Republicans Want to Cut Obama’s Green Energy Plan Down to Size

Obama's Team Wants to Foster Green Energy and Clean Tech

Ken Silverstein | Jul 02, 2012

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The July 4th holiday is bringing out the fireworks. But the biggest features are in the political realm, where the House Republicans are now trying to cut President Obama’s green energy program down to size, saying it has “failed.”

It’s the tale of two political parties. Both sides are trying to get out ahead of the curve, all before the presidential campaign begins in earnest after their respective summer conventions. To start the rally, the Republicans are saying that the president’s nearly $1 trillion stimulus plan has distorted the economy and prevented a full recovery while the White House counters that the green economy must be nurtured and supported initially with public funds. 

“For 40 consecutive months and counting, the United States has endured a national unemployment rate higher than 8 percent, and speculation about the role of stimulus-funded programs continues unabated,” say House Energy and Commerce Committee Republicans, in a report. “The European nations that once were ahead of the U.S. in adopting green jobs programs are now ahead of the U.S. in abandoning them. It is time for America to do the same.”

The same critics are emphasized that the cost of each job is staggering. They are suggesting to divide the total stimulus dollars by the number of jobs created. If that money were targeted elsewhere, they add that the country would have gotten more bang for its buck.

Case in point: Solyndra, the failed solar company that received a $535 million loan guarantee backed by taxpayers. Beyond Solyndra, there are the bankruptcies of Evergreen Solar and SpectraWatt, as well as that of energy storage maker Beacon Power, which actually found a buyer.

House Republicans are arguing that not only are those businesses unsustainable without government subsidies but that they are also unproductive. A 2009 study from Madrid’s King Juan Carlos University found for every green job the government creates, 2.2 jobs are lost in competing industries. That is because factories will downsize to compensate for higher energy costs.

“It clearly hasn’t created many jobs, and when its direct and indirect impacts are taken into account, it may well be costing them,” say those House members.

The Flip Side

The Obama administration says that it will take its case to the American people, pointing out that fossil fuels have been heavily subsidized for generations and that the creation of a New Economy does not happen overnight. It adds that China and India are aggressively pursuing those same strategies and that this country must “play to win.”

It is calling attention to research done by the Pew Charitable Trust, which is showing that global investment in clean technology is at a record $263 billion. Annual investment growth rates are between 10 percent and 18 percent in the developing world, which includes not just Asia but also Africa, the Middle East and Latin America.

“Investments in wind, solar and improved energy efficiency are creating well-paying jobs for people of all skill levels and educational backgrounds,” says the Pew report. “These investments will revitalize not only the economy, but also help protect the global environment.”

As for the loan guarantees targeted to green industries that the House Republicans have profiled as both wasteful and politically motivated: The Obama administration says that they have injected $55 billion into local economies while at the same time, they are generating enough clean energy to power every home in the state of Colorado.

And while investors may be drawn to green energy projects that are able to produce steady cash flows, they are requiring a nudge from the government. To that end, the loan guarantees in combination with the stimulus have proven that large-scale wind, solar and geothermal projects can be commercially successful. That indicates to lenders that it is safe to issue those loans, Obama says. 

The non-partisan Congressional Budget Office assessed the president’s stimulus plan. It estimates that Gross Domestic Product has risen between .8 percent and 2.5 percent more than if no stimulus plan had been enacted. It adds that unemployment is .5 percent to 1.6 percent less than what it would have otherwise been, increasing the number of working Americans by 1 million to 2.9 million.

The clean energy race is now part of the presidential race. Republicans are saying that the free market should determine which fuels take the lead while the White House is arguing that clean technology will prevail over time, producing healthy results for both the economy and the ecology.

EnergyBiz Insider is named a 2012 Finalist for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com

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More truth...

Just because the Congressional Budget Office conducts a "study", it cannot theoretically make jobs suddenly appear that were never created. Example in Michigan: Federal stimulus spent $34.5 million for only 183 total jobs in 14 companies = $188K per job. http://www.michigancapitolconfidential.com/article.aspx?ID=16868&print=yes And trying to create an industry to "produce jobs" such as the Chevy Volt, that costs taxpayers up to $250K per vehicle gets us nowhere fast. http://www.michigancapitolconfidential.com/article.aspx?ID=16192.  And to call federal production tax credits "a nudge", when the costs required annually and forever are in the billions, is the understatement of the year! It is certainly not the truth.

