Free Markets, or Government Knows Best?

In 2009 the Department of Energy (DOE), under the Obama administration, began enacting the Loan Guarantee Program granting $37 billion dollars of taxpayer money to “green” energy companies in an attempt to boost alternatives to fossil fuels. The Loan Guarantee Program consists of three programs in total: Section 1703, Section 1705, and The Advanced Technology Vehicles Manufacturing (ATVM). The Department of Energy has claimed that this program saved or created 62,350 jobs. However, taking a closer look at the numbers, 30 percent of these jobs are temporary construction jobs while another 50 percent will be created at Ford Motor Company.

Under the 1705 loan program, taking up half of the funding form the Loan Guarantee Program, 2,378 permanent jobs were claimed to be created. If you do the math right, this works out to costing the taxpayer $6.7 million per job created. I don’t know about you, but if it takes the government $6.7 million to create one permanent job, something is wrong.

Reviewing how some of the companies of the recipients of the Loan Guarantee Program and the American Recovery and Reinvestment Act of 2009 (the stimulus package) produces some alarming findings. 



 Government  issued  Loan/Grant

 Estimated             Permanent Jobs

Estimated Annual Generation Output (MWh)

Georgia Power Company


 $8.33 billion



Solar Trust


 $2.1 billion





 $2 billion



Abengoa Solar, Inc.


 $1.446 billion



NRG Solar


 $1.237 billion



Solyndra Inc.


 $535 million



Abound Solar


 $400 million

 1,200 (Bankrupt on  6/28/2012)


LS Power Associates


 $343 million



Ener1, Battery Maker

 Lithium-ion  batteries

 $118 million



Kahuku Wind Power, LLC


 $117 million



Record Hill Wind


 $102 million



Cogentrix of Alamosa, LLC


 $90.6 million



Beacon Power


 $43 million




The combined amount of money given to alternative energy companies, through the 1705 and 1703 Loan Programs, totals around $19.2 billion. According to the US DOE, 3,498 jobs have been or will be created because of these loans. This comes out to almost $5.5 million in cost per one permanent job created.

Unfortunately, these projected permanent jobs created are an overestimation, if you take away the jobs lost due to six of these companies going bankrupt. Solar Millennium Inc., LSP Energy LP, Ener1 Inc., Beacon Power Corp, Abound Solar, and Solyndra LLC combined have received over $3.5 billion from the Logan Program yet have produced zero jobs and hurt the fragile U.S. economy.  

Now it may be argued that the Loan Programs have done at least some good. The third and last program, Advanced Technology Vehicles Manufacturing (ATVM), has provided $8.5 billion worth of loans to mostly car companies, such as Ford, to update their factories making them more environmental friendly and efficient. ATVM has been projected to create 38,700 jobs (not necessarily permanent jobs) according to the DOE.

The effort of the Obama administration to create jobs and stimulate alternative energy growth has been a disaster. Comparing job creation and energy output in private sector companies producing mostly oil and gas, to government-sponsored alternative companies yields a stark contrast.



 Jobs  Created

 Revenue  2011

 Energy output


 Oil and Gas


 $386.460  billion

 daily produces 3.4 million    BOE and 1.9 billion cubic  feet of natural gas


 Oil and Gas


 $486.4  billion

 daily produces  3.921  million BOE (barrels of oil  equivalent)and 3.9  billion  cubic feet of  natural gas


 Oil and Gas


 $253.7  billion

 daily produces 2.763  million net oil-equivalent  barrels and 1.3 billion  cubic feet of natural gas


 Oil and Gas


 $251.2  billion

 daily produces 2 million  barrels a day and 1.6  billion cubic feet of  natural  gas

Chesapeake Energy

 Natural Gas


 $11.64  billion

 daily produces 2.6 billion cubic feet of natural gas

Peabody Energy



 $7.97  billion

 9 billion tons of coal   reserves 

Arch Coal



 $4.2 billion

 3.1 billion tons of coal   reserves

Williams Energy

 Natural Gas


 $9.6 billion  (2010)

 daily produces 1.2 billion   cubic feet of natural gas

Cloud Peak Energy



 $400  million

 1 billion tons of coal   reserves


These nine companies alone, granted they are some of the larger energy producing companies in the country, provide our country with nearly 303,000 jobs while at the same time costing the taxpayer a whopping zero dollars!  

So what’s the issue? Why can’t the government do just as good of a job at producing energy that private sector companies can? To answer this question we must go back to the fundamentals of economics. In the real economy, for businesses to survive they must make a profit by meeting the demands placed upon them by you and I–the consumers. What the government is trying to do is create a demand for alternative energy that is simply not there. Instead of responding to the demands of consumers, the government has its own agenda it wants to force into the market. That agenda is the reduction of greenhouse gases via green energy. Unfortunately for them such a market does not exist so companies like Solyndra and Beacon Powers go out of businesses costing taxpayers literarily billions of dollars.    

The other issue that companies in the real economy have to address is making profit. If the technology on the market does not allow companies to make money off of alternative energy sources, than producing alternative energy is not worth it. Businesses cannot stay in business without the ability to pay their employees, keep their facilities running, and invest in new technology. Economics teaches us that given a high enough demand for a product, the free market will deliver that product to its consumers. Let the market alone and the demand of consumers will be met. Interfere with the market and money will be misallocated, jobs will be lost, and taxpayers will get very angry.

The government needs to take a lesson from Google, one of the world’s most successful and growing businesses. After investing $168 million into an alternative energy company called Bright Source Energy, Google has since decided to cut its entire renewable energy initiative named Renewable Energy Cheaper Than Coal. Google has realized that its investment into alternative energy was a mistake–the economic laws of demand and profit are simply not met. The U.S. Department of Energy, which has given Brightsource $1.6 billion in federal loan guarantees, needs to realize its past mistakes in companies like Solyndra and Beacon Power, take the advice of Google, and stop pouring billions of taxpayer money into failing energy companies. Just this past Thursday, Abound Solar, the most productive green-energy company in terms of job creation, filed for bankruptcy. What will it take for Obama’s Department of Energy to stop this madness? The free market, not the government, knows what’s best for its customers.