Green Energy Fiasco

From the Heritage Foundation, a list of “green energy” companies that have gone under.

1. Abound Solar

Government’s Bad Bet: $ 790.3 million

2. Solyndra

Government’s Bad Bet: $570 million

3. A123 Systems

Government’s Bad Bet: $377.1 million

4. Ener1 (EnerDel, subsidiary)

Government’s Bad Bet: $182.8 million

5. Range Fuels

Government’s Bad Bet: $162.3 million

6. Azure Dynamics

Government’s Bad Bet: $119.1 million

7. Energy Conversion Devices (subsidiary, United Solar Ovanic)

Government’s Bad Bet: $110.3 million

8. Evergreen Solar, Inc.

Government’s Bad Bet: $84.9 million

9. Beacon Power

Government’s Bad Bet: $77.4 million

10. Raser Technologies

Government’s Bad Bet: $33 million

11. Nordic Windpower

Government’s Bad Bet: $24.6 million

12. SpectraWatt

Government’s Bad Bet: $20.5 million

13. Konarka Technologies

Government’s Bad Bet: $13.6 million (Heritage’s calculations), $20 million according to Konarka’s website

14. Satcon Technology Corporation

Government’s Bad Bet: $17 million

15. Olsen’s Crop Service and Olsen’s Mills Acquisition Co.

Government’s Bad Bet: $10.8 million

16. Stirling Energy Systems, Inc.

Government’s Bad Bet: $10.5 million

17. Thompson River Power, LLC

Government’s Bad Bet: $6.5 million

18. Cardinal Fasteners and Specialty Co., Inc.

Government’s Bad Bet: $480,000

19. Mountain Plaza, Inc.

Government’s Bad Bet: $424,000

20. ReVolt Technology

Government’s Bad Bet: $10 million

Now, a bit about details:

These numbers do not reflect the amount of government funding the company necessarily received or used—these are amounts the government was willing to risk. These figures do offer estimations of assistance provided by local, state and/or federal governments. This assistance could have been promised to the companies in a variety of ways, including tax credits, loans, loan guarantees, grants, and other forms of financial incentives and support. The numbers below are the best calculations possible given the incomplete, at times even inconsistent, information from the government and other sources.

Additionally, during bankruptcy proceedings, these companies could very well be purchased by another company and be brought back to life. However, their tombstone in the Green Graveyard will remain as a reminder of the darker days.

The problem here is not that green energy is forever and always a losing proposition. It’s that when politicians get to spend other people’s money, they lack the normal market incentives to spend it wisely.

It goes to things that sound good. It goes to political cronies. It goes to promote an ideological agenda.

If a given project can’t hack it in the market, that’s a signal that it’s not economically viable. Throwing taxpayer money at it isn’t going to make it viable.

Obama’s Green Energy Fiasco

An opinion column by Charles Lane in the Washington Post:

The Washington Post In blackjack, doubling down is a high-risk, high-reward move. If you think you can win, based on the first two cards dealt, you bet 100 percent more — but you also pay for the privilege by agreeing to take one, and only one, additional card.

Doubling down is also the semi-official metaphor of President Obama’s energy strategy, as we know from his speech in Cleveland last week: “My plan would end the government subsidies to oil companies that have rarely been more profitable — let’s double down on a clean-energy industry that has never been more promising.”

Blackjack pros like doubling down; it’s a chance to profit from newly acquired relevant information. Whether that logic applies to the U.S. government’s energy bets, however, is a different story. What we’ve learned so far suggests that the president should fold his cards.

U.S. energy subsidies — spending, tax breaks, loan guarantees — increased from $17.9 billion in fiscal 2007 to $37.2 billion in fiscal 2010, according to the Energy Department. Yet fossil fuels’ overwhelming market advantages have produced a litany of clean-energy failures, from electric cars to Solyndra.

The subsidies ostensibly address several issues — dependence on foreign oil, job creation, international economic competitiveness and environmental degradation — but without clear priorities, much less rigorous cost-benefit analysis. Unintended consequences and political influence abound.

