NOVEMBER 22, 2011

Green Fiascoes and Boondoggles

Economist Mark Hendrickson, a member of CF's Council of Scholars, looks at the failure of government funded "green energy" projects in his latest column for the Center for Vision and Values.  He identifies  key lessons from these government fiascoes, for which the Solyndra scandal is only the most famous of many examples at the federal and state level.

There are at least four important reasons why we should stop funding "green" government programs:

First lesson: government-appointed experts are incompetent economic planners—a fact of life that any intelligent adult should know after the spectacular failure of central economic planning in the socialist experiments of the 20th century. No matter how brilliant and how well-intentioned government planners may be, they do not and cannot know what consumers want and how much they are willing to pay for it. Only free markets can solve this challenge. If electric cars are to be a viable industry, private companies will make them so.

Second lesson: The government's involvement in Solyndra raises troubling questions about possible corruption. While I think the Solyndra deal stinks to high heaven, I wonder whether any laws have been broken. Where is the dividing line between influence peddling, legitimate lobbying, political deal-making, and actual crime? Many farm-state Republicans have supported the uneconomical ethanol boondoggle for decades in exchange for generous support of their electoral campaigns, so the practice is bipartisan.

Third lesson: Government job programs are a blatant failure. They have never been economically beneficial. In the 1930s, Franklin Delano Roosevelt had the department of agriculture hire 100,000 Americans to monitor how much acreage American farmers were cultivating. These federal jobs produced no wealth. Their jobs made no more economic sense than paying people to dig holes and then fill them up.

Today's green workers are economically nonsensical, too. True, they sometimes produce something, but the economic value is invariably less than the amount of tax dollars needed to subsidize their job. In other words, federal jobs make us poorer.

Fourth lesson: Finally, we simply can't afford these green boondoggles. Uncle Sam's official debt is now $15 trillion, and when you include off-budget items and unfunded liabilities, the situation is far worse. Given this fiscal reality, it is the height of irresponsibility to throw taxpayer dollars at any special interests, and it is particularly egregious to subsidize enterprises that are plainly uneconomical.

posted by NATHAN BENEFIELD | 11:00 AM | 0 comment

NOVEMBER 21, 2011

Sky Darkens for Solar Mandates

HB 1580, which we wrote about previously, would accelerate state mandates for utilities to use solar power as part of their electricity portfolio.

A new Energy Association of Pennsylvania report calculates increased energy costs of more than $139 million annually if HB 1580 becomes law. Studies of similar laws in other states indicate that these costs will be directly passed on to consumers via higher utility rates.

The House Consumer Affairs Committee is scheduled to vote on HB 1580 on December 8. Government mandates in the legislation unfairly transfer the investment risk of solar power facilities from private investors to us, the consumers.

That risk is real and the bill should be voted down.

Environmental advocacy group PennFuture recently distributed a talking points memo warning solar supporters to avoid mentioning the infamous $528 million Solyndra scandal. Solyndra is but one of many green energy investment failures. Brightsource Energy Inc., a solar manufacturer with political connections, was the recipient of another $1.4 billion bailout.

Why should Pennsylvania force investment in an industry whose failure rate is skyrocketing? Solar energy's viability should depend on its success in the marketplace, not on subsidies and mandates enacted by politicians and backed by taxpayers.

posted by JOHN BOUDER | 02:03 PM | 0 comment

OCTOBER 28, 2011

State Energy Mandates Cost up to $440 million

A new study by Penn State scholars found Pennsylvania's alternative energy mandates will cost taxpayers up to $60 million next year and up to $440 million in ten years. Twenty-five to 30 percent of this price tag stems from meeting the state's solar requirements.

While solar looks bright on the surface, any jobs that depend on government assistance are overshadowed by a dependency on taxpayer pocket books. Accord­ing to the Federal Energy Information Administration, solar energy producers already get 55 times more sub­si­dies per megawatt hour than coal, and 95 times more than natural gas. Moreover, state solar energy is 10 times more expen­sive than elec­tric­ity from nat­ural gas and nearly six times more expen­sive than coal.

Given that Pennsylvania families can ill afford higher energy costs in this sluggish economy, Harrisburg policymakers are pushing a bill that would make these mandates more expensive.

House Bill 1580 would require that all solar credits used to fulfill the state's mandate be purchased from in-state companies, instead of companies within the PJM territory (PJM manages the electricity market in Pennsylvania and in all or parts of 12 other states and the District of Columbia).

The Penn State study shows that Maryland and Jersey—states in the PJM market that already require solar credits be purchased in-state—have solar credit prices that average 40 percent and 160 percent higher than Pennsylvania.

