Obama’s Folly: Gambling Billions on Green Energy
On October 7, 1903, reporters, photographers, and sightseers gathered on the banks of the Potomac River near Quantico, Virginia, to witness the first manned flight. Samuel Pierpont Langley, a prominent professor and secretary of the Smithsonian Institution, constructed the airplane with $50,000 ($1.4 million today) in federal government funds. Catapulted from the roof of a houseboat, Langley’s airplane collapsed and tumbled 16 feet into the water. A second attempt on December 8 disintegrated the airplane and nearly killed its pilot.
Dubbing the project “Langley’s Folly,” members of Congress, the press, and the public attacked the waste of taxpayer funds. The New York Times wrote that it might take “mathematicians and mechanicians from one million to ten million years” to achieve manned flight.
On December 17, 1903, only nine days after Langley’s second crash, Wilbur and Orville Wright achieved the first manned flight in an airplane they built with their own funds.
The President’s Losing Bets on Green Energy
President Obama correctly calls us the nation of the Wright brothers, but his policy choices are more like Langley’s Folly. The President has invested billions of taxpayer dollars in “green” energy companies only to see them file for bankruptcy or fall into dire financial straits. In the wake of Langley’s Folly, Washington prudently stopped funding for the failed airplane experiment. Incredibly, in response to President Obama’s failing green energy program, he wants to double down on taxpayer bets in energy from renewable sources like solar and geothermal.
Most famously, the President blew through $535 million of taxpayer money betting on now-bankrupt solar panel maker Solyndra. At first, he explained this as merely another high-risk investment that, unfortunately, just did not pan out. Now, he claims Solyndra was “not our program, per se” and tries to blame Congress, the Chinese … anyone but himself. But President Obama famously took credit for Solyndra when he toured the company in March 2009, calling it a prime example of “American ingenuity and dynamism.” Political appointees pushed Solyndra financing despite opposition from career employees, before completed marketing and legal reviews were even available for consideration, and regardless of warnings by ratings agencies.
Solyndra was “NOT ready for prime time,” as one concerned Office of Management and Budget employee cautioned days before the government announced its financing deal with the solar panel maker. Neither were other now-failed or failing green energy companies on which the President recklessly gambled billions in taxpayer dollars.
*The Energy Department made a conditional commitment to Solar Trust for this amount, but never closed the loan because the company declared bankruptcy.
If the abysmal performance of his green energy gambles were not enough, there are more reasons why President Obama’s plan to risk billions more on his green energy vision is bad for America.
Picking Winners and Losers Is Not an Energy Policy
Gambling away even more taxpayer money on risky green energy bets will not lower gas prices, create desperately needed jobs, or jumpstart the American economy. Doubling down on more Solyndras is no more an energy plan than any of the other measures recently proposed or implemented by Democrats:
- Tapping the Strategic Petroleum Reserve;
- Blocking the construction of the Keystone XL pipeline;
- Raising taxes on oil producers;
- Asking Saudi Arabia to produce more oil;
- Re-activating a failed task force to study speculation;
- Increasing regulations on refiners and their petroleum products;
- Imposing new fuel economy requirements on cars.
At best, these measures do nothing to relieve our pain at the pump. At worst, they exacerbate it. Higher gas prices seem to be exactly what Democrats hope to achieve. President Obama and his energy team have repeatedly indicated their desire to raise, not lower, gas prices. After all, higher prices at the pump will make their green technologies more “affordable” in comparison with reliable, abundant, fossil fuels.
The President Is a Terrible Venture Capitalist
Larry Summers, President Obama’s former top economic adviser, had it right when he noted during the unraveling of Solyndra that the government is a “crappy” venture capitalist. He wrote in response to an email from an investment executive who warned, “The allocation of spending to clean energy is haphazard; the government is just not well equipped to decide which companies should get the money and how much.”
- A revolving door of green energy venture capitalists and major political contributors to the Obama presidential campaign filled important roles in the Energy Department and throughout the Administration. They were well-positioned to unduly influence the government’s green energy investments.
- A White House-commissioned report, a House Oversight and Government Reform Committee report, and a Government Accountability Office report all concluded that Energy Department officials seriously mismanaged the loan guarantee program responsible for green energy investments, exposing taxpayers to unacceptable financial risk and costing them billions.
- Similarly, a Defense Department Inspector General’s report found that Navy officials neglected to consider “whether projects were cost-effective or analyze different types of energy projects to determine the best investments for meeting legislative energy goals” when providing taxpayer financing to solar power projects. As a result, taxpayers lost $25.1 million of the $50.8 million the Navy invested in photovoltaics.
Enormous Government Support Won’t Make Green Energy a Winner
President Obama has provided every imaginable form of government support to the green energy companies in which he invests. The President proudly proclaims the U.S. has nearly doubled renewable energy generation from solar, geothermal, and other renewable sources since 2008. But these sources still amount to a negligible portion of the total power consumed by the U.S. last year. Their products continue to lag in the marketplace, yielding taxpayers no decipherable return and costing billions.
