Govt Energy Subsidies [Archive] - RetrieverTraining.Net - the RTF

: Govt Energy Subsidies

Gerry Clinchy
11-13-2011, 07:04 AM

When the NY Times is complaining about the govt picking the winners and losers, it must be pretty bad!

The project is also a marvel in another, less obvious way: Taxpayers and ratepayers are providing subsidies worth almost as much as the entire $1.6 billion cost of the project. Similar subsidy packages have been given to 15 other solar- and wind-power ( plants since 2009.

The government support — which includes loan guarantees, cash grants and contracts that require electric customers to pay higher rates — largely eliminated the risk to the private investors and almost guaranteed them large profits for years to come. The beneficiaries include financial firms like Goldman Sachs and Morgan Stanley, conglomerates like General Electric, utilities like Exelon and NRG — even Google.

For those concerned about a shift in the share of income to the "1%" we might come to the conclusion that it is the extent of govt intervention in the free market that creates such a situation. If we look at communist countries we see that as well. The 99% get an uniform level of poverty, while govt bureaucrats live in luxury. Gives credence to the words of Milton Friedman: the 99% fare better when the govt doesn't interfere. Or as RP said in one of the debates, when asked what govt should do to create jobs: "Get out of the way."

As NRG’s chief executive, David W. Crane, put it to Wall Street analysts early this year, the government’s largess was a once-in-a-generation opportunity, and “we intend to do as much of this business as we can get our hands on.” NRG, along with partners, ultimately secured $5.2 billion in federal loan guarantees plus hundreds of millions in other subsidies for four large solar projects.

“I have never seen anything that I have had to do in my 20 years in the power industry that involved less risk than these projects,” he said in a recent interview. “It is just filling the desert with panels.”

That is counter to the premise of capitalism. Entrepreneurs' large rewards are supposed to be compensation for taking the "risks" of being entrepreneurs. I suppose one should give them credit for recognizing a sure thing when the govt hands it to them on a silver platter, and removes the risks.

And look who's footing the bill ... the consumer, as well as the taxpayer. The govt is mandating that the public utilities buy this expensive energy; so naturally they are passing the cost onto consumers. Great way to fuel the economy? Jobs created for a few; misery created for many.

NRG is not the only company gobbling up subsidies. At least 10 of the 16 solar or wind electricity generation projects that secured Energy Department loan guarantees intend to also take the Treasury Department grant, and all but two of the projects have long-term agreements to sell almost all of their power, according to a survey of the companies by The Times.

Because the purchase mandates can drive up electricity rates significantly, some states, including New Jersey and Colorado, are considering softening the requirements on utilities.

So, then we will have this expensive electricity that nobody really wants to buy at the inflated price. Without govt intervention, they won't have to. So, what will the owners of these green energy sources do? Default on their loans? Might as well, since they don't have much skin in the game. Who will be holding the bag on that?

Obama administration officials said the subsidies were intended to help renewable-energy plants that were jumbo-sized or used innovative technology, both potential obstacles to getting private financing. But even proponents of the subsidies say the administration may have gone overboard.

It occurs to me that jumbo-size is not always the answer. Our eastern power outage would have been far less damaging to everyone, if each individual home were more "energy independent". Jumbo-sized projects would have some negative aspects as well.

A friend who visited Germany said consumers there put photo voltaic cells on every exterior surface they can find.

Concerns that the government was being too generous reached all the way to President Obama. In an October 2010 ( memo prepared for the president, Lawrence H. Summers, then his top economic adviser; Carol M. Browner, then his adviser on energy matters; and Ronald A. Klain, then the vice president’s chief of staff, expressed discomfort with the “double dipping” that was starting to take place. They said investors had little “skin in the game.”

OMG! Someone actually used their brain cells!

Officials at both agencies declined to discuss the anticipated financial returns of the clean-energy projects the federal government has agreed to guarantee, saying the information was confidential.

Ah, transparency.

But there is no doubt that the deals are lucrative for the companies involved.
G.E., for example, lobbied Congress in 2009 to help expand the subsidy programs, and it now profits from every aspect of the boom in renewable-power plant construction.

GE? Where have I heard that name pop up before?

Mr. Katell said G.E. and other companies were simply “playing ball” under the rules set by Congress and the Obama administration to promote the industry.
“It is good for the country, and good for our company,” he said.

Satya Kumar, an analyst at Credit Suisse who specializes in renewable energy companies, said there was no question the country would see real benefits from the surge in renewable energy projects.

“But the industry could have done a lot more solar for a lot less price, in terms of subsidy,” he said.

Oh, my, it sounds like Mr. Kumar is saying that the govt didn't get such a good deal after all? How could that be?