President Obama’s Green Initiatives did not Create Jobs or Save the Planet

Posted by PITHOCRATES - June 2nd, 2012

Week in Review

If the Energy Department was a private corporation it would be the ideal bailout target for a company like Bain Capital.  Inept management, poor investments and bad strategic policy.  It has everything.  So much so that it would be easier for the bailout team to ask them at Energy what actually worked.  It would keep the initial meeting much shorter (see Difference Engine: To and from the grid posted 6/1/2012 on The Economist).

Since then, interest rates have fallen, while the price of solar panels has tumbled even more so—thanks to Chinese overcapacity. Meanwhile, electricity rates (at least those in southern California) have risen noticeably. Your correspondent reckons photovoltaic solar systems now cost half as much as they did four years ago.

Two things could make or break America’s affair with solar power. One concerns the ushered in by the economic stimulus bill of 2009. Many of those temporary tax credits are now coming to an end. If nothing is done to extend them, the incentives will fall from a peak of over $44 billion in 2009 to $16 billion this year and $11 billion by 2014. That could bring the solar-installation business to a screeching halt and wipe out tens of thousands of green jobs. The industry’s future depends largely on the outcome of the November election….

The irony is that those who invest their own money to generate clean electricity from solar panels on their rooftops are likely to be the last to benefit from it environmentally. Nowadays, most people work outside the home during the day and consume the bulk of their residential electricity in the evening and during the night. In California, that is when the state—which meets only 70% of its electricity requirement from its own resources—relies heavily on cheap electricity imported from dirty coal-fired power stations elsewhere in the country. This situation will only be exacerbated if, as expected, plug-in battery vehicles, needing to be recharged overnight, account for an increasing share of the Californian fleet.

That aside, all your correspondent now has to worry about is whether the 31% anti-dumping tariff recently imposed on Chinese solar-panel makers really does deter them. Having seen such trade spats play out many times before, he suspects the tariffs will only spur Chinese firms to acquire the few remaining American solar-panel makers so that they can carry on manufacturing in low-cost Wuxi or Shanghai and do their final assembly in middle America (presumably with local subsidies to boot).

So solar panels have never been cheaper thanks to the Chinese.  Which is good.  These lower prices will encourage people to save the planet by installing solar panels onto their roofs.  Unless the government raises these low prices with a 31% anti-dumping tariff.  Hmm.  Looks like you have to choose between saving the planet.  And providing green jobs.  For as this anti-dumping tariff clearly shows you can’t have both.

And because jobs are more important than the environment the government is subsidizing the clean energy industry.  Let’s crunch some numbers.  They say we could lose “tens of thousands of green jobs.”  So let’s assume there were 80,000 jobs created in the first year.  And they declined by 10,000 every year to reflect with the growing number of bankruptcies in the green energy sector.  Dividing the incentive by the cost in the first year you get a cost of about $550,000 for each job created.  If do the same for the last year you also get a cost of about $550,000 for each job created.  That’s a lot of money to pay someone.  And I’m guessing that the Chinese aren’t paying their employees a half million each in wages and benefits.  Not when they’re making these solar panels so cheap that the U.S. has to slap an anti-dumping tariff on them.

Of course these numbers don’t include the $500 billion the government blew on Solyndra.  Or the other Solyndras out there.  Which when you factor all of these in these green jobs are costing the taxpayer probably in excess of a million dollars each.  For what?  To pay someone a $50,000 wage on an assembly line so he or she can take these earnings and stimulate the economy?  Talk about a negative return on investment.  And the president is attacking Mitt Romney’s Bain Capital past?  If Bain Capital took over the United States government to turn it around to get a sensible return on tax dollar investments guess who would be the first fired from his job?  The incompetent chief executive that spent a million dollars plus to get $50,000 worth of stimulus.

And the kicker is that none of this matters.  When solar power is available people are at work.  When people are home cranking up their air conditioners and plugging in their electric cars for the night the sun is down and coal-fired power plants are meeting this peak demand.  So we get nothing.  No jobs.  And we don’t even save the planet.  We just get higher taxes and more debt.  A pretty crappy deal if you ask me.  We have coal.  We should just use coal.  And not demonize it.  We’d arrive at the same outcome.  Only with fewer taxes and less debt.  And cheaper electricity.  Because we’d be bringing more coal-fired plants on line.  Now that is a smart turnaround plan.  The kind of turnaround that could end up in the win column at Bain Capital.


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Private Investors passed on Solyndra, so why didn’t the Smart People in Government pass, too?

Posted by PITHOCRATES - September 14th, 2011

The High Cost of Solar Power makes Reliable Fossil Fuel-Produced Electricity even more Attractive

Solar panels. One of the darlings of green energy. And a favorite of the Obama administration. Especially Solyndra. Where Vice President Biden made a personal appearance to showcase the government’s half billion dollar investment into the economy of the future. A future, albeit, that will not include Solyndra. Why? Sales of solar panels are down. Way down (see Opposing view: ‘Perfect storm’ sank Solyndra by Daniel Poneman, Deputy Secretary of Energy, posted 9/14/2011 on USA Today).

