Tag: "federal subsidies"

Power of the Sun

The White House announced last week that it is making much more commitments to solar energy deployment and jobs and calling for others to join in the renewable energy push. The solar expansion includes:

    • Funding Regional Solar Market Pathways: Today, the Energy Department announced a $15 million Solar Market Pathways funding opportunity to support state, tribal, and local leaders in developing plans that create the economic environment for cost-competitive solar deployment. The new Solar Market Pathways program will target broader regulatory and policy market barriers with a focus on stakeholder partnerships and commercial-scale solar. It will fund the development of multi-year plans and innovative programs to help spur significant solar market growth. Examples include establishing or expanding shared or community solar programs and local financing mechanisms, such as commercial property assessed clean energy (PACE).
    • Providing Technical Assistance and Analysis to Support Solar at Federally-Assisted Housing: The Climate Action Plan calls for a target of 100 megawatts of installed capacity of renewable energy on-site at federally subsidized housing by 2020. The 100 megawatt target aims to make use of millions of federally-subsidized roofs with on-site generation potential and will more than triple the existing renewable energy capacity onsite. Today, the Energy Department’s SunShot initiative, which is dedicated to reducing soft-costs of solar power installations, is providing staff and resources to ensure we reach the 100 megawatt target, while the National Renewable Energy Laboratory (NREL) is providing technical expertise and mapping support.
    • Launching an “On-Site Renewables Challenge” as part of EPA’s Green Power Partnership: Since 2001, EPA’s Green Power Partnership has worked with businesses, local and state governments, schools, and Federal agencies to expand the use of clean renewable energy, including solar. More than 1,500 organizations have been recognized for their leadership as Green Power Partners, together purchasing enough green power annually to avoid the carbon emissions of more than 2.4 million homes. Today, EPA announced that the Green Power Partnership will aim to double the use of on-site renewable energy, including solar energy, at Partner facilities by the end of the decade. To support this goal, EPA is announcing a new On-site Renewables Challenge within the Green Power Partnership. The Partnership will track all Partners’ annual combined on-site renewable energy use, which will be updated quarterly. As part of the Challenge, EPA is inviting Partners to commit to increasing the amount of energy they produce and use from on-site renewables by the end of the decade.
    • Sharing Best Practices with a “Solar Deployment Playbook”: To assist businesses looking to install solar, in the next few months the Energy Department will release the Commercial Solar Deployment Playbook. The playbook will help businesses to identify low-cost financing for solar energy, provide model contracts, and offer case studies of businesses improving their bottom line by deploying solar.
    • Advancing Solar by Partnering with the Rural Utilities Service: Rural America offers excellent resources for renewable energy, and is home to electric co-ops that provide reliable, affordable power for their customers.  To support the growth of renewable energy in rural areas, last year, Agriculture Department’s Rural Utility Service (RUS) Energy Efficiency and Conservation Loan Program finalized rules to facilitate the development of distributed generation and solar in rural communities.  To bolster this new RUS program, the Agriculture and Energy Departments will work with the National Rural Electric Cooperative Association (NRECA), to develop tools, templates, and finance options for co-ops looking to deploy distributed solar in rural communities, including on Federally assisted housing.
    • Leveraging Financing Tools to Deploy Solar: The growth of solar has been fueled in part by access to innovative financing tools. Today, DOE is announcing that in the coming months it will release an updated Guide to Federal Financing for Clean Energy. This guide will highlight financing programs located in various Federal agencies, such as the Treasury, EPA, and USDA, which can be used for energy efficiency and clean energy projects. Earlier this week, the Energy Department’s Loan Programs Office also announced the release of the draft Renewable Energy and Efficient Energy Projects Loan Guarantee Solicitation. This solicitation makes available at least $2.5 billion in loan guarantee authority, which can support innovative solar energy projects and will highlight projects focused on improving the functionality of distributed generation and energy storage.
    • Bolstering Co-Investment in Renewable Energy and Natural Gas: The NREL’s Joint Institute for Strategic Energy Analysis is hosting a series of workshops focused on the unique opportunities for greater synergistic use of natural gas and renewable energy. The workshops will be held in four locations: New York City, focusing on the investment community; Washington, D.C., focusing on national policy; and the states of Texas and California, where both natural gas and renewables play a significant role in the economy, and could be used more synergistically.
    • Steep Decline in Solar Technology Costs: Since the beginning of 2010, the average cost of solar panels has dropped more than 60% and the cost of a solar photovoltaic electric system has dropped by about 50%. Solar is now more affordable and more accessible for more American families and companies.
    • Deployment of Solar on Public Lands and Buildings:  Five years ago, there were no renewable energy projects on public lands. Today, the Interior Department is on track to permit enough renewable energy projects on public lands by 2020 to power more than 6 million homes; the Defense Department has set a goal to deploy three gigawatts of renewable energy – including solar, wind, biomass, and geothermal — on Army, Navy, and Air Force installations by 2025; and, as part of the Climate Action Plan, the Federal Government overall committed to sourcing 20% of the energy consumed in Federal buildings from renewable sources by 2020.
    • Creation of Solar Jobs: According to industry analysis, solar now employs nearly 143,000 workers in the United States, a growth of more than 50% since 2010. Jobs in the solar industry are increasing faster than any other sector in the United States — by more than 20% each year. Every four minutes, another American home or business goes solar, supporting workers whose jobs can’t be outsourced.

