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Wind Dies Down, Should We Subsidize Something Else?

Posted By Nicolas Loris On November 3, 2008 @ 3:37 pm In Energy | Comments Disabled

Decrease in energy demand and the current credit crunch has led to a number of hold ups and delays in large renewable energy projects, particularly wind. The decrease in demand for energy caused natural gas and oil prices to fall in recent months and Reyad Fezzani, chief executive officer of BP’s wind and solar operations, remarked [1]that financing for large wind projects dried up. Even T. Boone Pickens announced [2]delays in his project.

I think it is all going to be put off because we have got the credit crunch, one, but, two, natural gas prices [are down], so you are going to price wind off natural gas power and right now natural gas is so cheap there will be no new wind deals until natural gas price gets back up.”

How will these projects move forward? Only with more help from the government. During the 1970s and early 1980s there were many attempts by the federal government to pick winners and losers among emerging energy alternatives—wind, solar, ethanol and others—and tilt the playing field in their favor. Virtually all turned out to be big disappointments.

Richard Murray, director of the University of Houston Center for Public Policy, believes that

Presumably, a lot of capital would have to be raised to move these things forward, and that looks to be extremely difficult in these current conditions. And if crude drifts back down to the $50 to $60 range, it is going to take a lot of the incentive away to shift your energy paradigm.”

Even if the government tries to force incentives for renewable energy though lavish mandates and subsidies, they have a dismal track record relative to allowing market forces to decide the direction of energy innovation.

Maybe if we let the market work, renewable energy sources will flourish and new ideas that haven’t been thought of yet will come to the table. Let’s not forget that if we mandate wind and solar, it could crowd out new, innovative ideas. For instance, research and academics think that [3]“algae could someday be turned into cheap fuel for automobiles and airplanes, and are betting heavily with infusions of venture capital money and intensive research.”

Mostly driven by private investment with a little government help for research and development, many think that algae will compete with fossil fuels even when the price per barrel of oil is low. Interestingly enough, the government crowded out algae before because government research shifted to ethanol, and we all know what a great success ethanol has been [4].

I certainly can’t predict if algae will be successful, but my guess is that the government can’t either. Whether the next major energy source is pond scum or something that’s not been discovered yet, the best thing the government can do is stay out of the way.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2008/11/03/wind-dies-down-should-we-subsidize-something-else/

URLs in this post:

[1] remarked : http://www.argusleader.com/article/20081103/VOICES09/811030304/1052/OPINION01

[2] announced : http://www.guardian.co.uk/environment/2008/oct/30/windpower-energy

[3] think that : http://tech.yahoo.com/news/ap/20081103/ap_on_hi_te/tec_algae_energy

[4] we all know what a great success ethanol has been: http://www.heritage.org/research/energyandenvironment/wm1925.cfm

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