Tag Archives: Green jobs

“Green” Energy: The Color of Money

In light of the recent legal filing for creditor protection by Spain-based, Abengoa, Inc., the viability of the Renewable Fuel Standard (RFS) is getting appropriate scrutiny and reconsideration. Through that program, the giant green-energy company received billions of U.S. taxpayer dollars in grants, loans, and subsidies. Still, last week they were forced to close their cellulosic ethanol facility in Hugoton, Kansas. The court filing for creditor protection came the day before Thanksgiving and within a week, the Kansas employees received layoff notices while many creditors received nothing.

Economic predictions suggest taxpayer losses could amount to five-times that of the 2011 Solyndra collapse. For local farmers, $5 million in unpaid, delivered product prompted their cooperative (CHS, Inc.), to file a lawsuit just two days prior to Abengoa filing for protection in a Spanish court. While some articles and blogs appear to revel in an Obama administration failure, others denounce the fact-based reporting of Abengoa’s troubles as a hit-piece against green-energy. Neither position is accurate, valid or productive.

From a free-market, smaller government perspective, the issue is not green-energy versus traditional energy sources. There is no denying the world would be a better place if everyone had access to affordable, renewable clean energy. But, consider the financial sink-hole that is the Hugoton plant and contrast that with the stunning announcement that it has sold zero gallons of cellulosic ethanol, and it is apparent that to some the label of “green” energy denotes big money as opposed to an emphasis on low environmental impact.

It should be noted that Abengoa’s demise was not a shock to everyone. Various sources have been sounding the warning sirens for years.

  • A 2009 Government Accountability Office (GAO) report warned of multiple challenges to RFS’s increasing volumes of biofuels, particularly cellulosic.
  • November 2011: Senator Jeff Sessions of the Senate Budget Committee specifically requested all documents relating to Abengoa and other solar companies from the Department of Interior (DOI).
  • 2012 GAO letter to The Honorable Dianne Feinstein, and House & Senate members of the Subcommittee on Energy and Water Development, Committee on Appropriations stating it was the sixth time GAO had reported its concerns about (DOE) loan guarantees for biofuels.
  • March 2012 GAO report to Congress restating concerns about the lack of adequate review and oversight by DOE and its $30 billion loan program, detailing Abengoa as the recipient of $1.2 billion.
  • March 2012: U.S. House Oversight Committee report specifically finds loans and resources granted to Abengoa, created excessive risk. The report reveals that “Abengoa managed to obtain a DOE loan commitment for the lowest rated project across the entire DOE Junk portfolio — which received an extraordinarily low CCC rating and was still approved by DOE for a direct loan to the project. This overinvestment in this single firm will likely cause substantial harm to the taxpayer.”
  • May 29, 2012: Letter from the U.S. House Oversight Committee threatened the Department of Interior (DOI) with “compulsory action” if they failed to release requested documents related to Abengoa and other solar companies. The Committee stated appearance of preferential treatment in taxpayer-funded loan guarantees.
  • April 30, 2013: Office of Inspector General (OIG) reported Abengoa of received $2 million dollars through The American Recovery and Reinvestment Act of 2009 (Recovery Act) for a project completed before the passing of the law.
  • May 1, 2014: GAO warned a significant threat to taxpayers in the DOE biofuels loan programs due to poor oversight and deviation from monitoring and qualifying procedures that, “pose an unacceptable risk of default.”

Highlighted above are but a few examples of serious problems with the government’s renewable fuels program. So, as presented, critics are not opposed to the concept of green energy but see the RFS as a seriously flawed mechanism to that end. The wasting of billions of dollars on infrastructure for a product that is not market ready could be better served funding advancing research projects in laboratories. The simple concept of putting the cart before the horse comes to mind. It is not Capitalism when the Federal government, through sheer financial force develops unsustainable, artificial industries.

Even Abengoa knew the Kansas plant would not be self-sustainable. In a 2014 report to DOE, the company presented their risk mitigation plan. The list included a push for the development of “energy crops”, continued dependence on the RFS to maintain a premium for ethanol, and to encourage the USDA to allow farmers to produce cellulosic biofuel crops on Conservation Reserve Program (CRP) lands.