Green Energy Plan

Renewables have a big problem--lack of dispatchability

Wind and solar are non-dispatchable.  They are available only when the wind blows or the sun shines.  Land-based wind in the most prime wind areas is typically most available between midnight and six or eight in the morning.  While solar is somewhat readily distributed, the best sites for utility scale solar are far from any load centers.  Wind is not readily distributed because the capacity factors around most of the load centers are poor compared to the prime locations.  These characteristics mean the building of long distance transmission lines is necessary to bring the power to the load centers.

The article once again compares the tax credits given to renewables to the income tax deductions given to oil and gas and coal producers for expenses related to searching for, exploring for, producing, and refining their products.  First, renewable generation does not compete against these energy producers--renewable generation competes against other generation--facilities that do not get tax credits.  A 250MW wind farm or solar farm cannot compare in delivered energy to a 250MW coal-fired steam plant, a 250MW gas-fired steam plant, a 250MW gas turbine combined cycle plant, nor a 250MW simple cycle gas turbine plant.  In a given year, the fossil-fueled plants will put roughly 3 times the energy on the grid that a wind farm will and 5 times the energy that a solar farm will.

The PTC for wind power is $22/MWh.  In the ERCOT  region, that is more than the wholesale price of electricity in the off-peak time.  Once a wind farm is built, the expenditures for O&M on a nameplate capacity basis are small compared to a fossil-fueled plant.  To owe $22 in income tax at the corporate tax rate of 35%, a fossil fueled generating facility must clear about $62.86 in pretax earnings after depreciation and amortization.  To get that kind of earnings, the facility must have tax deductible expenditures of around $700.  While some of that is depreciation and amortization, a sizeable chunk of it consists of fuel, staff operations and maintenance labor, contract maintenance expenditures, operating chemicals, sales taxes, and property taxes.  The operating and maintenance staff pay income taxes.  The contract labor personnel pay income taxes and the contractor pays corporate income taxes.  The fuel supplier has people working for them who pay income taxes and the supplier pays corporate income taxes.  In other words, the fossil fueled plants create and maintain a lot more jobs than renewables ever will while delivering less expensive electricity.  Less expensive electricity means a more competitive manufacturing and business environment to battle for the global market with China, India, Vietnam, Thailand etc.

China is cutting back sharply on their wind and solar investments to concentrate on nuclear and hydro power.  NEWSFLASH:  Hydro is not exactly green when one considers the amount of land area, including forested regions which get innundated.

Lastly, take a good look at the investors in wind and solar in the US.  You have BP, GE, Google, Microsoft, Verizon etc.  Just think how much corporate income tax is being lost to the PTCs paid these firms.  Tell me exactly who you think will make up the difference.

Green power investment is a luxury to be afforded by an affluent society with money to burn.  The US no longer qualifies.  But we continue to pour money into these ineffective techologies thereby discouraging investment in newer, cleaner, and more efficient fossil-fueled plants to replace older, dirtier, inefficient ones.  The result is that we are not making the impact on reducing CO2 emission--or toxic emissions either--that we could while we simultaneously drive our manufacturing businesses overseas due to higher cost electricity and higher taxes.  This is an incredibly stupid policy to pursue.

Think we are not being stupid.  A news story last night discussed how the US Navy was replacing petroleum based fuels with biofuels at a cost of $26/gallon versus $3.60/gallon for the petroleum based fuels.  In this day and age when Uncle Sam borrows $0.40 of every $1 spent, isn't that a fantastic thing to do?

Truth

As with most arguments, the truth lies somewhere in the middle. It sucks to be conservative these days and like renewable energy. The leaders you look up to spew lies and spin nonstop. Some of Europe is lowering RE incentives, true. But abandoning? No. Germany, clearly the most fiscally responsible nation in that region, is on a path to eliminate nuclear power by 2020. Renewable energy is a huge part of their economy. This shouldn't be about jobs anyway. It should be about keeping $ onshore instead of sending them to the middle east. As I see it, electric cars and renewable energy would help that. I don't want politicians creating jobs. Politicians don't create jobs. Industry creates jobs. Tax incentives work to give industry opportunities.

energy subsidies

I'm always surprised that people who oppose subsidies for energy technologies fail to mention the Price-Anderson Act, witout which there would be no nuclear power industry in the United States.