Will Clean Energy Stain Fossil Fuels?

Devisive loans, breaks at issue here

Ken Silverstein | Feb 13, 2012

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Despite the pummeling that President Obama has taken over the federal loan guarantee program, he will be hitting back on the campaign trial. For all the clamor over the collapse over solar firm Solyndra, his political opponents are still stained from high oil prices and the BP oil spill.

The Obama administration is now emboldened: An independent review team headed by a former official in the Bush 11 White House said that U.S. Department of Energy’s loan guarantee program is effectively leveraging the loans to create jobs while much less money needs to be reserved to cover potential losses. Still, the analysis said that the loans must be closely watched after they are awarded.

The president is expected to keep pushing for monies for clean energy deals while Republican lawmakers want to reduce such funding. It’s an honest debate but one in which the president does not intend to back down, given the determination he displayed during his annual address to the nation in January.

“Some technologies don’t pan out; some companies fail,” President Obama said. “But I will not walk away from from the promise of clean energy.” He went on to take a shot at the oil industry, which is enjoying record revenues and which -- the president and his supporters claim -- are resting on the public dole.

The report, authored by Herb Allison who oversaw the program to bail out the nation’s big banks, says that loan guarantees have successfully leveraged $35 billion into the U.S. economy. It also says that the fund must keep $3 billion in reserves to cover potential losses -- a third of what lawmakers had thought. At the same time, eligible businesses have only accessed a portion of their loans.

The review goes on to say the loans are generally secured. That’s because the operations getting the money are doing business with utilities that have stable cash flows. And even those businesses that are posing risks still have value even if they belly up. Consider Beacon Power that makes energy storage products: The failed company snagged a $43 million loan guarantee, although Rockland Capital bought the remains for $30.5 million and thereby diminished the losses.

Energy Secretary Steven Chu responded, saying that other endeavors may fail but that the vast majority will succeed and repay their loans on time and with interest.

Political Opposition

Allison’s findings, which didn’t specifically look at Solyndra and Beacon, correspond with two earlier studies: The Congressional Research Service and Bloomberg Finance. The former concludes that the ultimate success or failure of the projects will depend on management and its ability to mitigate risks. Meanwhile, Bloomberg’s analysis says that 87 percent of the loans are low-risk and that Solydra’s $535 million loss is a fraction of the total $35 billion program.

“The reality is the Department of Energy’s loan guarantee program will likely result in minimal costs and large gains for taxpayers—just like many other federal lending efforts,” add Mark Muro and Jon Rothwell, both with the Brookings Institute, in the New Republic.

Altogether, the Energy Department is at some stage of awarding $35 billion in loans to about 40 alternative energy projects, which according to the administration have saved or created 62,000 jobs. Some of those deals may get cut off in the new fiscal year. But if Republican lawmakers reason that loan guarantees are “wasteful spending,” then they must apply same logic to such investments as carbon capture and sequestration as well as nuclear development.

So is it in the interest of the political opposition to hammer away at the Solyndra debacle in light of what they will be asking government to do for the industries backing them? No doubt, Solyndra is fair game and any potential cronyism should be exposed. But it should work both ways.

Take Big Oil: The five leading companies have made huge profits and as a result, they have been asked by some lawmakers to forego some of their lucrative tax breaks. President Obama would use that money to reduce the annual deficit while allocating some of it to green energy enterprises that need some seed money.

Oil companies aren't about to budge and will argue that higher taxes in any form would serve to discourage domestic oil and gas drilling. Because demand is expected to continue increasing, prices would rise. The make-up of the Congress will mean that the oil companies get their way -- even though Americans are paying high gasoline prices and have witnessed the worst oil spill in history.

But that’s a case that President Obama will take to the American people and it’s one that will be juxtaposed next to a collapsing solar company.


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Comments

nuclear loan guarantees

This is an interesting piece.  But what about the $8.33 billion set aside for the Vogtle nukes in Georgia, which have already involved faulty concrete and non-spec rebar?  How about we take that money and put it into solar?

Fossils and subsidies

If fossil fuels are more efficient and are more easily combusted, then why do they need subsidies? The market will surely recognize that, right? If they take subsidies, why should they resent wind and solar getting subsidies too? You say the money is wasted because the technologies don't work all the time and natural gas and coal do. The money is better spent on fossil fuels. Okay. What about pollution? What about health costs? Coal, natural gas and oil are all on the public dole, as this article states. If you don't like public handouts then stop taking them. If you take them, don't complain if wind and solar ask for them too.

Big difference between a deduction and a subsidy

The oil, gas, and coal industries get deductions from income for things such as depreciation, exploration expenses, and devaluation of the mineral rights they purchased as the minerals are extracted thus making that particular mineral right less valuable.  But, as others have pointed out, they still pay income taxes which in many cases amount to more than their after-tax profits by a considerable margin.  Windfarm and solarfarm developers get a handout to them of taxpayer dollars in the form of cash grants or production tax credits and get to depreciate their capital investment at an accelerated pace as well as take other deductions similar to any industrial firm including the oil companies.

