Peter
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It's been a rough stretch for Colorado's "new
energy economy." Over the last few months, the Centennial State's green energy
industry, which the new energy economy was supposed to kick start, has been
beset by a series of setbacks. Loveland-based Abound Solar went bankrupt; Vestas
Wind Systems laid off almost 200 workers at its Windsor blade plant; and General
Electric pulled the plug on a planned solar manufacturing plant in Aurora.
The troubles of renewable energy companies
are not unique to Colorado; they extend nationwide. U.S. taxpayers ponied up $60
billion for green energy "investments" as part of the American Recovery and
Reinvestment Act of 2009, better known as the stimulus bill. The results are
only coming in only now, and they are not good. The list of "stimulosers" — of
which Solyndra is only the most famous example — is long and growing. It
includes Beacon Power, Evergreen Solar, Amonix, A123 Systems, Nevada Geothermal
Power, and many others.
These green industries are in trouble for a
simple reason. They are running out of subsidies. The 2009 stimulus has been
spent and the wind production tax credit is set to expire in December. Without a
steady influx of taxpayer help, renewable energy sources like wind and solar
power cannot compete, due to their high capital costs and intermittent
supply.
How dependent on government are these
industries? The American Wind Energy Association estimates that almost half of
the entire wind power workforce — almost 37,000 people — would lose their jobs
if Congress were to allow a single tax subsidy to expire. Such sudden and severe
contractions are symptomatic of industries whose business plan is predicated on
political favoritism. When the political winds change and the subsidies on which
these companies depend are cut, the bottom falls out from under them.
On the demand side, green energy entails
higher rates for consumers. In 2011, for example, a New Energy Economy policy
known as the Solar*Rewards program accounted for almost 4 percent of sales,
despite generating a scant half a percent of Xcel Energy's system-wide power.
That's a bad deal for Coloradans. Unfortunately, the burden on Xcel ratepayers
will only increase with the expiration of federal subsidies, which have
effectively discounted Colorado's policies.
Somewhat paradoxically, the new energy
economy's biggest expense likely will pertain to fossil fuels. The 2010 Clean
Air Clean Jobs Act mandated that Xcel Energy generate from natural gas almost
1,000 megawatts of base load supply that it now gets from coal. At current
prices, natural gas is historically cheap, but it is still more than twice as
expensive as coal, according to Xcel Energy's regulatory filings.
And let's not forget that the price of
natural gas reached historical highs only four summers ago. In fact, the high
cost and volatility of the natural gas market relative to coal was the primary
reason that the Colorado utilities have relied on the latter to meet the
preponderance of the state's energy needs.
A spike in the price of gas after the current
supply contracts expire would cost Xcel Energy ratepayers dearly.
The worst aspect of the new energy economy
program is its regressive nature. Utility bills represent a larger portion of
poor households' budgets, so the new energy economy's costs are shouldered
disproportionately by those who can least afford them.
Before the new energy economy program came
along, Colorado utilities' decisions on how to provide power to consumers were
guided by considerations on how to do so most efficiently at the least cost.
Now, many of those decisions are based on political considerations, such as the
need to prop up renewable energy, imposed by politicians. As a result, Colorado
ratepayers can expect to pay for unsustainable subsidies, endure lower power
supply reliability, and suffer unexpected consequences — all in the name of
green ideology.
William
Yeatman is assistant director of the Center for Energy and Environment at the
Competitive Enterprise Institute, a free-market think tank in Washington,
D.C.
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