Will “Clean Energy” Lead an Economic Recovery?
Can pigs fly?
Keynesians and semi-socialists claim that “clean energy” will create jobs and net economic growth. From Al Gore to the New York Times, “green energy” is almost religious in scope, as advocates claim that not only will it give us better air and weather, but it also will be a fundamental building block of economic recovery.
To speak out against this is tantamount to treason in some quarters, and people who dissent are vilified in the media; organizers wanting California’s recent “clean energy” law repealed recently were attacked by the New York Times. Indeed, it almost seems to be self-evident that a “key” to economic recovery is government “investment” in “green technologies,” so anyone who might look differently at this new government-led venture not only opposes progress but new jobs as well.
The technologies leading the way in this effort include biofuels, such as corn-based ethanol and biodiesel; wind power; and solar photovoltics. Not surprisingly, Gore partners with a venture capital fund that helps to finance many of these things.
Of course, these are ventures are not profitable on their own. In other undertakings, entrepreneurs find new ways to apply existing resources in hopes of making a profit. They rarely have the luxury of being targeted for success by governing bodies; rather, they have to deal with all the roadblocks and difficulties that any business venture might find in its way.
With green technologies we have a situation in which entrepreneurs purchase various factors of production, put together a product, sell it, and then chronically fall short of making a profit. Then they lobby for subsidies or mandates. This is not the same kind of situation that faced a capital-intensive operation like Federal Express, which went five years without making a profit. The goal was to be profitable in the future, knowing the company would not receive special government benefits.
As Robert Bryce notes in his eye-opening book, Gusher of Lies, much of what proponents claim about these “new technologies” not only is untrue but will remain untrue because of the first and second laws of thermodynamics: The laws of science stand in the way of these projects ever becoming profitable on their own, and Congress cannot repeal either economic or scientific laws.
Some green energy proponents understand this, but counter that if governments limit consumer choices, people will be forced to purchase these products at prices that will make them appear profitable. That means government coercion is enlisted to create the illusion that “green technologies” are viable when in reality people must use them under threat of state-sponsored violence. One cannot build a prosperous economy on that footing.
Why can’t a good that must be subsidized be the basis of an economic recovery? The answer would seem obvious on its face, but people often don’t see it. The answer is based on this fact: The very presence of subsidies and targeted favors for a particular good means that the real value of the resources being used to create that good is greater than the value of the good itself. No economy can grow under such circumstances. The reality is that “green energy” actually causes the economy to contract.
Part of the misunderstanding comes because people see only one side – new jobs being created in the subsidized industry – but fail to see the entire picture. This hardly is limited to alternative energy — the “broken window fallacy” permeates our body politic and even more so when we suffer economic downturns, as governments seek “solutions” that only make things worse.
If there ever were an example of the “broken window fallacy” in energy, it is the notion that “green energy” in its present circumstances will help the economy grow. That is a logical impossibility, but governments (and, sadly, many economists) don’t do economic logic.
Comment by Michael JR Jose on 29 September 2010:
Well this is a well-written and reasoned a stab at the powers that be as I have read. Wind power is mentioned above, but of course the greatest villain of the piece is the madness which will follow the wind power scam. The hideous fans churning in our countyside in the UK and Europe are by far the worst solution to supplying the grid with reliable cheap power, and almost no-one would find the economically viable for any reason without government subsidy. They even destablilise the existing power grid and sometimes cause blackouts as the wind rises and falls, let alone stops altogether at times. This is Luddite Medevalism at its worst, and the EU and the UK are the greatest culprits of all. When the British grid is destabilised on a large and recurring scale (experts like Dennis Birtkett are estimating about 2014) the whole thing will come to a shattering halt, to the vast expense of the British and EU taxpayer.
Comment by bill h on 29 September 2010:
Re: “green energy” is almost religious in scope
It is beyond “almost”. It has become the religion of many for whom G-d has become deniable. The human heart does desire nobility and the alleged ends of the “green” cause seem to fill the void. The movement is too young to realize the emptiness of the claim and the false hope still has (at)traction. Having said that, responsible stewardship of resources is always appropriate and good. So far, the only “green” in the new religion is going into someone’s bank account. Peace.
Comment by John Hancock on 29 September 2010:
“Congress cannot repeal either economic or scientific laws.”
This appears to be a truth that politicians just refuse to accept. My dad, an aerospace engineer, use to laugh whenever he told us of the story of the politician who tried to pass a law that would change pi from 3.14159… to just 3.14. The reason being that it would be easier for people to determine the circumference of a circle and improve math scores since they would have less to memorize. It was funny back then but now that they think they can change the laws of economics it is downright scary!
