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‘Cleantech’ Gets Clocked By 60 Minutes, and the Usual Suspects Try to Make Lemonade

Thursday, January 23, 2014

Despite massive taxpayer-funded subsidies, ‘clean energy’ is a failure because it remains far too expensive to compete in the marketplace.

Abound Solar. A123 Systems. Beacon Power. Brightsource. Compact Power. ECOtality. Ener1. Evergreen Solar. First Solar. Fisker Automotive. Nevada Geothermal. Range Fuels. Solyndra. SpectraWatt. SunPower. Vehicle Production Group. Vestas.

These names are inspiring, uplifting, and so very green. And there are many more, as that list is only a subset of the dear departed whose headstones litter Heaven’s Eternal Garden of Federal Clean Energy Subsidy Boondoggles Memorial Park. Earlier this month, 60 Minutes broadcast a report on the unbroken string of failures endured by taxpayers under various Department of Energy subsidy programs for “clean” and “renewable” energy — adjectives curiously devoid of actual definition — a political/bureaucratic effort comprising subsidized loans, grants, price supports, tax credits, guaranteed market shares, and other such subventions, all authorized by Congress amid the deafening self-applause so characteristic of the Beltway. Thus does the federal black hole — politicians, bureaucrats, and “experts” joined at the hip — consume vast amounts of resources financed with other people’s money. This is part of an endless effort to prove that they are just as smart as real businessmen, and, of course, is on endeavors which subsidize their various constituencies.

Under some conditions, particularly when the subsidies take the form of an investment tax credit, no actual ‘clean energy’ output is needed for the subsidies to flow.

“Cleantech” is the sanitized term for this broad array of subsidized energy technology beneficiaries: firms producing batteries, solar devices, wind power components, “efficient” autos, “alternative” electricity, “renewable” electric generating facilities, ad infinitum. Together with “clean” and “renewable,” Cleantech is a word that obscures the less-than-clean, life-or-death tug of war among interest groups competing for snout privileges at the federal “clean energy” trough. As an aside, under some conditions, particularly when the subsidies take the form of an investment tax credit, no actual “clean energy” output is needed for the subsidies to flow. The term hides also the unreported reality that there is little “clean” about “clean energy”: It has environmental advantages over conventional energy only if we ignore the adverse environmental effects of “clean energy.”

But let us put that aside. The 60 Minutes report displayed its customary lack of rigor and obvious questions not asked, characteristics and habits so common among modern journalists. A prominent example of the latter: Why, precisely, are subsidies needed if Cleantech really is economic, that is, if indeed it is the future of energy? (For a critique of the central rationales for subsidies commonly asserted in the context of wind and solar power, see this.) After all, private-sector investors support risky and cutting-edge technologies in myriad industries as a matter of course without taxpayer subsidies; why has Cleantech proven to be a series of subsidized boondoggles?

Correspondent Lesley Stahl seems to accept the lazy excuse that the “venture capitalists and Internet geniuses” who have provided the private venture capital necessary to qualify for the federal subsidies have been too unfamiliar with the idiosyncrasies of the energy market, thus yielding the dismal performance of these politicized investments. The implication is that the outcomes — the number or magnitude of taxpayer-funded failures — would have been far better had it been energy-sector professionals making the investment decisions and running the companies.

Then why have they failed to do so? That the energy-sector professionals have chosen en masse to stay away in the absence of substantial government support provides a clear signal that something other than amateurism is the underlying source of the problem. The reality is that “clean energy” simply is very costly and uneconomic — in a word, uncompetitive —  due to the inherently unconcentrated energy content of sunlight and wind flows, due to their intermittent availability and thus their unreliability, and due to the difficulty of sharp improvements in battery technology. And due to the vast increase in natural gas supplies and the resulting decline in prices brought by advances in horizontal drilling and hydraulic fracturing.

In short, the 60 Minutes report sees half of the forest clearly: After “$100 billion in loans, grants, and tax breaks … [Cleantech] suffered a string of expensive tax-funded flops.” What Stahl fails to see is the central cause of this failure both massive and massively subsidized: “Cleantech” by its very nature cannot compete.

What is fascinating is the circle-the-wagons response of the supporters of these boondoggles. Department of Energy spokesman Bill Gibbons retorted as follows:

Simply put, 60 Minutes is flat wrong on the facts. The clean energy economy in America is real and we are increasingly competitive in this rapidly-expanding global industry. This is a race we can, must and will win.

Gibbons fails to list even one ‘clean energy’ project that has proven viable without subsidies.

Wow. Beyond the utter emptiness of that non-rebuttal — what does it mean to say that the clean energy economy is “real”? — note that it ignores the central point, to wit, the large financial losses that are the operational definition of federal “clean energy” programs. Like Sherlock Holmes’s dog that failed to bark, Gibbons fails to list even one “clean energy” project that has proven viable without subsidies. As far as the increasing competitiveness asserted by Gibbons, the endless travails of electric automobiles — so beloved of bureaucrats and politicians everywhere — are illuminated by sales figures that speak for themselves, particularly in comparison with, say, pickup trucks, despite large subsidies for the former. And perhaps Gibbons is too busy making excuses for abject government failure to have noticed the Energy Information Administration estimates for the (average levelized) projected costs of conventional and renewable power generation for plants entering service in 2018 (using year 2011 dollars per megawatt-hour):

            Coal                                             100.1
            Natural gas combined cycle         67.1
            Nuclear                                        108.4
            Wind (on-shore)                           86.6
            Wind (off-shore)                           221.5
            Solar (thermal)                             261.5
            Hydroelectric                                90.3

The estimate for on-shore wind power is likely to be far too low for various reasons, among them the poor average availability (“capacity factor”) characteristics of renewables and the resulting costs of needed backup capacity, but that is an issue for another day. The central observation here is the rather obscure basis for Gibbons’s assertion about the “increasingly competitive” nature of “clean energy.” Precisely what is the basis for that claim?