Source: Energy Information Administration, Monthly Energy Review (March 2012)
- The Energy Information Administration projects that all renewables will contribute 16 percent of total U.S. electricity generation by 2035, underscoring the point that American consumers have little choice but to depend on fossil fuels as their primary source of energy for the foreseeable future.
President Obama dedicates vast federal resources to promoting green energy technologies. In 2011, he provided renewable energy and energy efficiency companies with 78 percent of all federal energy tax incentives, yet the President and other Democrats insist that tax benefits claimed by oil companies (and effectively available to every other industry) are unfair and should be eliminated. In fiscal year 2010 alone, the Administration launched nearly 700 initiatives, with little regard for duplication or waste, at 23 federal agencies to promote renewable energy.
- The Departments of Defense (116), Agriculture (105), Energy (92), and Interior (82) were collectively responsible for more than 60 percent of all federal initiatives.
- A variety of renewable energy sources received support, including bioenergy (398 initiatives), solar (345), wind (296), geothermal (211), waste conversion (180), hydropower (177), and ocean (123).
- In Europe, generous government subsidies to the renewable energy industry have failed to provide it with enough of an advantage to win in the global marketplace. In response to a cascade of green energy insolvencies, Germany, Italy, and other European nations are slashing subsidies to solar companies to spare their taxpayers from losing billions more.
Government Fixing Markets Against Red, White, and Blue Energy Is a Loser
President Obama further tips the scale in favor of green energy by implementing policies intended to diminish the market competitiveness of fossil fuels. The more expensive he can make gasoline or fossil-generated electricity, the “cheaper” he can make renewable power appear to be in comparison. Last month, the President and Senate Democrats recycled a plan to raise taxes by $24 billion on domestic oil and gas companies for no other reason than to further disadvantage them compared to their green energy competitors. This plan failed on a bipartisan basis for the second time this Congress.
- The President’s regulations substantially disadvantage fossil fuels like oil and coal as an energy source, effectively costing consumers more.
- The Environmental Protection Agency (EPA) recently proposed a rule to reduce greenhouse gas emissions from new power plants; this rule has been analyzed to end the use of abundant American coal as a fuel source and raise electricity costs.
- The EPA’s planned greenhouse gas emissions rules for power plants, refiners, manufacturers, vehicles, and other sources could raise gas prices.
- The EPA’s planned Tier 3 rule to cut air emissions from fuels and light-duty vehicles, including requiring refiners to drastically cut sulfur in gasoline, could increase the cost of manufacturing gasoline.
- New regulations on cars will cost consumers even more for new cars at the point of purchase. One analysis concluded that the cost of new emissions equipment more than wipes out any fuel efficiency savings, even with gasoline at $6 per gallon. Average consumers could be priced out of the market altogether.
- President Obama’s restrictions on domestic oil production keep supplies tight – and gas prices high – in an attempt to push Americans into alternative energy sources.
- The President’s proposed offshore oil and gas leasing program for 2012 to 2017 eliminates 50 percent of lease sales provided for in the previous plan, opens less than three percent of offshore areas to energy production, and imposes a moratorium on developing energy from 14 billion barrels of oil and 55 trillion cubic feet of natural gas in the Atlantic and Pacific oceans.
- In fiscal years 2009, 2010, and 2011, the total number of acres of leased onshore public lands decreased from 45.4 million to 38.5 million acres -- a 15 percent cut.
- The President can increase supply by truly opening federal lands to energy exploration, which could lower prices. When President Bush and Speaker Pelosi lifted moratoriums on domestic oil and gas drilling in 2008, crude oil prices dropped.
- By rejecting the Keystone XL pipeline, the President denied Americans the benefit of 830,000 barrels per day of additional crude oil from Canada that his own Energy Department found could reduce gas prices in the East Coast, Gulf Coast, and Midwest, and replace dwindling crude oil imports from Mexico and Venezuela.
Upping the Ante on Green Energy Bets Won’t Help Reduce Our Dependence on Foreign Oil
In speech after speech, President Obama suggests that his investments in renewable energy technologies will reduce Americans’ pain at the pump. But the President’s prized green energy technologies have virtually nothing to do with the price of gasoline.
Source: Energy Information Administration, Gasoline and Diesel Fuel Update
- Zero percent of the price of gasoline consists of solar, wind, or other non-biomass renewable energy costs, with the possible exception of electricity generated by those methods used in the refining and distribution process.
- In fact, green energy technologies have virtually nothing to do with the primary energy consumption of the domestic transportation sector as a whole.
- In 2011, petroleum products like gasoline derived from crude oil accounted for 93 percent of primary energy consumed by the U.S. transportation sector. Biomass products, like fuel ethanol and biodiesel derived from wood, waste, and other green sources, accounted for four percent; natural gas accounted for three percent.
- Zero percent of the domestic transportation sector’s primary energy consumption consisted of solar, wind, or other non-biomass renewable power in 2011.
