The facts elaborated on in the following article have been obvious, known, and discussed on this blog and elsewhere since its inception. Maybe, finally, our current worldwide economic depression and enforced belt-tightening is bringing some common sense to our energy policies. Let's hope so. The public ought to be outraged at this waste; are you?
Let's hope this same common sense prevails this coming November and those pushing this "green energy boondoogle" find themselves out of office.
Green Energy Is a Financial Parasite
source: Casey Research firstname.lastname@example.org
Any politician who talks of a green, utopian US - where wind and solar produce most of our energy, electric cars put power back into the grid, green fields of corn produce clean fuels, and millions of Americans work in green technology factories - is creating a fanciful vision so far detached from reality it should really be called a lie. Such tales are designed to encourage a public that is increasingly despondent about the future, but the policy moves that have been made in support of these fantasies have cost taxpayers tens of billions of dollars. Much of it is money that will not be repaid, because a whole whack of the companies and industries that accepted green grants, loan guarantees, and tax credits have turned out to be complete failures. (e.g. Solyndra)
Two green subsidies expired with 2011, and not a moment too soon. In fact, we wish more of the US government's initiatives to support green energy had ended with the stroke of midnight, because the green energy industry has become completely dependent on a steady stream of government money. Protected by this "green gold," green technologies from corn ethanol to solar power have not had to compete against other power sectors based on their merits. If they had, many would have already failed.
Let's a take tour through some of the US's green subsidies and examine just how they have tipped the scales in favor of technologies that generally don't stand the test of economics, are often worse for the environment than conventional methods, and are costing taxpayers dearly.
There's nothing good about corn ethanol fuel
On New Year's Eve the corn ethanol subsidy quietly expired, 30 years after it was implemented. In those three decades ethanol became the US's top recipient of alternative-fuel funding, with corn ethanol in particular becoming the darling of the biofuels craze. As a darling should be, the industry was showered with money: Over the last 30 years the federal government has spent $45 billion supporting corn-ethanol producers. In 2011 alone the feds spent $6 billion on corn ethanol subsidies, equating to 45¢ for every gallon of ethanol. Even with that support, US corn ethanol was not able to compete with Brazilian ethanol, which is made from sugar cane. To rectify that, lawmakers instituted a 54¢-per-gallon tariff against the Brazilian product. Together, the 45¢ subsidy and the 54¢ tariff meant American-made corn ethanol was supported to the tune of almost $1 per gallon.
That would be great were ethanol a good way to reduce greenhouse gases, lower energy costs, or increase US energy independence. Unfortunately, it fails on all of those fronts. A growing left-right coalition has been speaking out against ethanol as a fuel for some time now; the latest voice to join the chorus is none other than the National Academy of Sciences. In October, NAS researchers concluded that grain ethanol "could not compete with fossil fuels in the U.S. marketplace without mandates, subsidies, tax exemptions, and tariffs... This lack of competitiveness raises questions about the use of government resources to support biofuels." The report went on to discuss how biofuels actually increase net carbon emissions: pumping energy-intensive row crops into gas tanks leads to land use changes that increase greenhouse gases.
Continuing down the list of ethanol-as-a-fuel failures, it turns out ethanol is very tough on vehicles - a bill to allow gasoline to contain 15% ethanol (compared to the max 10% now allowed) was shot down after every major automaker said that much ethanol would cause significant engine corrosion. Then there's the fact that corn ethanol subsidies also generated a host of painful side effects. One is literally making us fatter: widespread use of high fructose corn syrup. Starting in the mid-1980s farmers realized that, even when sale prices for corn were low, the government's largess meant it was still worthwhile to grow the stuff. More and more corn was grown, beyond what could be consumed by people or livestock or made into fuel. What were producers to do with the rest of it? Make high fructose corn syrup, a sweetener that is now in hundreds of thousands of products and that contributes thousands of empty calories to the average American diet every week.
So ethanol is uneconomic unless the government spends billions of taxpayer dollars supporting it, worse for the atmosphere than fossil fuels, and really hard on engines, while the support system to encourage corn-based ethanol production is contributing to the US obesity epidemic. Why, then, is ethanol even used in fuel? Because of all those government subsidies and mandates. After major lobbying efforts from the agricultural and biofuels industries, Congress mandated annual increases in use of renewable fuels, including ethanol, starting with 15 billion gallons in 2007 and growing to 36 billion gallons in 2022.
So fuel makers have to include ethanol in their mixtures. Too bad that rule did not also expire.
Electric vehicles: expensive toys that basically burn coal instead of oil
Another lesser-known tax break also expired with 2011: the credit that gave electric car owners up to $1,000 to defray the cost of installing a 220-volt charging device in their homes, or up to $30,000 to install one in a commercial location. A related subsidy that did not end still gives $7,500 in tax credits to purchasers of electric vehicles. For a variety of reasons, like the ethanol subsidy none of these incentives should have existed in the first place.
Electric vehicles have failed on one front after another. To start, they are inordinately expensive - the much-lauded Chevy Volt costs $40,000, while the Karma from Fisker costs a whopping $100,000. This means electric vehicles are only affordable for the wealthy; it's pretty hard to understand why American taxpayers should subsidize cars for the wealthiest members of society. The subsidies go beyond direct tax credits and rebates - government loans and grants in support of the Volt alone total $3 billion, which means each car produced to date has been subsidized to the tune of $250,000. (Volt supporters contest this number, saying subsidies only total $30,000 per vehicle... still not an insignificant amount.)
