Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
A New Solar Plant Shows the Economic Dangers of US Commitment to Environmentalist Foolishness
Two news items that appeared just before Christmas demonstrate the inability of our leaders to learn the dangers to America’s economic future of our espousal of so-called green energy sources. The federal government is taking a huge risk in subsidizing the construction of alternative energy sources like solar and wind power. The federal government wasted hundreds of billions of dollars in Pres. Obama’s $800 billion economic stimulus plan by such subsidies and, as seems clearly evident, created very few jobs.
The first news item appeared in the Wall Street Journal, headlined “Spain’s Cuts to Solar Aid Draw Fire”. It reported that a group of international investors has called on the Spanish government to reconsider its plans to cut costly subsidies for solar power, “including existing power plants”. . In Spain, the government pays the extra cost “roughly 10 times the price utilities pay for power produced from conventional sources such as gas and coal”. Last year, the government paid out €2.6 billion. Now it wants to reduce the existing subsidies. But investors who have acquired a vested interest in continuation of the inefficient subsidies want them continued. Apparently, our leaders are committed to the same foolishness.
As we reported in an earlier article, Professor Gabriel Calzada Alvarez of Juan Carlos University in Madrid found that for every green job created by the Spanish government 2.2 jobs were destroyed elsewhere in the economy. This has now been confirmed by Spain’s socialist-led government. Alvarez's findings, Investors Business Daily reports, have been backed up by Carlo Stagnaro and Luciano Lavecchia, “a couple of researchers from the Italian think tank Istituto Bruno Leoni. They found that in Italy, the losses were worse than they were in Spain.
In the U.S., subsidies take two forms. The initial subsidies to facilitate the construction of plants producing electricity from solar or wind are just the beginning. The plants produce electricity at a very high cost. So when they are connected to the electricity grids, power distributors are forced to buy the electricity and are authorized to pass the extra cost on to the consumers including businesses. It amounts to a sales tax on consumers of electricity.
The second news item is the announcement that the government has approved a guarantee of a $1.75 billion loan to a Spanish company Abengoa Solar Inc. to construct Solana, a 250-megawatt, concentrated solar power (CSP) facility located near Gila Bend, Arizona. The total cost of the project will exceed $2 billion. President Obama during one of his weekly addresses stated that after years of watching companies build things and create jobs overseas, it’s good news that we’ve attracted a company to our shores to build a plant and create jobs right here in America. Unfortunately, it will create only about 1600 temporary jobs building the plant and only 80 permanent jobs at the facility. To make matters worse, only 70 percent of the plant’s materials will be made in the U.S. No mention has been made of the price it will charge for its electricity. Nor of the increase in our trade deficit it will cause. By contrast, gas and coal-fired generating plants have very low cost per kwh and use all domestic materials.
The Abengoa plant is a good example of how small the contribution, if any, of solar and wind powered electricity plants can be expected to make to the U.S. economy. Pres. Obama is ill-informed.
Comment by Steve the Tuna, 2/10/2011:
Those who know the cost of everything in today's dollars know the value of nothing and have no conception of a future. May your kids enjoy dying in foreign wars to exploit the fossil fuels under the sands of dictators.
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