off on the deal, including Germany. My doubts are not over whether everyone signs a deal, but rather whether Greece can stick to the terms. I maintain that Greece is surely not going to reach and maintain a current account surplus of 3.5% of GDP in three years. In fact, Greece is not going to maintain a primary account surplus (surplus excluding interest on debt) of 3.5%. Nonetheless, let's play the "What if?" game. What If? If by some miracle, Greece were to hit that fantasyland 3.5% surplus projection, Greece would be in very good position to tell the Troika to go to hell, declare the debts odious (as it did once before) and default. As long as Greece can maintain a primary account surplus, no one could force it out of the eurozone. Schäuble hopes to prevent such a default by requiring Greece to put up €50 Billion in assets as collateral for the loan. But realistically, Greece will have a hard time coming up with state assets worth that amount. Also, agreeing to pledge assets and actually doing it are two different things. Meanwhile, the cost of the bailout (and potential default) keeps going up, and up and up. A default five years ago may have cost banks €60 billion to €80 billion or so. Now, counting target2 imbalances Greece would default on over €400 billion. Those who pretend the deal is "feasible" have not looked at the long-term math: To prevent banks from taking an €80 billion hit, taxpayers are at risk for well over €400 billion, counting all Greek liabilities.  IMF Participation It will be interesting to see how the IMF plays this. On July 31, the IMF staff reiterated Greece Disqualified for Bailout, Participation Depends on Debt Relief and Reforms. More than likely, senior IMF officials will keep their mouth shut until the German parliament approves a deal. Then the IMF is very likely to demand haircuts for participation. Germany's only choice at that point will be to pony up still more money, or agree to a haircut. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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