Latest posts by James H. Rust (see all)
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Last month I wrote about the waste of money for renewable energy subsidies which described direct governments payments to individuals or companies using or providing renewable energy sources. This article describes arguments for use of renewable energy sources, subsidies for renewable energy jobs, and different subsidies in which taxpayers or rate payers make direct payments to renewable energy providers.
Renewable energy subsidies are massive in the present government in Washington. The executive branch provides subsidies through the Environmental Protection Agency. Cabinet level agencies appear to be competing to provide visibility for their programs to promote renewable energy. These agencies are the Department of Energy, Department of Defense, Department of Labor, Department of Education, and Department of Agriculture. Annual expenditures have to be in the hundreds of billions.
First, we will mention a renewable energy source that does not get much attention—geothermal energy which is tapping into heat below the earth’s surface to make electricity. Aamer Madhani wrote an October 5, 2011 article for USA Today titled “Profits Elude Geothermal Companies.” The article describes two companies, Raser Technologies and Nevada Geothermal Power, who have received “$195 million in partial federal loan guarantees and grants”. Raser Technologies has “filed for Chapter 11 bankruptcy this year” and Nevada Geothermal Power “said in its financial filings it has never operated profitably and it is at risk of failing as a going concern.”
There are two main arguments for use of renewable energy sources—they reduce increased atmospheric carbon dioxide from burning fossil fuels and they reduce our reliance on imported oil.
Wind, solar, and geothermal renewable sources produce electricity and don’t reduce our demand for imported oil unless we have massive use of electric cars which doesn’t appear likely in the near future. Because wind and solar have low capacity factors, 25 and 14 percent respectively, and have rapid output changes, they must have fossil fuel backups that can respond to rapid load changes. These backup are usually gas turbines that have low efficiencies in comparison to coal, nuclear, or combined cycle gas turbines. Thus the saving in use of fossil fuels is diminished by wind and solar erratic behaviors and poor efficiencies of their gas turbine backups.
Ireland has 1500 MW wind turbines and 7000 MW gas turbines, coal, and hydroelectric power generation. Their national utility posts on the internet a continuous record of electricity production and carbon dioxide generation for all sources. Examination of this data shows the wind turbine capacity factor is 25 percent and savings in carbon dioxide output due to wind turbines is very small. The residential cost of electricity in Ireland is 25 cents per kilowatt-hour.
Even though ethanol from corn provides ten percent the gallons of fuel used in our cars, the savings in imported oil is very small and may be zero. Ethanol has only two-thirds the energy content of gasoline, so the savings is reduced by one-third. Making ethanol from corn requires tilling, planting, harvesting, and transporting corn to distilleries. Energy is consumed producing ethanol and then the product is shipped by tanker or rail to the point where it is mixed with gasoline. The mixture is shipped by tanker to filling stations because ethanol can’t be shipped through pipelines because it’s corrosive. A considerable amount of diesel fuel is used in these processes. Cornell University Professor David Pimentel has studies the energy balance making ethanol from corn and published it takes 1.29 Btu of energy to make 1 Btu of energy from ethanol. The reduction in carbon dioxide from using corn as a fuel is lost in the carbon dioxide produced by the multitude of processes getting the ethanol to its source.
Government payments for job training in solar and wind installations are another form of subsidy. An October 4, 2011 New York Times article by Emily Yehle “Green Jobs Program Falls Short, Should Return Funds—IG” describes a $500 million green jobs program at the Department of Labor. The agency’s inspector general wrote the program has so “far provided only 15 percent of current participants with jobs and the bulk of the money left in the program should be returned to the Treasury.” Some of this money went to labor unions and other friends of the administration. The Department of Agriculture is providing assistance to the South Georgia Technical College in Americus, GA for a Solar Academy program.