So just to recap, solar power drives up electricity prices for consumers, while lower prices for natural gas are reducing consumers' electric bills and saving Pennsylvanians on heating costs. Yet legislators are considering mandating the former and taxing the latter.

To learn more about Pennsylvania's alternative energy mandates, known as the Alternative Energy Portfolio Standards, click here.

posted by KATRINA CURRIE | 04:30 PM | 0 comment

AUGUST 29, 2011

Alternative Energy Mandates Make Consumers Pay More for Electricity

This month, the PUC released its latest annual report evaluating Pennsylvania's Alternative Energy Portfolio Standards. The report shows renewable energy continues to take more out of taxpayer's pockets.

The study found solar energy is more than 10 times more expensive than electricity from natural gas and nearly six times more expensive than coal. Electricity from onshore wind is nearly three times more expensive than natural gas.

Instead of letting electricity consumers choose whether or not they want to pay more for renewable energy by switching to a renewable electricity provider, the state's AEPS forces all consumers to pay more.

States with renewable standards, like Pennsylvania, have electricity rates that are nearly 40 percent higher than states with no mandate. While state electricity costs are affected by other factors, alternative energy mandates necessitate higher energy prices. Right now, residents of Pennsylvania pay more for their electricity than the national average and residents in 36 other states.  Higher energy costs add on the difficulties Pennsylvania families are already facing in this sluggish economy, forcing them to sacrifice to support special interests profiting off of solar and wind power.

The House Republican Policy Committee is currently holding hearings to evaluate Pennsylvania's AEPS.

posted by KATRINA CURRIE | 11:28 AM | 0 comment

JUNE 10, 2011

Biofuel Failure becomes Natural Gas Success

Pat Copple owns a biodiesel plant in Monaca, or at least he did until May when he started to convert his operation into a Marcellus wastewater treating facility. Copple says the biodiesel business was never good, despite the hype from Gov. Rendell and President Obama, who both toured his facility.  

With about $1 million in equipment changes, Copple estimates he can refit his plant and take advantage of the growing need for more sophisticated water treatment plants. In other words, even with the wealth of federal and state tax and production incentives for biofeuls, the largely unsubsidized natural gas industry created a better business opportunity.

Apart from biofuel's dependency on subsidies, their production—especially ethanol—has had devastating effects on the poor. We've blogged in the past about how their production creates water shortages and rising food prices. 

posted by ELIZABETH STELLE | 03:58 PM | 0 comment

APRIL 22, 2011

Earth Day Tribute to Fossil Fuels

Instead of planting a tree today, I'm celebrating earth day by honoring the human ingenuity that's made this planet a better place to live. There's no question that standards of living have improved over the last one hundred years, and a recent study from Indur Goklany argues much of this progress was due to the use of fossil fuels. (HT Cafe Hayek)

Despite claims that global warming will reduce human well-being in developing countries, there is no evidence that this is actually happening. . . Specifically, agricultural productivity has increased; the proportion of population suffering from chronic hunger has declined; the rate of extreme poverty has been more than halved; rates of death and disease from malaria, other vector-borne diseases, and extreme weather events have declined; and, consequently, life-expectancy has more than doubled since 1900.

And while economic growth and technological development fueled mainly by fossil fuels are responsible for some portion of the warming experienced this century, they are largely responsible for the above-noted improvements in human well-being in developing countries (and elsewhere).

This point is particularly poignant for Pennsylvanians where the connection between fossil fuels and prosperity is especially tangible given our large coal and natural gas industries.

Today, crusades to regulate fossil fuels use out of existence (without viable alternatives) rarely mention what it will mean for individuals' day-to-day living. With all the complaints over small changes like low-flow toilets and CFL light bulbs, something tells me many Pennsylvanians are not willing to give up their healthier living conditions to leave coal and natural gas behind.

posted by ELIZABETH STELLE | 01:29 PM | 0 comment

APRIL 12, 2011

Economic Freedom Means no Subsidies for any Energy Source

The Marcellus Works proposal is a package of seven bills designed to incentivize natural gas vehicles through a combinations of tax credits and government loans. The bills include:

• HB 1083 - Creates tax credits for private natural gas fleet vehicles.
• HB 1084 - Creates a grant program for smaller mass transit agencies to purchase natural gas buses.
• HB 1085 - Creates a revolving loan program for large mass transit agencies to buy natural gas buses.
• HB 1086 - Requires 25 percent of all new bus purchases by large mass transit agencies (SEPTA, PAT, Lehigh) from 2012-16 to run on natural gas; 50 percent in 2017-2021; 75 percent in 2021-2026; and 100 percent by 2027.
• HB 1087 - Creates a natural gas corridor tax credit to encourage the construction of natural gas fueling stations along I-76, I-78, I-79, I-80, I-81, and I-83.
• HB 1088 - Dedicates the Alternative Fuel Incentive Fund to grants for municipalities, schools, and the private sector for the purchase of natural gas vehicles.
• HB 1089 - Repeals California Air Resources Board (CARB) section 2030 to eliminate costly duplication of EPA and CARB certifications for natural gas vehicles.