The best-laid plans are vulnerable to unforeseen market developments — such as the boom in oil and natural gas “fracking” over the past decade, which Obama has now embraced.

To the extent that it’s coherent at all, the federal energy “portfolio” represents a return to industrial policy — governmental selection of economic winners — which was fashionable in the 1970s and 1980s, before it collapsed under the weight of its intellectual and practical contradictions.

As such, current clean-energy programs are no likelier to pay off than President Jimmy Carter’s Synthetic Fuels Corp., which blew $9 billion, or President George W. Bush’s $1.2 billion program for hydrogen vehicles.

This isn’t just my opinion or the finding of some right-wing think tank. Rather, all of the above comes from a new paper by three certifiably centrist Brookings Institution scholars, Adele Morris, Pietro S. Nivola and Charles L. Schultze; Schultze was a senior economic adviser to Presidents Kennedy, Johnson and Carter.

The researchers pick apart clean-energy subsidies rationale by rationale.

Like his predecessors of both parties, Obama argues that the subsidies can help reduce dependence on foreign oil. But even with 100 percent self-sufficiency, we would be vulnerable to price shocks in the global market for this fungible commodity. Many technologies favored by current policy — wind, solar, geothermal — replace coal and natural gas, in which the United States is already self-sufficient.

Obama also cites the need to compete with other countries in developing the energy industries “of the future.” The Brookings scholars argue that higher living standards depend on growing productivity, not the global market share of U.S. industries. Their authority for this is Nobel Prize economist Paul Krugman’s 1994 essay in Foreign Affairs, “Competitiveness: A Dangerous Obsession.”

Having China or someone else develop clean-energy technology might be to U.S. advantage; let them pay the inevitable start-up costs; then we can adapt the discoveries to our own needs.

Heck, if we want to reduce the most emissions at the least cost, it might be wise to import the means of doing so.

As for job creation, clean-energy subsidies shift demand for labor; they don’t increase it. “I’m not aware of a single peer-reviewed economic study that shows these programs create jobs in the long run, and on a net basis,” Morris told me. Solyndra and its 1,861 vanished jobs proves her point. Fracking probably created more permanent positions.

Reducing carbon emissions and other environmental goals represent the best rationale for government intervention in the energy market. Market prices for fossil fuels do not capture all costs of consuming them. Also, the private sector underinvests in basic research that might, someday, lead to new commercially viable energy sources.

Higher gas taxes or a tax on carbon could efficiently limit pollution, if those steps weren’t politically toxic. Basic research funding is, indeed, part of Obama’s strategy, but it should be more focused and insulated from politics, the Brookings scholars argue.

If government does double down on clean energy, it’s the federal budget that will end up busted.

Obama’s Edsel

From Rich Lowry in National Review Online:

President Barack Obama says he wants to buy a Chevy Volt when he’s out of office in five years. If getting into a General Motors electric automobile means so much to him, he’d better hope he loses in November. What the president dubbed the “car of the future” in a visit to a Volt plant may not make it to January 2017.

The partially government-owned General Motors has suspended production of its government-approved miracle car and temporarily laid off 1,300 workers at a Detroit plant. The halt is the result of a piddling detail lost in the gushers of praise for a big, bad car company supposedly learning the error of its environment-destroying ways — people don’t want to buy the damn thing.

GM hoped to sell 10,000 Volts last year and sold only 7,500. It planned to sell 45,000 this year and is scaling back production to meet the real rather than the imaginary demand. The Volt is the Solyndra of automobiles, another Obama-touted recipient of government subsidies that was succeeding as a great paladin of the future in all the speeches and press releases until it ran into hard market realities.

The Volt is too expensive, too small, and too complicated to appeal to all but a tiny slice of what is already a tiny segment of the car market. Hybrids have never been more than about 3 percent of all U.S. sales. To buy a Volt, you need the money to splurge and the exquisite environmental consciousness to think plugging in your car will help save the planet, even though about half of electricity comes from coal. The Volt is as much affectation as car.