In an email response to the 60 Minutes report, Peter Davidson, executive director of the Department of Energy Loan Program Office, informs us that “in the last four years, the U.S. has more than doubled electricity generation” from such sources as wind and solar, a fact that is rather beside the point; no one doubts that large subsidies attract resources. And: “In 2012, wind was America’s largest source of new electrical capacity,” a fact that hides the enormous political obstacles confronting construction of conventional power plants, and that blurs the distinction between production capacity and the actual production of electricity. The EIA estimate of average availability for, say, natural-gas combined cycle plants is 87 percent; for wind it is 34 percent.

The comedy highlight of Davidson’s email missive is the assertion that:

After the Energy Department financed the first five utility-scale [photovoltaic] solar power plants in the U.S., the private sector stepped in — supporting the construction of the next 10 utility-scale PV solar power plants in the U.S. without DOE support. (Emphasis added) After DOE… established a framework for how to successfully finance these projects, the private sector took over.

Wow again. Note the sleight of hand in terms of the absence of “DOE support.” Davidson forgets to mention the massive federal subsidies for solar power provided outside the purview of DOE, among which is a 30 percent investment tax credit on capital expenditures if placed in service before 2016, and/or a production tax credit of $22 per megawatt-hour. A recent EIA analysis finds the following federal subsidies and support for electricity production in fiscal year 2010, in year 2010 dollars per megawatt-hour:

            Natural gas                0.63
            Coal                           0.64
            Hydroelectric              0.84
            Biomass                     2.00
            Nuclear                      3.10
            Geothermal               12.50
            Wind                          52.48
            Solar                          968.00

Got that? Federal subsidies and support for solar power per megawatt-hour are roughly 1,500 times those for gas-fired power; for wind power it is about 83 times as high. Davidson goes on to laud DOE support of “advanced vehicle technologies,” a series of boondoggles and embarrassments that are the lifeblood of late-night comedians, as noted above.

Sales heavily subsidized tell us little about underlying competitiveness, and the utter failure of electric vehicles in the market despite those large subsidies tells us much.

Not to be outdone, Joe Romm of the Center for American Progress informs us that “clean technology is booming by every key indicator,” and then in a series of charts descends into a classic exercise in Beltway obfuscation:

•    Costs are falling and installed capacity is rising for solar photovoltaic components. Yes, costs have been falling sharply in the face of large Chinese subsidies for the production of the components, but that is hardly an indication of increasing competitiveness, and rising installations reflect both the Chinese subsidies and the massive U.S. subsidies summarized above. What do these “data” offered by Fromm have to do with the financial losses borne by taxpayers for Cleantech? In a word: nothing.

 

•    Costs are falling and installed capacity is rising for on-shore wind components. Actually, Fromm’s chart shows that wind power costs have been roughly constant for the last 20 years. (Fromm is too sloppy to tell us whether his data are adjusted for inflation; since his chart shows costs rising in the mid-to late 2000s, it may be reasonable simply to assume inflation away as a first approximation.) In any event, the same point applies: This has nothing to do with competitiveness properly defined or the taxpayer losses due to “clean energy” projects.

 

•    LED lighting costs are falling and the installed number of LED lights is rising. Is Fromm kidding here? In the face of an increasingly stringent ban on the sale of traditional incandescent bulbs — unenforced by the federal government due to legislative riders sponsored by Representative Michael Burgess, but tell that to the home improvement stores and other large sellers of light bulbs — it is not surprising that cumulative installations of LEDs would rise. Nor is it surprising that some scale economies might be achieved as increasing numbers of such bulbs are forced upon the market. What really is interesting is how expensive such bulbs remain despite federal subsidies for development costs. And, again, none of this has anything to do with the various Cleantech financial fiascos.

 

•    Costs are falling and cumulative sales are rising for electric vehicles and batteries. Wow yet again. Of all the fiascos and embarrassments characterizing the Cleantech effort, the electric vehicle/battery saga is the most distressing or amusing — take your pick — of all. (See above.) The central point remains: Sales heavily subsidized tell us little about underlying competitiveness, and the utter failure of electric vehicles in the market despite those large subsidies tells us much.

“Clean and renewable” energy has proven so costly and so uncompetitive that even the Europeans are backing away from their own mandates rapidly. The basic reality — one that cannot be neutralized by any amount of Beltway blather — is that “clean and renewable” energy in almost all of its manifestations is far too expensive and unreliable to compete. That is what explains the endless failures of the federal subsidy programs, that is what drives the 60 Minutes report, and that is the underlying truth that lays waste to the rationalizations offered by the DOE propaganda machine and its apologists. These subsidy programs yield only pure resource waste and excessive costs even as they represent a federal trough for special interests, one at which only white elephants feed.

Benjamin Zycher is a resident scholar at the American Enterprise Institute.

FURTHER READING: Zycher also writes "The 'Science' of Global Warming, Part 2" and "Limitations on Natural Gas Exports and the Brownsville U-Turn." Kenneth P. Green introduces "The 'Science' of Global Warming, Part 1" and discusses "More Pipelines in the Pipeline."

Image by Dianna Ingram / Bergman Group

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