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The Stimulus Solar Boondoggle

Posted By David Kreutzer, Ph.D. On August 26, 2010 @ 11:00 am In Ongoing Priorities | Comments Disabled

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According to a press release [2], Energy Secretary Steven Chu says that the billions of dollars in federal stimulus money directed toward solar-power will cut solar power costs in half by 2015. It’s a grand sounding prediction, but his own Energy Information Agency projects [3] that electricity from solar cells will cost nearly five times as much as electricity from natural-gas-fired power plants. And that’s without any adjustment for the unreliable nature of solar power or for the additional transmission costs.

Forcing those higher costs on taxpayers and ratepayers, spells bad news for the economy in terms of lost income, lost jobs, and higher electricity prices [4]. Families could see their incomes drop thousands of dollars per year as the labor market loses a million jobs.

On the other hand the subsidies would seem like a great deal for the solar industry. However, before you call your broker, you might want to reflect on a previous experiment with government directed shift to the “energy of the future.”

The Energy Independence and Security Act of 2007 mandated the use of billions of gallons of ethanol to jump start what then seemed like a promising technology. Indeed ethanol production capacity rose from 4.3 billion gallons per year in January 2006 to 12.5 billion gallons per year in January 2009—a stunning 200 percent increase in just 3 years. Too bad the investment euphoria stimulated by credits and mandates wasn’t matched by market economics. The January 2009 demand for ethanol was only 8.4 billion gallons per year.

This 50 percent excess capacity drove many ethanol producers, including some of the largest [5], into bankruptcy [6]. By January of that year the industry was hosting a conference [7] to help match those in bankruptcy with lawyers and takeover artists.

Energy sources that need subsidies and mandates need them because they don’t make economic sense. If they did make sense there would be no need for mandates and subsidies. When it comes to providing affordable energy, supply and demand do a much better job than lobbyists and bureaucrats.


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

URL to article: http://blog.heritage.org/2010/08/26/the-stimulus-solar-boondoggle/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/solar.jpg

[2] press release: http://content.usatoday.com/communities/greenhouse/post/2010/08/biden-report-shows-us-will-halve-cost-of-solar-power-by-2015/1

[3] projects: http://www.eia.doe.gov/oiaf/aeo/electricity_generation.html

[4] lost income, lost jobs, and higher electricity prices: http://www.heritage.org/Research/Reports/2010/05/A-Renewable-Electricity-Standard-What-It-Will-Really-Cost-Americans

[5] including some of the largest: http://www.renewableenergyworld.com/rea/news/article/2009/02/can-the-future-of-the-us-ethanol-industry-be-determined-by-verasun

[6] bankruptcy: http://www.marketwatch.com/story/pacific-ethanol-joins-others-in-bankruptcy-court

[7] conference: http://www.ethanol09.com/

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