It costs more than $40,000. At that price, perhaps GM should have made it part of the Cadillac brand rather than Chevy. Most buyers dropping that much prefer to go all the way and buy something really nice — say, an Audi or a BMW.

According to GM, the average income of a Volt purchaser is $175,000 a year. These well-heeled buyers get a $7,500 tax credit for selecting a car out of reach of many Americans, a trickle-up redistribution toward the upper, politically correct end of the car market.

It’s not that the Volt isn’t a fine piece of machinery. It is a smooth ride and has been well-reviewed. It’s just not going “to make Big Oil sweat,” in the words of a smitten writer for the New York Times. Big Oil presumably has other things to worry about than a rounding error in the more than 12 million vehicles sold in the U.S. every year.

As Henry Payne of the Detroit News argues, the Chevy Volt is basically the electric version of the gas-powered Chevy Cruze. Despite the Environmental Protection Agency’s rating that the Volt gets 60 miles per gallon, as a practical matter it’s more like 35 (it can go less than 40 miles on battery alone and then needs to switch over to gas). That’s comparable to the Cruze, which costs half the amount, has greater range, seats more people, and is easier to operate since all it requires is a visit to the filling station. GM sells more than 200,000 Cruzes a year.

The Volt is looking like Obama’s Edsel. What the president so confidently deems “the future” when he talks of energy and cars is his ideological vision dressed up in the language of historical inevitability. If he had been told in 2009 that the real future of the car market would be trucks, SUVs, and the like, which again ticked above half of sales, he surely would have blanched. If he had been told that technological breakthroughs would bring a future of new oil production, he would have been no less insistent on funding the likes of Solyndra.

For all his smug confidence about his vision of the future, he doesn’t truly know what car he will be driving in five years. If he stays true to his word, it might have to be a secondhand Volt.

Ultimately, the liberal obsession with “sustainability” comes down to raw cultural bias.

Liberals resent mass affluence. The believe they are entitled to live better than other people, but ordinary Americans live in nice houses, own big cars, drive in from the suburbs to work and go where they want to go.

They vote against gay marriage and sometimes elect Republicans.

They are, in other words, uppity.

Since elitist liberals have trouble distinguishing themselves by consuming more than ordinary Americans, they have to distinguish themselves by consuming differently.

Thus they despise the vulgar affluence of the masses, while consuming politically correct luxuries. Hybrid cars. Fair Trade coffee. Exotic cuisines.

And of course they deride the tastes of ordinary Americans, whose affluence and political power they resent.

The Solar Boondoggle in Germany

From Der Spiegel, and account of how solar power has cost too much, and generated too little electricity.

That’s what happens when you get a whole cult around “green,” and nobody asks the tough cost/benefit questions.

It’s not that solar never makes any sense. It’s that political correctness never makes any sense.

Washington Post: Stop Electric Car Subsidies

The Washington Post has a reputation as a liberal newspaper, and indeed that’s what it is.

But it has shown itself able to take a cold hard look at some of the programs that give liberals the warm fuzzies. One recent example dealt with one of the Obama Administration’s favorite class of subsidies.

THERE MAY NOT have been a party in Times Square to celebrate, but two of the most wasteful subsidies ever to clutter the Internal Revenue Code went out with the old year. Congress declined to renew either the 45-cent-per-gallon tax credit for corn-based ethanol or the 54-cent-per-gallon tariff on imported ethanol, so both expired Dec. 31.

Taxpayers will no longer have shell out roughly $6 billion per year for a program that badly distorted the global grain market, artificially raised the cost of agricultural land and did almost nothing to curb greenhouse gas emissions. A federal law requiring the use of 36 billion gallons of ethanol for fuel by 2022 still props up the industry, but the tax credit’s expiration is a victory for common sense just the same.

Meanwhile, a lesser-known but equally dubious energy tax break also expired when the year ended Saturday: 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. As a means of reducing carbon emissions, electric cars and plug-in hybrid electrics are no more cost-effective than ethanol. What’s more, only upper-income consumers can afford to buy an electric vehicle (EV); so the charger subsidy is a giveaway to the well-to-do.