Unfortunately, expanding production has coincided with short-term softening demand, a product of the banking crisis in Europe and its wider economic effects. The combination has had a dramatic effect on the price of solar cells, which has plummeted 42% in the past nine months. This has taken a serious toll on solar manufacturers everywhere, including the U.S.

Actually, what made Solyndra’s solar panels unsellable was something else. They didn’t use silicon. Like everyone else. They used another material. And a different technology. This cost more. But the installation was cheaper. So the total package was competitive. Until the price of silicon fell, that is. Which priced them right out of the market.

Solyndra needed silicon to remain expensive to remain competitive. Much like E85. That really only sold well when gas peaked over $4/gallon. And people didn’t realize that they had to buy more of it to go as far as gasoline would take them. Which meant a lot of people bought E85 only once. But government still subsidizes it. To make it cheap enough to get people to buy it. Even though they don’t want it.

Which is why solar panels aren’t selling. Governments everywhere are implementing austerity measures to reduce record debts. Which means they can’t subsidize these solar panels anymore. Which makes their high prices even higher. Making that sweet reliable fossil fuel-produced electricity all the more attractive. So bye bye Solyndra.

This month, Solyndra , a California-based company, filed for bankruptcy. Solyndra had been named one of the world’s 50 most innovative companies and reported sales growth of 40% to $140 million last year. In 2006, the company applied for a federal loan guarantee. It underwent years of rigorous internal and external review before being approved — before the perfect storm of deteriorating market conditions.

This year is 2011. So they reported sales of $140 million in 2010. And if you do some math, this means they reported sales of $100 million in 2009. Sounds impressive. But numbers are relative. We have to put them into some kind of context for a true understanding.

Government Investment into Solar Energy is Politics over Substance or just Plain Cronyism

So let’s find a little context (see White House ignored red flags in loan to failed solar company by Martin Wolk posted 9/14/2011 on MSNBC).

The FBI raided the Silicon Valley headquarters of the company, Solyndra, last week, investigating whether the government was misled when it loaned the company $535 million in taxpayer funds…

Solyndra received the loan guarantees in 2009 as part of President Barack Obama’s promise to create millions of so-called “green” jobs. But last month, Solyndra declared bankruptcy, laying off all 1,100 workers.

Hmm, let’s see. That was $535 million to produce $100 million in sales. Now that’s putting things into context. In other words, $100 million in sales is not impressive. In fact, it is downright abysmal. Only about 19% of the federal loan produced sales in 2009. For the last two full years of their existence, about 45% of the federal loan produced sales.

Worse, by the time you subtract the cost of sales from these sales and calculate the return on this government investment, there is none. Even before the bankruptcy. This was a horrible investment. This is a lot like all of those dot-com startups. Companies that were flooded with investment capital. As people were anxious to find the next Microsoft. Pouring money into companies that never produced anything to sell. And when the investment capital dried up, the dot-com bubble burst.

At least with the dot-com economic destruction, private investors lost. The green energy bubble, on the other hand, it’s the taxpayer losing. Because we’re subsidizing so much of this green energy. Why? Because private investors see it for what it is. A bad investment. There isn’t a market for this stuff. So they’re not throwing good money at bad investments. Unlike Uncle Sam.

House Republican investigators have unearthed emails — reviewed by NBC — which reveal repeated warnings by government staffers about the loan. Days before final approval there was a warning that one model showed the project would run out of cash in September 2011, which it did.

Another memo from the White House Office of Management and Budget, also cited by The Washington Post, questioned the model the government was using, but said “[g]iven the time pressure we are under to sign-off on Solyndra, we don’t have time to change the model.”

Why the rush? The White House appeared to be pushing to meet political deadlines so Vice President Joe Biden could announce final approval when he spoke at the groundbreaking for the new plant.

A key question is whether Solyndra’s political connections were a factor. A big Obama donor associated with the venture, identified by the Post as Tulsa billionaire George Kaiser, repeatedly visited the White House. He has denied using his influence to win approval of the loan.

This explains a lot. Staffers warned against the loan. Some even did math. Probably recognizing that there were no sales. And with no revenue coming in it was a simple matter of dividing investment capital by their monthly costs. Which proved very accurate. The staffers were smart. The policy was just bad. But, alas, staffers don’t make policy.

This is politics over substance. Or just plain cronyism. Which means one of two things. Government is incompetent. Or corrupt. Take your pick. Whichever one makes you feel better.

If Private Investors won’t Invest it has to be a Bad Investment

Solyndra is just one example of bad government policy. The whole ‘green energy is our future’ is a pipe dream. An excuse for the government to spend money. And to pay back campaign donors.

If this was our future, private investors would be pumping investment capital into green energy like there was no tomorrow. Like they did with all of those dot-coms. Those didn’t need any government investment, did they? And you know why? Because the private sector is full of greedy bastards looking to get richer. That’s why. And they will bury someone with investment capital if that someone has a good idea.

Anything the government ‘invests’ in, then, is a bad idea. Why? Because private investors say so.


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