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    Big Government Is Killing Green Energy

    I trek across Iowa at least three or four times per year, and one sight has come to define the state for me: miles upon miles of (largely government-incentivized) wind turbines. Iowa’s wind power accounts for 20% of the state’s total energy output, putting them in third place behind Texas and California in capitalizing on what some see as the wave of the future: renewable energy. 

    The federal government (and the Obama administration in particular) certainly seem more than willing to encourage these “green energy” projects. More than $12 billion in subsidies will be spent on green energy in 2013, almost three-quarters of the total amount set aside for energy projects. That number doesn’t encompass billions of dollars in loans given out to corporations across the industry – all told, the Department of Energy estimates it has spent $34.5 billion on various loan programs. All that funding has produced just 60,000 jobs. For those of you keeping score at home, the federal government essentially spent $522,727 for each of those new jobs. In theory, most of that money will be repaid, but given that several of the biggest loan recipients have already gone bankrupt (we’re looking at you, Solyndra), the federal government probably shouldn’t hold its breath on that one. 

    Still, as long as energy progress is made, it’ll be money well-spent, right? After all, we’re saving the planet. Unfortunately, as a recent study shows, green energy may not be all it’s cracked up to be. Solar power costs two to three times more per kilowatt hour than electricity generated by coal and natural gas.  Wind energy technology in particular suffers from a continuity problem – the wind doesn’t blow all the time, necessitating backup by fossil-fuel generators. Turning those generators on and off can eat up massive amounts of energy, canceling many of the benefits of wind power. Electric cars suffer from market inefficiency as well – their high prices and limited driving range (the Chevy Volt can travel gas-free for just 38 miles) mean that a large number of customers just aren’t interested. 

    Government subsidies aren’t keeping these industries alive – they’re slowly killing them instead. By distorting market forces and offering false incentives for a not-so-good product, these subsidies encourage inefficiency and render companies less-able to support themselves when the well runs dry. Wind energy subsidies, in particular, have resulted in developers “seiz[ing] this limited opportunity to build out the less energetic sites.” Instead of focusing their resources on developing wind power in places where it might be more profitable (but more difficult) to do so, wind companies have taken the money and run, building in less-expensive places with less potential for production. Now, though, those companies are dependent on the government dollars to survive, because the sites do not produce enough to be profitable on their own. Other subsidies, especially those for electric car companies, have gone to corporations with a less-profitable business model, squeezing out organizations that may have produced a more-workable product for a lower cost. Several of these competitors have filed complaints against the Obama administration on these grounds. 

    As is usual when the government meddles in the market, the party hurt most by this cronyism is the consumer, who receives a mediocre product at a higher price. Seeing the mediocre results of the product, the consumer may be less likely to support the industry in the future – rendering the industry itself less viable in upcoming years than if it had simply been allowed to develop on its own. Let’s get Big Government out of green energy – before it kills the market entirely.

    4 comments
    Monk Mann
    04/22/2013

    The government earns more money from the use of oil. The private sector does, too, as much of manufacturing and mechanized agriculture, including renewable energy, requires oil.

    In addition, "business as usual," especially given a global capitalist system, makes matters worse. This can be seen in expensive EVs, which require oil to manufacture, and more have to be manufactured to satisfy a growing global middle class, and ultimately requires more subsidies for the oil industry.

    stonestone's picture
    stone stone
    04/23/2013

    Take away the term"green" and simply call it an "investment" as this article alludes to. If the argument here is that the government has spent a ton of money on an investment that in some areas might not have paid off (yet) then perhaps take a look at some of the MANY other areas that this has happened throughout history and explain how this is any different. For example, I'm not kidding when I say that in the late 50's-early 60's, the US military invested millions of dollars developing a flying saucer. Look it up. This really did happen. In the end they were stuck with an admittedly very cool and futuristic looking flying saucer than couldn't hover more than 3 feet off the ground and had to be tethered lest it lose control. Secondly, I don't care what anyone says. Oil is a finite resource. It will one day run out and while it won't happen all at once, it will become increasingly expensive. And as such other means to procure energy is an absolute necessity. Your counterpoint along with that of this article seems to argue about how some green technologies are pricey. So too was oil when it was in its infancy. Cars were 1000's of dollars in a time when the average family earned 100's per year. SO why should this be any different? So the takeaway is that the government is doing exactly what it has always done. Its just that the term"green" seems to be something that polarizes people into the same tiresome "Liberals" versus"Conservatives" camps.

    stonestone's picture
    stone stone
    04/22/2013

    Your article seems concerned over a few items:
    1: The costs of these government-funded projects
    2: The cost of green technologies
    3: The risk of government investing in green projects

    So first of all- the costs of funding such projects. The costs up front is going to be large initially because the costs of buying materials, machinery, and other startup costs are always going to be high whether its a government or a private concern. The payoff is in the future returns. I can think of a number of important government-funded projects that had HUGE costs and took sometimes decades to pay for. For example.... The US highway ( or Eisenhower freeway system), which is still to this date the largest project undertaken, taking 60 years to complete. The payout was that American cities grew rapidly and so too did the economy now that it had an efficient transportation system. Another would be the many, many billions of dollars spent on defense, which again- has HUGE up front costs. Yet another, the Manhattan project, which at the time was the single largest industrial project in the world. Of course the math isn't going to work out immediately.

    Your second concern: The cost of green energy technologies. You mentioned cost. At this point, solar panels, wind turbines, and high storage batteries are a fraction of their cost of even 5 years ago. Technology gets cheaper with time. I'm old enough to remember when a VCR cost $1,500. Now a DVD player can be bought for $30. The same is true with green technology. It too is and will continue to grow cheaper. As a side note its interesting you mentioned the Volt and that it was expensive and went 38 miles. One could read that and think thats as far as the car goes. It has a small gas engine that turns on after the battery is drained and hence can be driven for as far as the owner wants. BTW, the Volt is selling extremely well these days.

    And lastly, the concern over risks in investing in various companies. Seems to me that the right just loves to constantly mention Solyndra. But if you were to separate government investments and the success of those investments and compare that to the success rate of private investors and the government by far actually has a superior track record. Does that mean that ALL investments from either government or private investors will succeed? Of course not. That goes without saying.

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    04/23/2013

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