Comment by Kieran C on 29 September 2010:
There are several books analysing energy converging on which forms of renewable energy are likely to save the planet and are simultaneously more economically viable. Renewables are not ruled out on grounds of intermittancy as there are several storage options available. Some Countries are also using each other as large Batteries for example Denmark and Germany. Western Europe is planning a wind super grid. A link between North Africa and Southern Europe is proposed by many pundits as a potential way of harnessing solar power so abundant in these places of low population density. 2nd generation biofuels (Cellulosic Ethanol) is proposed as the best of the liquid transportation fuels and so on.
When fossil fueled power becomes more expensive in the advent of peak oil and gas (oil being sooner), then renewables become more attractive so it makes sense to get the infrastructure up and running even if in some kind of subsidised way. The impending ecological crisis also requires serious addressing, and one way to do this is to factor the ecological cost of the various types of power available into energy and products. The real cost is the price we pay in the shops plus the ecological cost of lost resources and destruction repair.
Two well written books on the subject are “Sustainable Energy – without the hot air” and “Ten Technologies to save the planet”. Well know authors “Our choice” by Al Gore and “Heat” by George Monbiot also come to very similar conclusions.
Bearing all that in mind, reduction is the number one technology when it comes to energy and waste production. Energy, renewable or otherwise is the lubrication, what we do with that energy after clever conservation, renewable or otherwise is the crux of things. Peak grain, water, gas, fertilizers and many mineral resources contained in our consumables and infrastructure are not all that far behind in peaking. Alternatively there are jobs in conserving these resources by re-use, recycling and re-design (i.e. better design modularity and design for disassembly). Again, some of these jobs might require subsidies, but failure to conserve means we hit the downward slope caused by the limits to growth much sooner.
Comment by Mike Greczyn on 29 September 2010:
Many opponents of clean energy use arguments about economic viability, government subsidies, limiting consumer choice, choosing winners, etc. What I always find lacking in these discussions is any admission that all electricity is heavily subsidized and the way we currently generate, distribute and sell electricity in this country for the most part prevents us from having an intelligent conversation about this issue.
Most utilities are government-sponsored monopolies. In a very real sense, these are not real businesses. They don’t have competition. They don’t have customers, they have ratepayers. They don’t earn economic profits, they earn guaranteed rates of return on capital investments. Their ratepayers do not have any choice in how the power they buy is generated. They do not have any choice as to who they buy their power from.
On government subsidies, the government has long subsidized every form of power generation, and continues to do so. Coal, natural gas, nuclear, large hydro, renewables, etc. All are subsidized, in some cases for many, many decades. We’re told that coal is “cheap” but in reality we have no idea if this is true. Government money has flowed to this industry for so long we truly have little idea how much it would cost if there had never been subsidies. There is some defense for these subsidies: they created ubiquitous, low-cost power. Arguably this has some attributes of an economic “public good”. Clean air and water are also public goods, and I argue that the government has a role to play in providing and protecting public goods. So unless we want to discuss the elimination of all subsidies for all power sources and the incorporation of market mechanisms to account for the impact to public goods such as clean air, the issue of subsidies for renewable energy is in reality a question of what should we get from power companies in return for our energy subsidy money. Cheap power with an unhealthy dose of mercury, NO, SO2, CO2, etc? Or cheap power without those harmful side effects? My suspicion based on the title of this blog is that readers would prefer to eliminate all subsidies. As citizens, the only way we can access zero-subsidy power is to own a power plant ourselves and decline government money for it’s construction and operation. Based on economies of scale, the only way most of us could afford to do this is by putting up PV solar and not applying for tax breaks.
So I ask you, in light of these facts, which forms of power generation are “economical” and why is it that only renewable energy should have to live up to this standard? You can’t tell me which ones actually make a profit, because in most regions none of them are deployed under actual business conditions and costs have been distorted by government intervention for so long that determining profitability might be difficult. We can, however, gain some understanding of the consumer choice (aka demand) side of the argument by looking at one of the few power markets that allows choice and the companies that operate there. Texas is a deregulated power market. Any company can operate a power plant and sell the output to customers. Customers can choose from a variety of different providers. Green Mountain is one such, and sells mostly clean energy. Green Mountain is profitable and recently was sold to NRG. To a lesser extent, ratepayers in many other regions are offered the option to purchase wind power. These offerings are regularly oversubscribed. I ask you, if in all the areas where consumers are actually offered a choice of clean energy vs conventional energy consumers choose to purchase clean energy, how can you field a consumer-choice based argument against clean energy?
