More Green Goblins

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The Great Green Energy Bust continues to accelerate, with new wrinkles on crony green capitalism showing up almost daily.

Let’s start with the far-from-sunny news regarding the Obama administration’s favorite industry, solar power. The Wall Street Journal reports that the whole solar industry is in trouble. The demand for solar panels is projected to be flat next year, and many of the players in the industry face plummeting stock prices or even bankruptcy.

In the last quarter of 2011, at least seven solar manufacturers hit the wall. These include the German firms Solar Millennium and Solon SE, and of course the notorious American firm Solyndra. Six of the ten biggest solar companies reported losses in the third quarter of 2011; six of the ten also showed corporate debts that exceeded their market capitalizations.

The solar industry as a whole experienced an average stock price drop of 57% during 2011.

Part of the problem is noted in the Journal article: a glut on the market of solar panels and other components, because China has expanded its solar manufacturing industry. Remember, China has the vast majority of known reserves of the rare earth minerals used in solar panels, and it still has relatively inexpensive labor.

But the article also notes that consumer demand for solar products has fallen off. During the last year, for example, German demand fell by 29%.

What the article doesn’t mention are the major reasons for the decline in demand, but these are important to understand.

First, more countries are cutting back on their massive subsidies for solar panels. Solar power requires much more subsidization than nuclear power, and vastly more than for fossil fuels such as natural gas.

Second, there has been a renaissance of fossil fuel energy, driven by the rapid rise of nonconventional fossil fuels — natural gas and oil extracted from shale and tar sand fields by such newer technologies as fracking and horizontal drilling. I have explored this renaissance elsewhere; suffice it to say that it has pushed natural gas in particular to such low prices that it is making green energy seem obviously stupid from any economic standpoint.

Next comes a report out of the Netherlands that the Dutch — for whom windmills have been part of the national ethos — are apparently starting to have regrets about wind as a power source.

Five years ago, in a burst of Green enthusiasm, the Dutch built three dozen huge wind turbines — each the size of a 30-story building — out in the North Sea. However, even the North Sea wind and the Dutch enthusiasm couldn’t change the fact that, like solar power, wind power is grotesquely inefficient, and so requires lavish taxpayer support. The Dutch had to pay $4.5 billion Euros last year to subsidize these windmills.

Consumer demand for solar products has fallen off. During the last year, for example, German demand fell by 29%.

The government there has just announced that it can no longer afford to pick up the tab. Naturally, it hopes to make consumers and businesses pick it up instead. In 2013, the government will start a billing scheme under which consumers will pay more for wind power, and investors will (supposedly) be lured into supporting it.

The government concedes, however, that the new arrangement will cover only about a third of the subsidy. So, as the article gently puts it, “The outlook for Dutch wind power projects seems bleak.”

The Dutch, those clever people — think of their achievements, from those enormous dikes to those quaint wooden shoes — have grasped the fact that land-based wind farms are hideous, costly, unsafe, and noisy, while offshore wind farms are even costlier and harder to maintain.

The Dutch government had planned to increase its current share of renewable energy (as a percentage of all energy used) from the current 4% to 14% by 2020. But that was just a green dream. The government now estimates that it will only be at 8% to 12% renewable energy by then. Of course, if it ended all subsidies, even the ones it passes on to hapless consumers, the industry probably wouldn’t grow at all — or even survive.

Let’s turn to another green energy boondoggle, one often overlooked because the scandals in solar and wind power have been so juicy and so damn numerous. Several recent reports show that the so-called “alternative biofuels” program is also rife with waste and corruption.

By the way, the misleading term “biofuels” refers to alcohol, diesel, or other liquid fuels created from plants. For many years, ethanol has been produced from sugar cane, and more recently from corn. Call that “standard biofuel.” Alternative or “cellulosic” biofuel is derived from other plants, such as switch grass, and plant wastes, such as corncobs. Now you know.

A WSJ article recounts the astonishing history of the whole biofuel program. It started as one of George Bush’s sillier ideas. So eager was he to show that he wasn’t the “oil boy” his critics accused him of being that he signed the Pelosi-crafted bill into law in 2007.

This abominable bill called for (shock and awe!) super subsidies for the super fuel. (Why do all these super energy schemes do that?) The bill provided a tax credit of $1.01 per gallon. Another Pelosi-Bush bill then required oil companies to blend this costly crap with their fossil fuels. The mandate started at 100 million gallons in 2010 and was supposed to hit 250 million in 2011, 500 million in 2012, and 16 billion in 2022. But already this preposterous program has stolen $1.5 billion from the taxpayers. I don’t need to tell you that Obama gave it his Chicago crony capitalist stamp of approval.

The Dutch, those clever people, have grasped the fact that land-based wind farms are hideous, costly, unsafe, and noisy, while offshore wind farms are even costlier and harder to maintain.