The same goes for the $7,500 tax credit that the government offers purchasers of electric vehicles, a subsidy that, alas, did not expire at year’s end. The Obama administration says that the credit helps build a market for EVs, which helps create jobs. Given the price of eligible models, like the $100,000 Fisker Karma, that rationale sounds an awful lot like trickle-down economics.

Backers of the charger tax credit may lobby Congress to renew it when lawmakers tackle the payroll tax extension issue again in the new year. We hope that Congress says no. Not only is it a case study in upward income redistribution, it also would represent a deepening of the taxpayers’ commitment to what looks increasingly like an industry not ready for prime time.

Sales of electric vehicles were disappointing in 2011, with the Volt coming in below the 10,000 units forecast. In addition to its high price, the Volt brand is suffering from news that some of its batteries burst into flames after government road tests. Meanwhile, Fisker, the recipient of more than half a billion dollars in low-interest Energy Department loans, repeatedly delayed the introduction of its ballyhooed Karma — while repeatedly raising the sticker price. And now Fisker has announced a recall of the cars because of a potential defect in its batteries — made by A123 Systems, another large recipient of Energy Department support.

Evidence is mounting that President Obama was overly optimistic to pledge that there would be 1 million EVs on the road by 2015. Electric cars are not likely to form a significant part of the solution to America’s dependence on foreign oil, or to global warming, in the near future. They simply pose too many issues of price and practicality to attract a large segment of the car-buying public. More prosaic fuel-economy innovations such as conventional hybrids, clean-diesel cars and advanced gasoline engines all show much more promise than electrics.

The ethanol credit was on the books for 30 years before it finally died. Let’s hope Congress can start unwinding the federal government’s bad investment in electric vehicles faster than that.

The problem, of course, is that policies like this have nothing to do with a cool-headed policy analysis. Rather they are mostly symbolic. The liberals who favor them want the “committment to green energy” that these programs claim, and aren’t inclined to ask whether they are really “green” and if so whether they are green at any sort of reasonable price.

After all, they are paid for with other people’s money.

Dutch Disillusioned With Windmills

No, we are not talking about the picturesque old kind. We are talking about the kind that give the environmentalists the warm fuzzies, but cost way too much relative to the electricity they generate.

From Reuters:

When the Netherlands built its first sea-based wind turbines in 2006, they were seen as symbols of a greener future.

Towering over the waves of the North Sea like an army of giants, blades whipping through the wind, the turbines were the country’s best hope to curb carbon emissions and meet growing demand for electricity.

The 36 turbines — each one the height of a 30-storey building — produce enough electricity to meet the needs of more than 100,000 households each year.

But five years later the green future looks a long way off. Faced with the need to cut its budget deficit, the Dutch government says offshore wind power is too expensive and that it cannot afford to subsidize the entire cost of 18 cents per kilowatt hour — some 4.5 billion euros last year.

The government now plans to transfer the financial burden to households and industrial consumers in order to secure the funds for wind power and try to attract private sector investment.

It will start billing consumers and companies in January 2013 and simultaneously launch a system under which investors will be able to apply to participate in renewable energy projects.

But the new billing system will reap only a third of what was previously available to the industry in subsidies — the government forecasts 1.5 billion euros every year — while the pricing scale of the investment plan makes it more likely that interested parties will choose less expensive technologies than wind.

The outlook for Dutch wind projects seems bleak.

U.S. liberals and leftists like Europe for all the wrong reasons, seeing it as the home of secular views, the welfare state and (although they won’t admit this) the dominance of people who think like them.

But of course there are some policy lessons to be learned from Europe. Their system of tort liability is much more rational than ours — which is maintained by liberals and Democrats because it benefits a key element of the Democratic coalition, the trial lawyers.

And Sweden has the most extensive system of school choice in the industrialized world.

But if liberals don’t want to learn these lessons from Europe, they probably won’t learn anything from the failure of wind power either.