The Abengoa plan does not reflect the goal of eventual self-sufficiency, but instead, details what others may contribute to help restructure market fundamentals to suit Abengoa’s projected goals. That is not capitalism. We have limited lands for food production, and the thought of more farmland to biofuel production is alarming. Also, the move would defeat one of the RFS stated goals of developing renewable energy by utilizing material currently identified as low valued waste or by-products.

To be clear, green-energy, as in renewable, eco-friendly, sustainable, and affordable, is a national security and humanitarian issue. There is little debate about the need to pursue that end. But, the government mandates and financial handouts created extremely provocative incentives to abuse the U.S. taxpayers. Through big dollar, experimental programs that ignore market impact, economic viability, coupled with extremely lax oversight, the term “green-energy” takes on a different meaning.

A Bumpy Ride for Germany’s Green Energy

The aim of the German Energiewende (also known as Germany’s Energy Transition) is to decarbonize the energy supply by increasing access to renewable energy and improving energy efficiency. A key part of the Energiewende is the outright rejection of nuclear power as an alternative to fossil fuels and the complete shutdown of nuclear facilities by 2022. The German government has also taken a stand against carbon capture and storage, calling it expensive and unsafe. The strategy focuses instead on wind, biomass (using landfill gas and agricultural waste products), hydropower, solar power, geothermal and ocean power.

So, how does Germany expect to transition to renewable energy so quickly?

  • Germany has been focusing on increasing wind power generation since the early 1990s. In 2014, onshore wind power provided 8.6 percent of the country’s power supply.
  • By 2020, Germany plans to triple the amount of energy produced by wind (both onshore and offshore).
  • Germany is aiming to have 6.5 gigawatts of installed offshore wind power by 2020.
  • Germany expects to increase citizen ownership of renewable sources, limiting the influence of large corporations, through the use of feed-in tariffs.
  • Increase “energy cooperatives” ― community-owned renewable projects, which have already garnered more than 1.2 billion euros in investment from more than 130,000 private citizens.

One of the most key impacts of Germany’s energy transition has been the democratization of energy resources. Turning traditional consumers into additional producers of energy has meant enacting generous support subsidies for renewables. This method seemed effective and by 2012 citizens and co-ops owned 47 percent of renewables, while energy suppliers controlled 12 percent and institutional and strategic investors owned 41 percent. In Freiburg, Germany, for example, citizens of the town of about 220,000 people funded a third of the investment cost for four turbines, with the rest coming from banks loans.

In 2014, the plan seemed to be on the right track and electricity from fossil fuels (including natural gas) hit a 35-year low. However, the German energy transition has hit a few bumpy spots along the way. Offshore wind has not taken off as it was supposed to and most Germans see it as a big business scheme. At the end of 2014, only 1 gigawatt of the total 6.5 gigawatts desired had been installed, with only 923 additional megawatts under construction.

The rush into renewables was also poorly timed and coincided with increased investments into traditional energy production by utility companies. The increased generation from both renewables and fossil-fuel power plants has overwhelmed demand causing prices to fall and hurt profits. Additionally, Germany had guaranteed above-market prices for newly installed renewable energy, to incentivize investment. The surge of renewables on the market are subsidized directly by a surcharge on customers, which increases in parallel with the addition of more renewable kilowatt hours. In the end, utilities have been forced to return to coal-powered plants due to the squeeze on profits.

Lauren Aragon is a research associate at the National Center for Policy Analysis

How is Creating Green Jobs is Like Banning Tractors to Create Farm Jobs?

Recently the “Political Economy Research Institute” at the University of Massachusetts released a graphic purporting to show “green” technologies create more jobs than traditional energy sources. The graphic, to the right, has been distributed widely by advocates of creating “green jobs.” This is a common assertion from the environmental left.

As I note in my book Eco-Fads, this claim is made by many on the left.

One Seattle Times columnist wrote approvingly of a study that found spending on ‘green’ projects “produced more ‘job hours’ than tax cuts or traditional infrastructure spending.” This, they claim, is a good thing.

The left, however, is halfhearted in its application of this approach. If they really want to create more jobs we can do much better.

For example, the graph shows 14 jobs are created per $1 million invested in solar energy, twice the amount created from coal. But we can do better. We can generate 500,000 kilowatt hours (kWh) of perfectly clean energy (enough to power 80 houses for an entire year!) while creating hundreds of jobs.

