By Mike Mulvihill
An article in the NY Times this weekend, A Gold Rush of Subsidies in Clean Energy Search, has generated a number of posts in support and in opposition of the article and solar subsidies.
The article points out that several investor-owned utilities and large projects capable of shopping for private capital, are utilizing federal subsidies to build solar generation. If the intent was to increase solar energy generation and to create jobs in the process, then why is this so bad? Meanwhile, Congress and the media want to dissect riskier projects that went belly up after receiving subsidies (i.e., Solyndra, Beacon Power, etc.) New technology, risky ventures will more likely fail than succeed, so these bankruptcies are not surprising. But they do provide fodder for political drama. And politicization of renewable energy spells bad news for green energy.
First of all, let’s look at the funding. From 2007 to 2010, federal subsidies jumped to $14.7 billion from $5.1 billion, according the U.S. Energy Information Administration. Most of the increase came from the 2009 economic stimulus bill, which financed an Energy Department loan guarantee program and a separate Treasury Department grant program, intended to create green energy jobs. The rules do not prevent large concerns from tapping the program to create added green energy production, and, in fact, it would seem reasonable that this added generation would be favorable (in the long-term) to consumers. For example, today solar costs 70 percent less than it did just two to three years ago and it is fair to assume that costs will only continue to decline as the industry grows and innovates.
The article points out that P.G.& E., and ultimately its electric customers, will pay NRG (one of the large, private ventures spotlighted in the article) $150 to $180 a megawatt-hour. At the time the contract was awarded, that was about 50 percent more than the expected market cost of electricity in California from a newly built gas-powered plant. Duh, yes, even though solar costs are declining, there is no economic case (and won’t be for at least another decade) to replace established fossil fuel technology (natural gas and coal) with renewable energy on a cost per KW basis. If we wish to tap solar as a renewable energy source, then we need to bring solar to scale and achieve economies that will eventually drive the price down to a level that the American public – and economy – can withstand.
As for the politicization of green energy, a recent Pew Research Center study release on November 10,shows voters galvanizing along party lines on green energy. Pew’s study shows that since April 2009, there has been a 30-point decline in the percentage of Republicans and Republican leaners supporting more federal funding for research into alternative energy technologies. Currently, 53 percent favor this policy, down from 82 percent in April 2009. There has been little change in opinions among Democrats and Democratic-leaning independents. Currently, 83 percent of Democrats favor increased funding for research into alternative energy technologies.
The study indicates that a narrow majority of the public (52 percent) thinks that government investment is necessary to develop new energy technology. About four-in-ten (39 percent) say that businesses will produce needed energy technology without government support. Again, there is a partisan divide on this topic. Two-thirds (68 percent) of Democrats and Democratic leaners say government investment in new energy is necessary. Most Republicans and GOP leaners (59 percent) say businesses will produce technology without government investment.
Bottom line, as campaigning for the next presidential election continues to heat up, green energy will become a football tossed back and forth for political gain with little concern for whether these actions foster or retard the creation of needed alternative energy generation and a foundation for achieving green energy affordability. Mull on that the next time you get ready to dig into a juicy energy headline.
Image by Thomas Tibitanzl