However, a recent publication from the National Center for Public Policy said that:

Globally, grid-connected solar capacity increased an average of 60 percent annually from 2004 to 2009, faster than any other energy source. Solar electricity production grew 15.5 percent in 2009 alone. Today, however, solar power still accounts for less than one-half of one percent of the world’s electric power output. Despite its impressive growth, and even with significant subsidies, solar power is substantially more expensive than conventional power sources in most locations.Analysts agree that if solar is to become a significant power source, it must compete with other energy sources — in markets without subsidies to any form of energy, barriers to the entry of new producers or discriminatory price regulations. When the price at which customers in a particular area can purchase electricity generated by solar power is about the same as the average price of electricity generated by conventional sources, it is said to have reached grid parity.

While it may seem like a good idea, in theory — in reality, pushing something like this way too early will simply not work. You have to let the free market decide when to use alternative energies and which ones. Forcing them causes huge government waste and time as well as failures.

Global “Clean” Energy Expenditures are Down (and Respect for Economic Realities are Up) in 2013

It is refreshing to see that environmentalists and liberal governments are beginning to recognize the economic realities they face when manipulating energy markets to promote clean, renewable energy sources. For example, a recent Time Magazine article investigates why total public and private funding of “clean power” from the global renewable energy industry fell 14% in 2013. This amounts to a decline of 23% since the peak of such spending occurred in 2011. The data cited came from a study from the Frankfurt School-UNEP and Bloomberg New Energy Finance.

This study points out that Europe decreased its spending on clean, renewable energy sources by 44% while the U.S. decreased it is spending by 10%. These reductions were found to largely arise from three economic realities:

  • The declining costs of producing “clean” energy.
  • The significant reduction in public subsidies.
  • Increased competition from renewable but “unclean” biofuels power sources.

Economic Reality #1: Subsidizing an activity can drive down the unit cost of production by creating economies of scale. For example, the average cost for installing a voltaic solar cell in the U.S. declined 60% in the last few years. Indeed, despite the reductions in total spending in 2013, global clean energy capacity in 2013 (from renewable energy sources other than existing hydroelectric power sources) had remained the same as it was in 2012. However…

Economic Reality #2: Public sector funding sources are scarce. As Europe is slowly recovering from the recent global recession, the central governments of these countries are finding it very difficult to justify costly public investments in clean energy subsidies when other popular social programs compete for survival in an environment of shrinking public sector budgets. In fact, Spain and Bulgaria made their subsidy cuts retroactive, shuttering their clean energy industries, despite the falling unit costs of providing clean energy. Further…

Economic Reality #3: Every choice has an opportunity cost that cannot be avoided.  Clean power is defined as coming from renewable, sustainable fuel sources that create very low or no pollution or greenhouse gas emissions. Environmental scientists are beginning to realize that subsidized biofuel production:

  • Pushes up global food prices, because the fuel is grown with water sources and lands that could be used for growing food, which increases food prices and makes biofuels less “sustainable”.
  • Increases water pollution levels from pesticides and insecticides, making biofuels “unclean.” Indeed, an article in the magazine Scientific American notes that, “U.N. Intergovernmental Panel on Climate Change has for the first time acknowledged the risks of uncontrolled biofuels development.”