I’ve modified the original graphic, which ended with the “Mass Transit/Freight Rail” row to include the best option of all – generating electricity using bicycle generators. Pedaling ten hours a day on a stationary bike, each person can generate 1 kWh. Investing $1 million in bicycle generators and paying people the going rate for the energy they create, we could create 1,610 jobs.

There is another benefit: these are not part time jobs. These are full-time jobs for an entire year, unlike many of the temporary jobs often included in “green” jobs calculations.

The reason solar power creates more jobs per $1 million is that solar is extremely inefficient, requiring more workers to do more as they produce less. We could easily apply this to other sectors.

If we want to create more farm jobs (after all the percentage of farm jobs in the economy has fallen dramatically in the last century), we could ban tractors. Think of all the jobs we’d create for farm workers!

Of course, the cost of farm products would rise dramatically, making it more difficult to buy food, especially for low-income families. But do we want to create jobs or not?!

If you’ve done the math by now, you may have figured out that I am paying my green-energy producing bike riders only 10 cents a day – the average rate for generating one kWh of electricity in America. So, let’s pay them $10 a hour. The cost per kWh would rise from 10 cents to $1,000. This might make it more difficult for manufacturers to buy the electricity, but it hardly seems fair to demand our bike riders earn less than a living wage, and wealthy investors like Warren Buffet can certainly afford to pay a bit more for electricity.

You may think that environmentalism and concern about resources means doing more with less. According to the Political Economy Research Institute and the environmental left, you would be wrong. They believe the way to create jobs and help the environment is by doing less with more – substituting high-cost solar power for low-cost natural gas. Using more resources (human and otherwise) and returning less energy.

And there are real-world examples of the “success” of this strategy. In 2008, Spain was widely lauded for its efforts to create a new, green economy. Today their unemployment rate is 25 percent.

The Pew Research Center ranks Oregon as the top state for “green jobs” in the country. Their unemployment rate has been above the national average every month for the last four years. Number three on the list is California, with a current unemployment rate of 10.9 percent. Last on the list? Natural gas rich North Dakota, with a current unemployment rate of 3 percent.

 

The Cost Doesn’t Matter…It’s For the Environment

A refreshing take on environmental policy appeared recently in Governing Magazine, written by Stephen Goldsmith, the Deputy Mayor of Operations for New York City. Arguing that policymakers need to assess the cost of reducing environmental risk, he highlights the negative tradeoffs that can result from making poor environmental policy. He writes:

Green is not free, however. We have to make public decisions with an eye toward how to accomplish our environmental goals in a way that compliments and does not threaten essential services. If we prematurely commit to expedite expensive school renovations in order to mitigate against “risks” that aren’t risky at all, that $1 billion expense would result in layoffs for teachers.

When governments spend billions to make only minor improvements in environmental quality, they miss opportunities to address more serious, but less trendy, environmental problems, or use those resources to address other issues, like education, health or improving the business climate to create jobs.

It is a lesson that is not being learned in Oregon. For years, the state has offered generous taxpayer subsidies to “green” industries in an effort to reduce unemployment. For their efforts, Oregon has been rewarded with an unemployment rate of 10.2%, more than a point higher than the national average. The Portland Oregonian reported last week that the subsidies have failed to produce the promised jobs, writing:

In some cases, the state has spent millions of tax dollars and gotten only a handful — or no — jobs in return because the companies didn’t perform as billed, were sold and shut down, or went bankrupt and folded.

What’s more, the subsidies are breaking the state’s budget. The subsidies are so generous and have so few restrictions, that costs have exploded.

The net result has been an explosion in state spending on the tax credits. The latest estimates, contained in a recently released state report, show the subsidies will cost Oregon’s general fund nearly $300 million over the next two years. That’s a 60 percent increase over current spending and quadruple what the state shelled out just four years ago.

This comes at a time when Oregon is grappling with a significant budget shortfall.

The irony is that these lavish expenditures are not only bad for the economy and the budget, failing to create the promised jobs, but the spending is also bad for the environment. Spending billions on projects that result in very little improvement in energy efficiency leads policymakers to eliminate funding for other efforts to improve environmental quality. While legislators justify the expenditure in the name of environmental protection, it is more likely they are actually doing environmental damage by ignoring real risks.