Another form of subsidies for solar and wind are called feed-in-tariffs (FIT). FIT require utilities to pay above market prices for electricity provided by solar or wind facilities operated by residences or businesses. These higher costs are passed on to utility customers. Germany has the greatest penetration of solar energy with 45 percent of world’s solar electricity at the
end of 2010. This is due to FIT ranging from 39 to 75 cents per kilowatt-hour. The residential cost of electricity in Germany is 35 cents per kilowatt-hour; triple the cost in the United States.
Additional subsidies for solar and wind are renewable energy standards (RES) or renewable portfolio standards (RPS). These are mandates for a certain fraction of electricity generation from renewable sources. Twenty four states have RPS; with an additional five states recommending use of renewable electricity sources.
California has one of the most stringent RPS with a mandate that 20 percent of electricity be from renewables by December 31, 2013 and 33 percent by 2020. As of May 2011, the cost of electricity for all sectors in California was 13.48 cents per kilowatt-hour; while the national average was 9.87 cents per kilowatt-hour; 36 percent higher than the national average.
The use of solar or wind as electricity sources can be compared to buying cars that cost 2 to 10 times competing cars, run 3 or 4 hours per day, and have to be junked after twenty years. But; I guess you could say that about those who buy battery-powered cars.
Subsidies for ethanol from corn are mandates for ethanol use of 15 billion gallons by 2015 and 36 billion gallons by 2022 through the 2007 Energy Independence and Security Act. Wikipedia stated a 2010 study by the U. S. Congressional Budget Office found the cost to taxpayers to replace one gallon of gasoline with ethanol from corn was $1.78. Ethanol use was 12 billion gallons in 2010 for a $21 billion cost to taxpayers. In 2011, 44 percent of the U. S. corn crop will go to ethanol production raising the cost of corn to over $7 a bushel compared to $3 per bushel a few years ago. This is creating inflation in the entire food chain.
Further transportation subsidies are awards in August 2009 from the U. S. Department of Energy of $2.4 billion in economic stimulus funds to build electric vehicles and support them with charging stations. One grant was for $99.8 million to Electric Transportation Engineering Corporation of which part was for free home charging stations and installations. Recently the federal DOT gave Oregon $2 million to build 20 electric charging stations in Northwest Oregon. Few electric vehicles are in use today. Since electric vehicles are expensive these subsidies could be said to be of benefit for the rich.
Energy and carbon dioxide savings for electric vehicles must be traced back to their source of energy— power plants used to recharge their batteries. For central station power plants, two thirds the energy is lost in conversion to electricity and transmission to batteries. This results in miles per gallon equivalent for electric cars in the high twenties. Gasoline-powered cars the size of electric vehicles may get 40 miles per gallon. Oil-fired power plants charging electric vehicles may end up with no savings in oil and most likely increase our dependence on imported oil. This would be true in Hawaii and parts of Florida and New York. Fossil-fueled power plants may end up with a greater production of carbon dioxide with electric vehicles in comparison to using gasoline-powered vehicles.
If fossil fuel energy prices escalate due to taxes or carbon dioxide tariffs, costs of renewable energy sources will increase due to fossil fuel requirements in there production with greater penalty for American citizens. Already China makes solar panels and wind turbines far cheaper than produced in the United States. Increased use of these energy sources only adds to China’s thriving economy to the detriment of the United States. The cost of electricity is 3 cents per kilowatt-hour in China due to most of its electricity being generated from low cost coal or hydroelectric. If the United States continues adopting renewable energy sources, China’s competitive edge in manufacturing will only increase.
Renewable energy subsidies are paid by taxpayers and ratepayers and they can be considered investments that succeed only if all other energy prices skyrocket. Renewable energy subsidies are likened to playing lotteries in which winners pay a 300 percent tax on winnings. Taxpayers lose in all cases.
Use this argument against providing renewable energy subsidies. Annual subsidies must exceed $100 billion, possibly $200 billion, and waste taxpayer’s money in times both state and federal governments are in deep economic distress.
An additional important factor is subsidies direct resources away from practical solutions to our energy problems. Thus improved energy supply will take longer, Can you name examples where governments picked economical winners?