We seem to be living in a world where national governments are intent on accelerating our adoption of clean energy sources along a time line not supported by private energy markets. At least it is refreshing to see that both governments and environmentalists are slowly (if only involuntarily) admitting to economic reality: the true scarcity of valuable resources in our world creates real and unavoidable influences on the efficacy of government policies designed to accelerate clean energy industry development. We cannot simply wave the magic wand of “hope” to force the hand of the market in a manner that ignores such economic realities.

Favoring Wind Power Endangers Birds and Bats

The Obama Administration has used subsidies and regulation to promote wind power. Yet the deaths of thousands of birds and bats from wind turbines, and the misappropriation of funds shows the danger of endless government subsidies and rules that are enforced only when they benefit certain industries.

Wind turbines kill approximately 600,000 birds a year. The American Bird Conservancy thinks that the Golden Eagle will wind up on the endangered species list because so many are being killed by turbines. Wind turbines also kill an estimated 900,000 bats each year. According to National Geographic bat-friendly turbine designs exist, but the wind-power industry has been slow to install the new turbines.

More disturbingly, the administration seems to be selectively enforcing laws. The Bald and Golden Eagle Protection Act and Endangered Species Act prescribe strict penalties for killing eagles and condors respectively. But the administration has given an exemption from prosecution to a California wind company if the company is responsible for the death of the California Condor, one of the rarest birds in the world. The administration wants to grant a similar exception to birds on the 1,500-mile Texas to North Dakota migratory corridor. And the administration seems to be ignoring bat deaths altogether.

Other businesses that inadvertently harm protected animals face hefty consequences. Shooting or electrocuting the Bald Eagle can lead to a $250,000 fine and two years in jail. Harming the bird can also lead to legal fees incurred in federal prosecution. Further, the wind industry is allowed to build wind farms on protected lands despite the danger to native animals.

No power source is perfect. Coal and oil power produce emissions. Nuclear power plants require a site to store used fuel rods. Solar power panels use large amounts of land, displacing native animals. But the wind power subsidies and selective enforcement of laws shows the government is deliberately distorting the market to favor a certain industry. Eliminating subsides and uneven enforcement of rules would allow energy companies to produce high-quality low-cost energy. Further it would improve not worsen the lives of birds and bats.

Electric Car Subsidies Distort Market, Without Reducing Pollution

Many states still rely on coal-burning power plants to generate over half of their electricity; electric cars are actually responsible for more greenhouse gas emissions per mile driven than hybrid cars, and are no better for the environment than comparable traditional vehicles. The hybrid Toyota Prius produces less carbon dioxide than the plug-in Nissan Leaf. The highly subsidized Chevrolet Volt in electric mode produces just as much carbon dioxide as it does when it operates in gas mode.

Lithium, the material in electric car batteries, can be resource intensive to mine. Since supplies of Lithium are limited, prices are expected to increase. Further lithium batteries need Copper and Aluminum to work correctly. Mining these elements requires significant chemicals, energy, and water.

Meanwhile conventional vehicles are becoming more fuel-efficient. For the 2013 model year, new cars averaged 23.5 miles per gallon. Cars averaged only 16.0 miles per gallon in 1980. With higher gasoline prices, manufacturers are scrambling to create even more fuel vehicles in the future.

Further, consumers are hardly demanding electric cars. Despite a $7,500 federal subsidy for buyers (and numerous state incentives), Chevrolet sold only 23,000 electric-powered Volts in 2012. The automaker sold more than 10 times as many Chevrolet Cruzes, the company’s gas-powered sister vehicle. By contrast, Ford sells 58,000 F-Series trucks a month.