If you research a few studies on the environmental and cost impacts of green energy technologies, you will find actual results from Europe, where there has been heavy investment in wind, that  indicate wind costs considerably more than fossil power when all factors are considered and you will also find it does virtually nothing to decrease CO2 emissions because of the necessity to run fossil fueled power plants at part load to back them up due to the high variability of output and frequency control issues as well as make power when the wind is not blowing.

By the way, the fossil energy industries are investing heavily in green techonology to get the tax credits to decrease their tax bills which means anyone not involved in green energy shoulders a larger portion of the tax bill.  One also must consider the life enhancing benefits that electrification has brought to the world.  Try reading Climate Coup and Climate of Extremes  to provide balance to EPA's numbers-out-of-thin air adverse impacts and Al Gore/Michael Moore BS.

Queen of Hearts and Energy Policy

That is a great quote!  But I see the application in reverse, i.e. Through a Looking Glass. 

 

I think most Green energy policy is wishful thinking.  ‘If only we could conserve enough energy to avoid new generation’; ‘if only we could make enough energy from thin air, e.g. wind and sun shine, to run a modern economy’; ‘if only issues of transmission, storage, and backup power didn’t exist’; ‘if only the people would understand time-of-day energy use’.  Too often, Green energy policy first determines the answer, i.e. the verdict, then does the analysis, i.e. the trial.  And extending the analogy further, congress is the Queen’s solders who are afraid of losing their head’s and so go along with this “first the verdict, then the trial” approach to energy policy.  It is all so very sad.   

 

David Dixon

 

"If you don't know where you're going,

... any road will get you there." , Lewis Carroll

Oil Spill

How much did it cost to clean up that oil spill? What were the total economic damages to the lives of those on the Gulf Coast? How much taxpayer money was involved in the clean up? How much did Solyndra lose?

Subsidies

Well written article that pointed out all of the subsidies to much more stable energy industries that those industries and their supporters of course ignore when attacking subsidies for fledgling technologies.  If we had started subsidizing solar and wind during the Carter and Reagan presidencies, we'd not be having this discussion because those industries would be mature and not need government assistance. 

Ken Reich

Solar Subsidies

Problem not just loan guarantees to green technology

There is a study done by an economist at King Juan Carlos University in Madrid that concludes Spain's headfirst plunge into wind and solar has cost the Spanish economy 2.2 jobs in other industries per each 1 job gained in the green energy field.  He also concluded that each green job costs the Spanish economy some $768,000.

There is a study by Dutch physicist C. le Pair published in October of 2011 that shows that the heavy investment into on- and off-shore wind has not cut CO2 emissions at all, in fact it concludes that wind energy proliferation has resulted in a 3% increase in CO2 emissions.

There is a study published by the Civitas group in the UK, based in large part on an analysis by Mott MacDonald, which indicates once all costs, including long distance transmission, have been included, both on- and offshore wind are the most expensive technologies with which to generate electricity with offshore in particular having a large economic penalty.  The Mott MacDonald work also concludes that the variability, unreliability, and non-dispatchability of wind results in no reduction in CO2 emissions because there must be fossil power available to back up wind and there must be a significant amount of it on line even when wind is generating to make up for these failings.

In the US, physicist John Drott has prepared studies and gathered some from others that show the economic fallacy of subsidizing power technologies that have not been fully developed on the cost of manufacture and deployment side.

Then there are the implications of the Climate-Gate emails that data was manipulated to force the results including possible omission of data that did not support the theory that anthropogenic carbon dioxide emissions are a prinicpal cause of global warming.

It is not like the Feds are giving loan guarantees to green technologies with promise of being economically viable without some other form of government handout.  It is not just the loan guarantees that are the issue: it's the PTCs and cash grants, the feed in tariffs, the renewable energy portfolio mandates, the long distance transmission lines costing billions of dollars for wires that will possibly never reach design capacity let alone ever carry significant enough quantities of energy to make a reasonable dent in demand, the vast acreage of wilderness lands with trees or brush cleared or having their ecology altered by sunlight shading from solar collectors, and the older power plants that should have been replaced by newer, more efficient, less polluting ones and the simple cycle gas turbines being built when combined cycle should have been without the mandated and subsidized wind farms.  And, it is the lost jobs in other industries resulting from higher taxes and higher energy costs, jobs that are going to China, India, and other countries that are building unmitigated coal-fired power plants at a rate that boggles the mind.  Then one must also consider that in the Solyndra deal, the taxpayer monies invested were subordinated to the private investors.  A nuclear plant has a lot better prospect of paying back its guaranteed loan without subsidies than does wind or solar.