Comment by Phil Lewis on 29 September 2010:
Green energy will never achieve a meaningful presence … unless it becomes economically viable. Politicians forcing citizens to adopt their solutions will ultimately fail. Politicians think they can modify our intelligence through regulation and manipulation … they shall fail. I’m not an enemy of the environment … just an enemy of political force for the purpose of restricting choice. Much of the “green movement” is really progressive fascism.
Comment by Donald M. Coder on 1 October 2010:
The final debate is always between market economy (economic freedom) and government control. If wind power is economically feasible, it will be exploited as a source of income. It is an economic failure and succeeds only when earnings are confiscated and given to encourage wind power.
Comment by Barry Robinson on 1 October 2010:
I once believed that renewable energy could save the planet. But then I came up against the politicians.
Barry Robinson (England)
Comment by nofreewind on 1 October 2010:
To the writer above who goes on yada yada that all electricity is subsidized. The devil is in the details and you are not aware of the details. Go to
http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/pdf/chap5.pdf
Look at page 16 I think and you will see per unit Wind and Solar are MUCH MORE subsidized than Coal/Gas/Nuclear. In fact there is no comparison. See, no one, NO ONE, would ever buy wind power or NO ONE would ever construct a wind turbine, NO ONE would ever be that DUMB! It is only a Government that is dumb enough to build them and then to force people to buy their power. Even with the slight of hand of subsidies, enormous ones comparatively, wind and solar are more expensive.
Check the top post about the enormously expensive solar tax farm going up near me. http://www.nofreewind.com . Our resources can be better spent elsewhere. Yes being Green is being noble, or thinking you are noble, when really what you are doing is the opposite and squandering our world’s resources, just like in recylcing!!
Comment by bruce on 1 October 2010:
Kieran, nice bit of writing, I would only ask, can we wait for current power generation to run out before relying on renewables? I really believe market prices will control power usage and new power generation. This offers two distinct positives. One, we don’t spend big money on dead end engineering and hope. Two, individuals will decide how they want to proceed. Government tends to correct punitively, hurting select facets of the economy for reasons that only it controls.
Allowing power generation to evolve instead of forcing decisions before adequate invention means the most economical, modern and waste neutral power possible. That is by definition the most green.
Comment by SMS on 2 October 2010:
nofreewind,
Thanks for the site and the obvious hard work you have put into the site to educate others(possibly the uneducateable). I’ve had discussions at work with other engineers about the stupidity of renewables but have problems getting past the “green” re-education (brain washing) that has taken place to our younger generation. I can’t get others to understand that a government subsidy is a tax on me and others. A tax on me when the government gives the solar panel industry a subsidy to produce the panels and then a second tax for the subsidy to the home owner for the purchase and installation of these “renewables”. These taxes should be considered as part of the true cost in the economics to install solar panels. But our government makes people blind to the true economics by 1) making renewables the new form of self-flagellation for the God Gaia, 2) supporting a political agenda for the left, 3) not fully educating the public on the true cost 4) creating a greed that reinforces the desire to install these monuments to stupidity.
I’d like to know when the government is going to tax the power used by electric cars at enough of a rate to offset the loss in tax income from the uncollected fuel taxes?
Comment by Alexander on 3 October 2010:
The problem is the political justification for green energy, that we will otherwise face runaway AGW from CO2 is ludicrously false. The reasoning is very simple: there’s either been a big mistake or it’s the biggest scientific bait and scam since Piltdown Man:
The ‘cloud albedo effect’ cooling [Figure 2.4 in AR4], 44% of headline AGW, is imaginary: no theory or experiment to back it up except for thin clouds. Therefore, you must nearly halve median AGW then factor into the models less recent heating from CO2, meaning it’ll come out at no more than about a third of the headline figure.
It’s not just me saying this: modeller insider Kiehl wrote in 2007 that the confidence in present estimated AGW is very low because of the uncertainty of ‘aerosol cooling’. And he didn’t realise the cloud part doesn’t exist.
So, it’s time to call a halt to wishful thinking. Ask a real physicist what he/she thinks of this: http://earthobservatory.nasa.gov/Features/Aerosols/
‘Figure 2b. (right) The high aerosol concentrations in these clouds provide the nucleation points necessary for the formation of many small liquid water droplets. Up to 90% of visible radiation (light) is reflected back to space by such clouds without reaching Earth’s surface.’
There ain’t no such physics. So, the models are wrong, some more than others. And as time goes on, the attempts to continue the pretence by the autocratic left behind which is the autocratic right, become even more desperate.
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