Earlier this week, Beacon Power, a company that builds systems to stabilize solar and energy power, declared bankruptcy. The company's Massachusetts plant will continue to operate at full capacity, but its finances will be restructured. This is big news mostly because Beacon Power received $43 million in Department of Energy loans, and because it follows the recent closure and bankruptcy of Solyndra, which got $534 million from DOE.
These developments have tongues wagging -- some see it as a symbol of government excess while others repeat the old myth that renewable energy just can't work. These critics are overlooking one important fact -- if our strategy for building new energy markets is having the federal government bet on winners and losers, then that is exactly what we are going to get: winners and losers.
Winners and losers happen all the time in the marketplace. Remember that adorable sock puppet from Pets.com? The company went bankrupt in 2000 after having received more than $50 million in private investment. Over $185 million from the likes of Coca-Cola and GE went into a company called Digital Convergence to create a personal bar-code scanner that flopped.
But putting government in the business of picking winners is not good policy. Neither is it good policy for government to turn its back on clean energy, particularly as China, Korea, and Europe are adopting policies that help their businesses grab more and more of the $2.3 trillion global market for renewable energy technologies.
Instead, I'd like to see our government investing in new energy infrastructure that welcomes participants into the marketplace, and promoting policies that diminish the need for subsidies and make all investments in renewable energy -- public and private -- a better bet. We've seen government play this role before -- just think about what the federal-funded interstate highway system did to boost American business in the 1950s, or what the government-backed Internet does for virtually every business today.
We need federal intervention again to transform our electricity grid from an outmoded obstacle to innovation, into an open platform that allows all energy resources -- renewable and fossil-fuel-based -- to compete on an equal footing.
For those who want to end government subsidies, for those who want less regulation, and for those who want to see the promise of clean, renewable energy fulfilled, the overarching goal should be to maximize opportunities for the private sector to do what government cannot: win, lose, and learn without risking taxpayer dollars. Meanwhile government should focus on creating the conditions that breed success, rather than trying to actually participate in it.
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http://www.nytimes.com/2011/11/07/opinion/krugman-here-comes-solar-energy.html
"But Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, “there’s now frequent talk of a ‘Moore’s law’ in solar energy,” with prices adjusted for inflation falling around 7 percent a year."
If the solar and energy storage markets are moving fast and breaking milestones each year, this seems to me to be clear argument why we need more R&D grants such as those to Solyndra and Beacon Power (and not less). The main risk of doing less is that we pretty much assure this equipment, jobs, and technology development (including important patents) will be developed elsewhere (and not in the US).
http://www.technologyreview.com/energy/24687/
Emanuel Sachs, the MIT professor of mechanical engineering developing the process, has a graph on his web site showing solar grid-parity with coal by 2020.
http://www.1366tech.com/cost-curve/
I like the idea of slowly rolling back subsidies. And if we invest, who is to say some other renewable energy will not be developed. The NY Times had an article on how they are having to figure out how to store excess electricity from wind!!!
Obama's own experts at the Energy Information Administration (EIA.gov) have forecast that in the year 2035, only 14% of world energy needs will be met by renewables. 58% of world energy needs will still be met by oil and coal; 22% by natural gas; 6% by nuclear.
http://www.eia.gov/forecasts/ieo/index.cfm
In fact, EIA estimates that in the year 2035, the world will actually be using MORE coal and oil than it is using now.
This "renewable energy economy" is a fantasy. A total fantasy. We're not going to spend many trillions of dollars to turn the world's economy upside down and completely remake it along different lines. Sorry.
That means that global warming will NOT be stopped. It will continue. And we'll have to adapt to it as best we can. That would be cheaper because the effects of global warming won't be felt everywhere. Coastal areas will need to be protected by dams and dikes. But inland areas won't have that problem.
Temperatures are going down while CO2 goes up. Hello...is anybody out there thinking? Do you understand that can't happen according to your AGW hypothesis?
CO2 is rising much faster than expected to record levels, and temperatures have dropped 0.37C since last year - with every single day in 2011 cooler than the same day last year.
http://discover.itsc.uah.edu/amsutemps/data/amsu_daily_85N85S_ch05.r002.txt
You premise is wrong. Yes you can have the temperature go down globally for awhile even during an overall planetary climatic warming. For instance the Earth has an elliptic orbit around the sun.
If the externality costs of dirty energy were priced in, you wouldn't need to stimulate renewable energy with grants and loans. The actual problem is that we all currently pay the costs of dirty power. If the real cost of pollutants and carbon and nuclear insurance was paid by those who incurred these costs, then the simple choice for cheaper and safer renewable energy would be clear. Free market choice can only work when you don't heavily subsidize the dirty alternative.
Plus the NIMBY problems are bigger with solar than fossil fuels. With a sufficiently smart energy grid (which we do need), you could site that natural gas plant anywhere and send the electricity to where it's needed. That's much more feasible politically than trying to persuade every homeowner and every owner of every commercial structure to put solar panels on their roofs.
Solyandra produced and installed 100MW of solar, that will produce over 1B$ worth of electricity.
That's not a bad deal, far better than war, banksters bailouts and tax breaks for the in ingrate rich.
Nukes got 54B$ in loan backing and they have a 50% default rate.
It's a witch hunt.
There is no 50% default rate on nuclear, the 50% "Expected" default rate comes from a 2003 CBO study based on a program which was never enacted.
http://www.nei.org/newsandevents/nei-backgrounders/myths--facts-about-nuclear-energy/myths--facts-about-economics-and-financing/
Banks or private sector investors will not provide debt financing to an innovative business, so loans are out of the question, except for a sellable commodity asset such as a building. In any innovative business, one can be almost certain something will go wrong. If you are debt financed with fixed payments, a setback can sink the company and prevent struggling through.
Only the government, through political connections, is stupid enough to lend money to someone trying to do something innovative. What the crony capitalist is saying to the politician is "if the innovation is successful, I will get all the benefits and the tax payers get a tiny interest rate, but if things go wrong in the high flying venture, tax payers will take the big loss -- probably after I have been wafted to the ground with my golden parachute".
Like the automobile, the telephone, personal computers ,,, none of wihch received outright grants. Soyndra ended government grants and Obama.