‘Green Gold’ Renewable Energy Projects

BY JACK DINI – Decrying what it calls a ‘gold rush’ mentality that primarily benefited companies like Goldman Sachs and others in need of no special help,  a recent article in the New York Times surveyed a range of properties where taxpayer and ratepayer subsidies have taken all risk from the private sector and all but guaranteed large profits ‘for years to come.’ Even some of the companies involved in the projects acknowledge that things got a little out of hand; some projects that have been heavily subsidized would have been built anyway. (1)

The New York Times article revolved around the California Valley Solar Ranch, a 250-megawatt utility project being built by NRG Energy on more than 4,000 acres of dry, sun-drenched land in San Luis Obispo County, northwest of Los Angeles. The ranch’s one million solar panels will provide enough power for 100,000 homes, but at the cost of $1.6 billion—nearly all of which according to the Times, will be paid for by government subsidies. (2)

The government support-which includes loan guarantees, cash grants and contracts that require electric customers to pay higher rates- largely eliminated the risk to 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, and even Google.

As NRG’s chief executive, David W Crane, put it to Wall Street analysts early this year, “The government’s largess was a once-in-a-generation opportunity,” and “we intend to do as much of this business as we can get our hands on.” NRG, along with partners, ultimately secured $5.2 billion in federal loan guarantees plus hundreds of millions in other subsidies for four large solar projects. “I have never seen anything that I have had to do in my 20 years in the power industry that involved less risk than these projects,” he said in a recent interview.  “It’s just filling the desert with panels.” (2)

NRG is not the only company gobbling us subsidies. At least 10 of the 16 solar or wind electricity generation projects that secured Energy Department loan guarantees intend to also take Treasury Department grants, and all but two of the projects have long-term agreements to sell almost all of their power.

“It’s 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.

From 2007 to 2010, federal subsidies jumped to $14.7 billion from $5.1 billion, according to a recent study. States like California sweetened the pot by offering their own tax breaks and by approving long-term power-purchase contracts that, while promoting clean energy, will also require ratepayers to pay billions of dollars for electricity for as long as two decades. (1)

General Electric announced that it will manufacture thin-filmed photovoltaic (PV) solar panels in Aurora, Colorado and employ 355 people. GE, which could have financed the whole project itself, went to Colorado because of government provided taxpayer funded incentives.  Ironically, the industrial behemoth recently announced $3.2 billion in net earnings for the third quarter, a 57 percent increase over last year. (3)

An argument of renewable advocates is that government subsidies over many decades allowed the oil and gas industry to cement its perch atop the energy chain. The implication is that wind and solar may need the same long-lived subsidization to achieve commercial viability too. However, the classic subsidies cited by renewable apologists began a half-century after the industry was born. Direct government subsidies, such as checks written on the US Treasury, were virtually nonexistent in the history of the petroleum industry. (4)

In FY 2010 wind’s $5 billion swamped oil and gas’s $654 million. Even tiny solar out-received oil and gas by one- third. And when you look at the subsidies on an energy production basis, the disparity becomes stunning. Wind’s 5.6 cents per kilowatt hour is more than 85 times that of oil and gas combined. And solar—would you believe 13 times that of wind, making the disparity north of a thousand times. (4)

Conclusion- Wind and solar are consumer-rejected forms of electrical power, pure and simple. They are not infant industries but perennially inferior ones that have found ‘green gold.’

References

1. Russell Mead, “Obscene green gold rush embarrasses The New York Times, American Interest, November 13, 2011
2. Eric Lipton and Clifford Krauss, “A gold rush of subsidies in clean energy search,” The New York Times, November 11, 2100
3. Amy Oliver and Michael Sandoval, “Clean energy’s dirty secret: cancer,” Townhall Magazine, October 28, 2011
4. “US energy subsidies: wind and solar have no argument,” Institute for Energy Research, Canada Free Press, November 22, 2011

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