- President Obama wants to sustain high gas prices in order to push Americans into green vehicles powered by green electricity. He admitted as much at a White House event honoring wealthy donors to charity. One honoree recalls speaking with the President: “I told him of the revolution in the oil and gas industry and how we have the capacity to produce enough oil to enable America to replace OPEC. I wanted to make sure he knew about this… He turned to me and said, ‘Oil and gas will be important for the next few years. But we need to go on to green and alternative energy. [Energy] Secretary [Steven] Chu has assured me that within five years, we can have a battery developed that will make a car with the equivalent of 130 miles per gallon.’… Even if you believed that, why would you want to stop oil and gas development? It was pretty disappointing.”
- The President’s investments in alternative vehicle technologies demonstrate they are a long way from commercial viability.
- Fisker Automotive, an electric car manufacturer, and A123 Systems, an electric car battery manufacturer, each received millions in federal taxpayer support. Both companies are failing, and their effort to create an electric luxury sedan resulted in embarrassment when it shut down during testing by Consumer Reports. The price tags for Fisker’s Karma ($107,850) and Atlantic ($50,000) models raise serious questions about the wisdom of giving the company $529 million to produce alternative vehicles only the wealthy can afford.
- The Chevy Volt, the gas-electric hybrid the President pledged to buy when he leaves office, continues to sell poorly. Its manufacturer, General Motors, is 26-percent owned by the federal government and received $2.3 billion in federal subsidies and $690.4 million in state incentives to produce the Volt.
The Chevy Volt: Not Commercially Viable
- Tesla, an electric car manufacturer, received a $465 million federal loan in 2009 only to lose $522.8 million within two years. Even President Obama acknowledged that the $101,000 price tag for Tesla’s premium electric vehicle is not affordable for the average American.
- Fuel-efficient technologies are so expensive that in many cases it would take the average driver more than a decade to save money over comparable new models with conventional internal-combustion engines – even with gas prices as high as $5 per gallon. In fact, gas prices would have to approach $8 per gallon – the European levels Energy Secretary Chu desires – before many alternative fuel vehicles would pay off in the six years an average person owns a car.
Giving Billions More to Green Energy Companies Won’t Create Jobs
Despite the extraordinary failures of his green energy investment program, President Obama recently touted his efforts at a solar plant in Colorado.
- The plant cost $141 million to build and was financed with $42 million in federal tax credits and $12 million in tax rebate commitments from Nevada.
- The plant created 300 part-time construction jobs, but only 10 full-time jobs – at a cost of about $5.4 million in taxpayer subsidies per employee.
- Solyndra ended up costing an average of $6 million for every permanent job created. When the company declared bankruptcy, it laid off 1,100 workers.
- Other failed and failing companies in President Obama’s green energy investment portfolio are similarly cutting jobs as their technologies are exposed as not yet commercially viable: Fisker Automotive (78 employees cut); Abound Solar (280); Evergreen Solar (800); SpectraWatt (117); Amonix (200); First Solar (2,100).
- The President spent nearly $250 million in federal stimulus funds in California to weatherize homes and train people for green jobs, resulting in around 1,250 full-time jobs or job placements – about $200,000 in taxpayer money per job.
After three years in office, President Obama’s Council of Economic Advisers credits him with having created or “saved” around 225,000 green jobs. Based on the conservative assumption that $80 billion in stimulus funds were directed toward generating green jobs, one analyst estimates that each of these jobs cost taxpayers $355,000.
- The Bureau of Labor Statistics (BLS) recently reported that there were 2.3 million private sector workers and 860,000 public sector workers employed in green jobs. But BLS includes some unusual “green” jobs, like school bus drivers, clerks at used clothing stores and even steel workers -- because most of our steel is made from scrap.
- While real green energy job growth has been miniscule, oil and gas sector job growth has been explosive. Over the past five years, the oil and gas industry has created more than 150,000 new jobs despite the President’s war on fossil fuels.
The President’s investments in green energy companies have all too often created new jobs in foreign countries instead of the U.S., where 13 million Americans remain unemployed.
- The Energy Department itself acknowledged that 80 percent of certain green energy programs, including $2.3 billion in manufacturing tax credits, benefitted foreign firms employing workers in China, South Korea, Spain, and other countries.
- Mere weeks before finalizing a $1.2 billion federal loan guarantee, a solar company announced plans to open a new manufacturing facility in Mexico.
- Vice President Biden applauded the $529 million loan guarantee to Fisker for its potential to generate thousands of American manufacturing jobs. It led to 500 jobs in Finland.
Doubling-down on green energy investments is not a credible energy plan. Gambling away billions more will not lower gas prices, create jobs, or get our economy humming again. Yet President Obama stubbornly props up his failed green energy vision while persistently attacking the fossil fuels capable of providing Americans with jobs and affordable, reliable, abundant energy today. Throwing good money after bad will only leave the American people in even greater debt. The President should learn from his record – and from recent developments in Europe – that deploying taxpayer resources to pick winners and losers in the global energy economy is a failed policy and it should end.
Next Article Previous Article