This may have been the worst week yet for the green energy agenda, at least at two major liberal newspapers. I posted last about the Washington Post's devastating article on the U.S. Government's adventures in funding energy projects.
Maybe, as Cory says, there are lots of cases where this was successful. He doesn't name any. It would take quite a list to measure up to the WaPo's list of failures. Granting what Cory says about venture capital being a chancy game, I suspect that any venture capital firm with that record would be in trouble regardless of the times it succeeded.
No doubt Congress can do some good by subsidizing basic research and by creating a more favorable legislative environment for prospective industries. What happens when government tries to bootstrap new, untested, and highly speculative technologies?
We are about to find out according to a second, even more appalling article on solar energy subsidies from the New York Times. Eric Lipton and Clifford Krauss have this:
Halfway between Los Angeles and San Francisco, on a former cattle ranch and gypsum mine, NRG Energy is building an engineering marvel: a compound of nearly a million solar panels that will produce enough electricity to power about 100,000 homes.
The project is also a marvel in another, less obvious way: Taxpayers and ratepayers are providing subsidies worth almost as much as the entire $1.6 billion cost of the project. Similar subsidy packages have been given to 15 other solar- and wind-power electric plants since 2009.
The government support — which includes loan guarantees, cash grants and contracts that require electric customers to pay higher rates — largely eliminated the risk to the private investors and almost guaranteed them large profits for years to come. The beneficiaries include financial firms like Goldman Sachs and Morgan Stanley, conglomerates like General Electric, utilities like Exelon and NRG — even Google.
Let's note the most interesting items in those three paragraphs. There are about 132 million housing units in the U.S. What would it take to supply 10% with electricity from solar arrays? If the NRG project works as projected (a big if) and if can be replicated on a large scale, it would take about 132 million solar panels. I would be interested to see an analysis of the economic and environmental costs of covering ground with that.
The cost of the NRG project is being almost entirely covered by taxpayers and ratepayers. That means that the immediate economic consequence of the new solar power generation is to raise the cost of electricity for consumers. Every poor Joe turning on his kitchen light will be footing part of the bill.
Meanwhile the robber barons will make out like bandits. Let me repeat one devastating line:
Government support largely eliminated the risk to the private investors and almost guaranteed them large profits for years to come.
This removes any incentive for the investors to even ask whether the project is economically viable, which is one vital thing that investors are supposed to do. They are guaranteed profits even if the whole solar array melts down on the first day of operation, profits covered by taxpayers and ratepayers whose rates will not go down "for years to come."
It's not just the NRG people mining that green gold rush.
At least 10 of the 16 solar or wind electricity generation projects that secured Energy Department loan guarantees intend to also take the Treasury Department grant, and all but two of the projects have long-term agreements to sell almost all of their power, according to a survey of the companies by The Times.
These projects, in almost all cases, benefit from legislation that has been passed in about 30 states that pushes local utility companies to buy a significant share of their power from renewable sources, like solar or wind power. These mandates often have resulted in contracts with above-market rates for the project developers, and a guarantee of a steady revenue stream.
"It is like building a hotel, where you know in advance you are going to have 100 percent room occupancy for 25 years," said Kevin Smith, chief executive of SolarReserve. His Nevada solar project has secured a 25-year power-purchase agreement with the state's largest utility and a $737 million Energy Department loan guarantee and is on track to receive a $200 million Treasury grant.
Kevin Smith, "chief executive of SolarReserve," should know when to keep his mouth shut. It's hard to blame him though. He is tit-deep in a river of government guaranteed green gold. He has every reason to believe that he is among the blessed.
Maybe government can invest wisely, and help new industries gain their footing. What it actually does is illustrated above. This is economically and morally dysfunctional. My friends on the left will continue to support it. They can scarcely do otherwise, without rethinking their most cherished opinions. They are altogether incapable of that.
If both the NYT and the WaPo are pointing to the emperor's lack of clothes--dare we hope that at least some of their readership take off the ideological blinders?
Thank you for covering this.
Posted by: Michael (Constant Conservative) | Tuesday, November 15, 2011 at 09:21 AM
KB says, "The cost of the NRG project is being almost entirely covered by taxpayers and ratepayers. That means that the immediate economic consequence of the new solar power generation is to raise the cost of electricity for consumers. Every poor Joe turning on his kitchen light will be footing part of the bill."
I hate to point out the obvious here, KB, but ratepayers and taxpayers pay the costs of every fossil fuel and nuclear energy generation station. Your argument here makes it seem as if you or out of touch with the real world and, perhaps, wearing blinders.
The immediate economic consequence of putting any new electrical source on the grid is to increase costs to consumers. When Black Hills Power put their new coal-fired power plant on-line they requested 26 percent more for the power from that new Wyogen power plant. If we had an unregulated energy market, as many conservatives demand, there would have been nothing that could have been done. But, contrary to conservative wishes, many states, including South Dakota, still regulate electric rates. A hearing was held, and Black Hills Power was allowed only a 12 percent increase, which was still more than many thought should have been allowed.
http://rapidcityjournal.com/news/local/article_a98cc1ba-89fb-11df-ae62-001cc4c03286.html
The other thing you seem to never consider is externalized costs, which are particularly high in coal-fired power. Who pays those costs? You and me.
Posted by: Donald Pay | Tuesday, November 15, 2011 at 10:52 AM
Flathead Electric Cooperative is exploring geothermal potential: http://www.flatheadbeacon.com/articles/article/flathead_electric_cooperative_to_begin_exploratory_geothermal_drilling/25399/
Check the James River in relation to a geothermal map of the US. Tap floodwater and remake the chemical toilet into an energy powerhouse.
http://www.youtube.com/watch?feature=player_embedded&v=naY3VFdTKEc
Posted by: larry kurtz | Tuesday, November 15, 2011 at 02:10 PM