Would that Bush and Obama had both been oil boys, real ones. In that event we taxpayers would have been spared the billions of bucks pumped pointlessly into corn ethanol and cellulosic biofuels — not to mention the $70 billion Obama has pumped into the even stupider solar and wind programs.

As anyone could have predicted, cellulosic biofuel program has been a complete fiasco. Despite the billions in pelf that have been purloined from the citizenry to induce companies to produce the government-approved dreck, very little is being produced. The EPA (the agency with the power to revise the mandate) dropped the 2011 requirement from the original 250 million gallons to a risible 6.6 million. The EPA has just announced that it will set the level at 8.65 million gallons in 2012, significantly beneath the 500 million gallons called for, and will allow refiners to use corn ethanol to help meet the requirement. (Of course, corn ethanol is another corrupt boondoggle, as I have remarked elsewhere.)

The EPA thus acknowledges that the real production of cellulosic biofuels is infinitesimal. The feds are requiring refiners to buy a product that isn’t being produced in anywhere near the quantities necessary for them to comply with the requirement, and the EPA has been fining oil companies for not meeting the mandate.

The problem with alternative biofuels — indeed, all biofuels — is the same as that with solar and wind energy. As the National Academy of Science put it in a recent report on this so-called industry, it is cost, “the high cost of producing cellulosic biofuels compared with petroleum-based fuels, and uncertainties in future biofuel markets.” Read: uncertainty about how much longer a nearly bankrupt government will be able to fund such scams.

Scams? Yes, I said scams — “scams” in the sense of unworkable nonsense, at least, and sometimes “scams” in the sense of something worse.

Despite the prospect or reality of subsidies, about a half dozen of the firms that were supposed to produce alternative biofuels never got off the ground. And the company that was supposed to provide 70% of the cellulosic fuel to meet last year’s mandate, Cello Energy, went bankrupt last year.

The Cello story is cute. The company was found guilty in a 2009 civil case of making fraudulent claims. It reportedly overstated its production capabilities to investors, and — this is hilarious! — passed off some ordinary (i.e., petroleum derived) diesel as biodiesel. In fact, the company never produced much biofuel of any kind, standard or alternative.

Then there is the unsurprising news that crony green capitalism extends to biofuels as well as wind and solar energy. A recent story recounts how yet another Obama crony is at the center of yet another massive scam on the taxpayer.

It so happens that the Regime’s highly politicized Agriculture Department — you know, the one that has been waging war on non-conventional fossil fuel production — pushed the Navy to purchase nearly half a million gallons of alternative biofuels for their aircraft. This is the largest federal purchase of biofuel ever.

That’s just the beginning of the story. In an effort to create what it calls — dig this! — “the Great Green Fleet Carrier Strike Force,” the Navy is working with the Agriculture and Energy Departments to buy $510 million in biofuels, so that our seaborne fighting force, which earlier made the transition from diesel to nuclear power, can transition back to diesel fuel — but this time to biodiesel rather than fossil fuel diesel.

If that’s not funny enough, consider this: the biodiesel just purchased costs $16 per gallon, which is four times the price of normal (i.e., fossil fuel derived) diesel.

A key beneficiary of this price gouging of our Navy is a California company called Solazyme. Solazyme’s major “strategic advisor” turns out to be one T.J. Glauthier, who was a member of Obama’s transition team and crafted the energy industry section of the Obama Regime’s notorious 2009 “stimulus” bill.

Oh, and lest I forget, Glauthier made sure that Solazyme got $22 million out of that very bill.

Meanwhile, however, there is hope. The renaissance in fossil fuels, and the growing shortage of government funds to subsidize stupidly inefficient industries, is rapidly putting paid to the whole insane, overhyped, profoundly corrupt green energy program.

Thank God!




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Comments

Mark

Mr.Jason,

have you included in your calculations the net subsidy corn ethanol receives when the TTB tax is included? The $2 (after $25 rebate) industrial ethanol tax, the $27 "sin tax" on booze, and the opportunity cost "tax" when the market rejects rubbing alcohol, solvents, etc because it's arbitrarily $2 more expensive? Also, fuel ethanol is charged the same federal fuel tax rate as E10 gasoline, which means it's charged 50% more on the so-called BTU-corrected basis.

When I look at the distillation industry I don't see an industry being subsidized as much as being regulated to hell.

Also, regarding your comments in the corn ethanol article you linked to, by my lay person calculations, the net loss of food value from corn ethanol should be near zero, if not a net gain. This can be explained by the corn ethanol byproduct partially replacing soybeans, which starts with an already low per-acre yield approximately equivalent to the 1/3 distiller's grain yield from corn ethanol.

John Shade

A useful summary, with a heartfelt tone of dismay at the awful wastefulness of this absurd and destructive 'industry'. Well done.

DP Thinker

This shows the simple economic fallacy of subsidizing something, when the market is able to determine on its own how much it should supply. I think one of the most frustrating things as a consumer is the cartelization of electric and gas companies, as well as a push for greener energy..

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