All that is being done on the backs of the American taxpayer with money being taken from them by a government which, in my humble opinion, handled the BP drilling permit, oil spill, and aftermath so ineptly and is handling energy policy in much the same way.  They are throwing tax money away while middle-class taxpayers struggle with the higher costs of filling their cars with fuel to go to work and the higher costs of food to put on the table--and the higher costs of paying benefits to the swollen ranks of unemployed caused by other failed federal policies.

Europe is staggering economically.  The US is staggering economically.  And, a lot of that staggering coincides with costly green mandates that are not necessarily that green when one considers the back up power that must be deployed to support it.

Mark Wooldridge

Studies can easily be cherry

Studies can easily be cherry picked to support anything anyone wants to say on either side with  weaker arguments featuring studies that were not well done.

"A lot of that staggering coincides with costly green mandates..." Key word coincides, not caused by. How easily the greed of big banks who lent irresponsibly and of the populous who used inflated equity in houses as mad money culminating in the housing crisis has been forgotten. Add to that the cost of two off-shore wars. Either by far dwarfs the tiny investment in renewable energy and energy efficiency made over the past fie years.

It's time to stop playing the global warming climategate card. Whether one chooses to believe in it or not, note that the US Department of Defense plans to be off OIL by 2040 for reasons of National Security. Much of this energy will come from renewable sources.

Even Exxon Mobile sees a significant shift in energy sources by 2040 and seems to be concerned about emissions. I'm sure that they are very happy, though, that personal vehicles in the US are on average far less fuel efficient than in any other region of the world. It sees electricity from wind energy growing by 900% by 2040, with a much greater portion in most sectors of energy usage being from electricity by 2040, too. It, also, sees huge gains in the efficiency of energy conversion on the horizon as related to electricity production and transportation related fuel efficiency.

http://www.exxonmobil.com/Corporate/Files/news_pub_eo2012.pdf

And guess what else? Even the oil companies are going green when it comes to saving money on operation of the buildings in which their businesses reside through energy efficiency and renewable energy additions to cut electric bills. They are even happy to make use of government grant money to do this. Yes, these are the same companies that are lobbying against subsidies and other perks for renewables.

Then show me the studies that say green energy is economical

Please, if you think these studies are cherry-picked, show me a study that proves conclusively that wind and solar energies are economical without government hand-outs or some mandate to establish a carbon tax to force the price of fossil energy up.  If wind and solar were economical, they would not need PTCs, mandates, or cash grants. 

Also, please note that I chose the word "coincides" very deliberately because it is not proven that green energy investment was necessarily causative and certainly not the only cause.

The DoD cannot economically get off of fossil fuel based on the use of renewables because renewables are not reliable, not dispatchable, and highly variable.  Even energy storage cannot compensate for these problems without a huge expenditure.   Should DoD ask any potential military threat not to attack when wind or solar is not available because there is no electricity to run the radar, provide power to operate weapons systems, or operate communications gear.  If wind is so dependable, why in the world do you think naval and commercial vessels went to thermal power to propel ships?  Get real, this is not a national security move; it is one of using taxpayer money to continue subsidization of wind and solar in pursuit of the "green at all costs" agenda.  It is contributing to the financial decline of America by spending billions of taxpayer dollars on uneconomical power supplies.

Guess why the Exxon Mobils and other energy companies are investing in green?  Sure, they want to reduce emissions--but wind certainly does not do that although solar may help except for the fact that most peak usage is after solar output peaks so fossil power is still needed to make up the declining output.  No, the energy companies are investing primarily for the tax credits.

And, no we should not back off the Climate-gate issue.  These scientists used public funds taken from taxpayers for much of their work and they manipulated data to avoid any evidence that their theory is not true.  If they had not done so and all data pointed to the theory being correct, then it would be a different story.  One must remember, in the scientific method, a theory remains a likely explanation of a phenomenon based upon all of the evidence pointing toward it being true, so only one factual negative to debunk the theory.  To knowingly throw out negative evidence means the scientists have a doubt about their theory.

Mark Wooldridge

Heresy Alert

Careful! You could be tried for heresy and burned at the stake. You might, perhaps, even be subject to the Queen of Hearts' system of justice: "Sentence first; trial later."  :-)

Take Big Oil

"Take Big Oil: The five leading companies have made huge profits and as a result, they have been asked by some lawmakers to forego some of their lucrative tax breaks."

Big Oil, as the result of earning huge gross profits, has paid huge federal and state taxes, despite the "lucrative tax breaks" included in tax law. The amounts of these federal and state taxes have exceeded Big Oil's after tax net profits by a factor of three.

The "need" of our fe(de)ral government for additional revenue appears to be limitless, even though the income and assets available to be taxed are not.

It is long past time for the US fe(de)ral government to be re-domesticated.