Then, for all that money, you still can only drive short distances. The Volt's official range is 30 miles, but reports show it can actually travel only 25 miles before needing to either recharge or switch to gasoline. There's also the issue that electric vehicles still need power, and the electricity that charges their batteries comes primarily from the US power grid, to which the largest contributor is coal-fired power plants. As such, a Volt essentially burns coal instead of gasoline, at least for the 25 miles it can drive before switching to gas.
At least coal is a domestic resource, compared to gasoline derived from imported crude oil, right? Well, let's see just how much electric vehicles will reduce US oil consumption. Assuming there are 6 million of them on American roads in ten years, out of 300 million passenger vehicles, and assuming that passenger vehicles continue to account for 40 to 45% of total US oil consumption, in ten years these tens of billions of dollars spent to support electric vehicles will have reduced US oil consumption by less than 1%. When you add in the fact that lithium-ion batteries are pretty toxic items, and that coal- or natural-gas-derived electricity demands will go up with each electric vehicle, the case for electric vehicles becomes pretty darn weak. (weak? pathetic!)
Solar and wind power: a financial sinkhole
Electric vehicles and corn ethanol fuel are not the only green industries that have been producing pitiful returns on government investment: Solar and wind power are just as guilty of eating up huge subsidies and still failing to break even economically.
Let's start with an example - one that was highlighted in a recent New York Times article. NRG Energy is building a 250-MW solar project in San Luis Obispo Country (northwest of Los Angeles), known as California Valley Solar Ranch. The ranch's one million solar panels will provide enough energy for 100,000 homes, but it will cost $1.6 billion to build. Most of those dollars are coming from government subsidies or low-interest loans.
All told, NGR and its partners secured $5.2 billion in federal loan guarantees plus hundreds of millions in other subsidies for four large solar projects. The crazy thing is, the government is giving out these grants and loans despite information from its own researchers that solar power is uneconomic now and will remain so in the future. The US Energy Information Administration predicts that by 2016 the total cost of solar photovoltaic energy will be about $211 per megawatt-hour, compared to $63 for an advanced natural-gas combined-cycle power plant.
Just as with corn ethanol, it's the taxpayer who bears the brunt of this obsession with expensive solar power. The main federal subsidy currently covers 30% of the cost of a residential solar system. When other subsidies are added in, as much as 75% of the cost can be covered. Obama's administration has spent $9.6 billion on solar and wind power through the Section 1603 Treasury grant program over the last few years.
With that kind of support, it's no wonder America is in love with solar power. In 2011, solar installations skyrocketed, with 1,700 MW installed during the year, an 89% increase over 2010. Still, all of the panels now installed across the nation produce only about as much electricity as a single coal-fired plant. And even with demand growing rapidly, the industry is awash in debt and bankruptcy.
US solar manufacturers are being pushed out of the market by low-cost Chinese manufacturers, which get even more support from their government than Obama gives to American producers. In California, for example, Chinese producers held 29% of the market at the beginning of 2011; by the end of the third quarter they had grown their market share to 40%, while US manufacturers saw their share fall from 37% to 29%. And with the Chinese flooding the market with cheap solar panels, prices for solar panels fell by 40% in 2011.
Falling prices for solar panels and dwindling market shares forced three US solar companies into bankruptcy in 2011 and recently necessitated staff cutbacks at another two companies. This is all happening despite billions in loan guarantees to these companies. First Solar, for example, took $3 billion in loan guarantees from the federal government to develop three solar farms in Arizona and California. Now the company is cutting half of its staff, including 60 jobs in California where it received $3 million in state sales tax credits.
Of course, the most notable solar bankruptcy of 2011 was Solyndra, the California-based company that went bankrupt months after receiving a loan guarantee of $535 million from the US government and despite increased demand for solar panels in the country following implementation of state mandates for solar energy.
And things are about to get a lot tougher for struggling solar panel producers in the US, because the 1603 program expired on January 1. When you add up grants, subsidies, loans, and tax credits that have been helping the solar and wind industries along, then add in mandates that require utilities to buy renewable power at set prices from the alternative energy producers for decades, you are left with an industry that is wholly dependent on taxpayers, not on its own technology's capabilities. Forced to go it alone in the power industry, solar and wind producers are not going to survive.
Leveling the playing field
In chasing the green power dream, the US is not alone. In fact, it trails several European countries in the effort. Germany and Denmark have the largest installed bases of alternative energy in Europe and are often held aloft as examples of how to encourage wind and solar power. Proponents usually stay mum on the fact that retail customers in Germany and Denmark pay the highest electricity rates in the European Union.
It is true that progress is never easy and is often expensive. From that pulpit, advocates argue that continued investment in green technologies will drive prices down in the long run. However, this reasoning ignores the other side of the problem: solar and wind can never produce baseload energy. The average wind plant in the United States runs at about one-third of its rated capacity, while solar plants runs at about 25% of their nameplate capacity. Since there is no way to store large amounts of electricity, the variable outputs from solar and wind facilities will only ever be able to replace a modest amount of conventional baseload power.
When you look at green subsidies on an energy production basis, the disparity becomes pretty stunning. Wind's 5.6 cents per kilowatt hour is more than 85 times that of oil and gas. Solar power costs 13 times more than wind, making solar more than a thousand times more expensive than conventional fuels.
Wind and solar power, corn ethanol, and electric vehicles are not infant industries in need of support. They are perennially inferior industries that only still exist in their current forms because of a constant stream of "green gold."
That stream is slowly drying up, thankfully. The only way to achieve the very admirable goal of transforming society into an energy-efficient space is to eliminate all of the subsidies that are currently directed at green energy and clean technology while increasing taxes on the things we are trying to minimize, such as gasoline consumption and plastic bags. That would force everyone to innovate, compete, and win or lose according to merit.