The program, except for HB 1089, is a package of subsidies and handouts, similar to the many government handouts for solar and wind production. Lawmakers are justifying the program and its estimated $60 million price tag by claiming no one will use natural gas as a fuel unless they sweeten the pot:

Right now we are suffering through a chicken and the egg problem, Rep. Stephens said. Nobody is buying natural gas vehicles because there is no place to refuel, and nobody is building re-filling stations because nobody is buying natural gas vehicles. This legislation will help move us forward by addressing both of these problems.

Pennsylvanians are smart enough to make their own decisions. Yes, the lack of fueling stations may discourage some at first, but if natural gas is such a cost-effective fuel with environmental benefits, then companies will make the investment. Likewise, if transportation authorities or businesses with large vehicle fleets can save money by switching to natural gas powered vehicles (as proponents claim), they should do so without state subsidies.  No on needs to be paid to save money.

Government subsidies—despite their good intentions—create economic bubbles and perverse incentives to lobby for more aid rather than improve efficiency.  Natural gas vehicles should succeed or fail on their own merit.  Lawmakers should stop trying to pick and choose winners among energy sources.

posted by ELIZABETH STELLE | 05:34 PM | 1 comment

FEBRUARY 10, 2011

Green Energy Could Lead to More Blackouts

Recent controlled blackouts in Houston were reportedly caused by the inability of older fossil fuel power plants to operate in unusually cold temperatures. Now proponents of green energy are using the unfortunate event to justify even more subsidies and mandates promoting renewable power, which will further compromise the reliability of the electricity grid.

The reality is, 53% of Pennsylvania's electricity is generated from coal, 35% from nuclear and about 8% from natural gas, despite the billions of dollars in aid to boost solar, wind, biomass, and other renewables over the past decade.

Issuing new mandates, like the EPA's Clear Air regulations, or increasing old ones, like Pennsylvania's Alternative Energy Portfolio Standards, prevents current plant owners from making the improvements or modernizations needed to keep the lights on. Additionally, owners have to contend with a public relations and legal nightmare every time they propose a new plant.

All five proposed coal projects in Pennsylvania are facing significant opposition. In Texas, nine recent coal and gas projects have been canceled. All this means fewer dollars for investment in new technology. Gene Barr put it well in Gordon Tomb's Patriot-News op-ed:

"When you mandate technologies, the best you get is today's technology and the worst you get is yesterday's technology," says Gene Barr of the Pennsylvania Chamber of Business and Industry. "And you run the risk of shutting out tomorrow's technology."

Today, few are willing to invest the billions of dollars needed to construct new gas, nuclear or coal plants with so much regulatory uncertainty, and with all the taxpayer support being directed to other types of energy. As a result, several Pennsylvania power plants are over 50 years old, making maintenence outages more likely and compromising the electricity grid's ability to meet demand.

posted by ELIZABETH STELLE | 11:52 AM | 3 comments

DECEMBER 17, 2010

Oregon Ducks Renewable Energy Failure

In 2001, Mayor Vera Katz promised Portland, Ore. would acquire 100 percent of its energy from renewable sources by 2010. Today, only nine percent of Portland's energy comes from renewables. What happened?

The cost to purchase renewable energy was too high—in fact, double what the city anticipated. The Cascade Policy Center's new report looks at the unrealistic goals set by Oregon politicians, noting that Oregon's attempts to artificially spur the renewable energy market has been a complete failure, as both politicians and citizens are unwilling to pay the high price to go green. And in the aftermath of these failures, there is little accountability or media follow-up.

On the state level, the study looks at Gov. Kulongski's effort to run state agencies on 100 percent renewable power by 2010. Earlier this year, the goal was revised to 100 percent renewable power by 2025. Meeting this ambitious goal would have cost Oregon taxpayers an additional $208 million.

Similar to Pennsylvania's costly altnernative energy mandates, the Oregon legislature passed their own renewable energy mandates in 2007 with promises of new jobs and protection from volatile oil prices. Instead, these "green jobs" are simply causing layoffs in other sectors, as ratepayers are beginning to see higher electricity costs.

posted by ELIZABETH STELLE | 00:30 PM | 0 comment