Further, these programs fail to increase total car sales. Instead, they incentivize buyers to purchase a particular type of car — a Volt instead of a Cruz. Since consumers would buy a car anyway, this subsidy is a waste of precious resources.

Local municipalities like electric vehicle programs since much the subsidies come from federal and state sources. But this is not a federal freebie; it is a waste of taxpayers’ hard-earned money — money that instead could be spent or actual programs that improve transportation of the environment or better yet refunded to taxpayers.

Eliminate Agricultural Subsidies, Charge More to Use Water

Recent heavy rains have not stopped California’s multi-year drought. As growth continues in other western states such as Arizona and Colorado, water will become even more precious. Instead of pleading for California residents to conserve water, Governor Jerry Brown and state officials should consider several agricultural policy changes that allow the market to encourage conservation.

Despite its favorable soil and warm weather, California is a less than ideal agricultural climate. Growing crops in sunny, high-temperature, low-humidity conditions requires up to six times as much water as growing the same crops in slightly cooler more humid conditions.

California needs to price its water correctly to decrease waste. While agriculture uses 80% of all California water, it accounts for only 2% of economic activity. Worse, by one calculation farmers have only paid 15% of the cost of the federal irrigation system that delivers water. While food production is important, the state should take several steps to preserve water. It should create a binding study group of agricultural and environmental experts, not politicians, to determine how much water farmers actually need. It is crucial that this group be non-governmental to reduce the political impulse to favor the agricultural crop with the strongest lobbyists over another crop.

Once it determines how much water farmers need, the state should stop providing discounts to agricultural users. It should charge commercial water users in the same manner that it charges residential users. Farmers should pay a flat rate per gallon for the amount of water needed to grow a basic crop such as carrots. But just as homeowners pay more for non-basic uses such as swimming pools, farmers should pay more for using extra water for luxury crops such as pistachios.

California should also consider short-term subsidies for crops that California has the comparative advantage in growing and increased rates for other crops. For example, carrots and olives use average to below average amounts of water to grow. And few places in the country other than California can grow carrots and olives. However, growing wheat and oats uses above average amounts of water. And many locations throughout the country can grow wheat and oats. Once California begins pricing water correctly the market should eliminate most of the problems. But to speed the transition, the state should offer short-term subsidies (five years at the most) to continue producing carrots and short-term penalties to discourage wheat production.

The Free Market’s Key Investment in Renewable Energy

This past week Walmart signed a historic deal with Plug Power, ordering nearly 1800 hydrogen powered fuel cells. The cells will be given to distribution centers in order to power their factory vehicles such as forklifts and will be an addition to the 500 they already have operating. Hydrogen fuel cells work by turning both hydrogen and oxygen into electricity. Walmart also bought a significant part of their GenFuel infrastructure, including a 6-year service contract for each site. The landmark deal’s numbers are not exact, but analysts report that it is close to $50 million dollars.

renewable energy

Death to Direct Payments

For years congress has tried to dismantle Direct Payments to farmers. These payments are subsidies that occur every year despite whether the farmers need them or not. This creates a void in case of disaster, and that’s where crop insurance will step in. From now on farmers will only be paid in case of a loss, at which point the government will help pay a percentage of that insurance. This means billions of dollars of savings for the taxpayers, and creates a system that is both different and intelligent.

Equality of Income and Largesse of American Rice

President Obama on several occasions has made critical statements that our capitalist economic system has so aggravated the degree of income inequality in America that this is now the “most pressing issue of our age.” The President has even warned Congress that if they are not willing to pursue remedies to this inequitable situation, he would use his Executive Powers to redistribute the flow of income in our economy.

This makes one wonder whether our federal government can produce a credible claim that it could equalize American income flows across families, especially when many current examples of public policy appear to benefit a privileged few at the expense of the general tax payer. A quick look at federal agricultural policy is quite revealing.