Mind of the Statist

David Roberts (via Kevin Drum) gives us a simply outstanding view of the mind of a statist:

In these grim economic times, one U.S. industry has defied gravity. Not only is it growing, it's thefastest growing industry in the country. It now employs 100,000 Americans at 5,000 mostly small businesses spread across all 50 states. Unlike in so many others, in this industry the U.S. has a positive trade balance with China; it is a net exporter of high-tech manufactured products....

The startling counter-cyclical growth of this industry had been unleashed by a modest bit of economic stimulus: a cash grant program that helps project developers compensate for the crippling credit crunch. In contrast to the familiar tax credits -- which tend to go to large, mature companies that have enough profit to benefit from them -- cash grants help small, innovative, growing businesses that are plowing revenue into growth. In fact, a recent study found that they work twice as well as tax credits. In 2009, this cash grant program pulled in $4.50 of private capital for every public dollar it invested.

The cash grant program expires at the end of the year. Extending it for a single year could support 37,000 additional jobs over and above the industry's baseline. And here's the capper: Since the cash grant program is simply repurposing money that's already devoted to a tax credit program, it requires no new federal revenue.

So you'd think this would be a home run, right? At a time when jobs are at the top of every politician's mind, surely a bit of low-cost economic stimulus that doesn't increase the deficit and leverages tons of private capital and creates tens of thousands of jobs can serve as the rare locus of bipartisan cooperation. Right?

Except the industry in question is the solar industry. And because this industry involves clean energy rather than, I dunno, tractor parts, it has been sucked into conservatives' endless culture war. Rather than lining up to support the recession's rare economic success story, Republicans are trying to use the failure of a single company -- Solyndra -- as a wedge to crush support for the whole industry. Odds are they're going to succeed and the cash grant program (Sec. 1603) won't be renewed next year.

Do you see the basic assumption -- if we don't take money from taxpayers and give it to businesses in a certain industry, that means we don't like that business.  Really?  That means that there is not a single industry in this country that I like, since I don't support subsidies for any of them.   Unless you believe the state is mother and father to us all, the fact that I don't support state subsidies does not mean that I don't like the industry somehow.  Kevin Drum even goes so far as to say that opposition to solar power subsidies is an aspect of the culture wars.  Huh?   Oh and by the way, the politicization of this loan process is just amazing to me.  More and more people at Solyndra seem to be fund raisers for Obama, and here is a story of how a cleaning products company turned donations to Democratic candidates into taxpayers subsidies for themselves.

It is interesting that he would mention tractor parts.  Guess what, folks who don't like the solar subsidies probably don't support subsidies for tractor parts either.  I was going to say something like, "guess what, we don't subsidize tractor parts" but in our screwed up corporate state, we probably do at some level, like with some special export program snagged by a John Deere lobbyist.  But I can pretty much guarantee that we don't subsidize anywhere near the total value of the tractor parts industry like we do the solar industry.

In one silly passage, he says

"In addition to being successful, this industry is wildly popular with the American public, across regions, demographics, and political parties. It has been embraced by mainstream institutions from Walmart to the U.S. military"

I could say the same thing for iPods too, but no one is rushing to provide grant programs for their manufacture.  If it is so wildly popular, why does its use require so many government incentives and subsidies.  Because the author pulls the trick of looking at one narrow solar program, and attributing the entire solar industry growth to that one program.  And then he says, see, look how much benefit we get from this tiny sensible expenditure.

But solar's growth (I don't have the data, but I am willing to be real money that his "fastest growing industry" claim is BS) is due not to just this tiny programs but to a plethora of federal, state, and local subsidies and mandates.  The government gives money to capitalize companies, and then then provides tax credits for up to 30-50% of their customer's purchase, and then through public utility commissions enforce above-market feed-in tariff rates for solar power.  One reason we export so much (the export market for US solar is nearly entirely to Europe) is that European governments have feed-in tariffs for solar power more than 5 times higher than the market rate for electricity.   They are paying something like 70 cents a kilowatt for solar electricity.

So of course solar is growing.  If the government were to buy small cars for $150,000 each, there would be big growth in car manufacturing. This does not mean the product makes sense -- in fact, the necessity for so many government supports at every step of the process means almost by definition that it does not make sense economically.  Look at corn ethanol.  Corn ethanol is the stupidest product ever, but it has grown like crazy due to the same combination of government subsidies, price floors, and mandates.

By the way, I am a huge fan of solar, in theory.  I honestly think that solar will some day be the power system of choice in this country, as companies figure out how to roll solar sheets out of the factory as cheaply and quickly as carpet comes out of Dalton, Georgia.  We are not there yet, and I am not at all convinced that the current approaches are anything but dead end technologies.  Beyond wasting a lot of money, there is a real risk the government actually slow ultimate implementation of sensible and economic solar, just as I would argue they did by forcing manned space flight and the transcontinental railroad ahead of their time.

  • Smock Puppet, Piloting The Economic Seas Betwixt Scilla and Charybdis

    >>> Republicans are trying to use the failure of a single company — Solyndra — as a wedge to crush support for the whole industry.

    Really? ONE? Just *ONE*?

    In addition to Solyndra:
    a) Wednesday, the Tennessee Solar Institute announced it would stop processing applications for further grants as it exhausts about $10 million of stimulus funds encouraging businesses to invest in solar technology.

    This news arrives as Tennessee Valley Authority officials continue to mull alternatives for the future of the Generation Partners program, which pays incentives to those who install solar systems at their homes or businesses. The program is funded by customers who voluntarily pay more money on their electric bills to support renewable energy.

    With the tough economy pinching customers, the contributions haven’t covered the costs, and the solar incentives are costing TVA about $5 million a year."

    and

    b) "Peak solar" hits Oregon as well.

    "A solar boom was spawned by the Legislature's supersizing of Oregon's controversial Business Energy Tax Credit in 2007, under which the state covered 50 percent of the cost of renewable energy projects up to a maximum credit of $10 million.

    But solar developers in Oregon say solar projects will no longer be feasible, now that lawmakers have put the state subsidies system on a starvation diet. With the state budget in free fall, the Legislature cleaved its commercial renewable energy subsidy pot by 99 percent for the current budget cycle, from a cap of $300 million in credits for 2009-2011 to $3 million in 2011-2013.
    Without the tax credits, the economics of commercial solar projects don't work, for electricity buyers or investors who underwrite the projects."

    Funny, it appears the money being shoveled at it by the government is the ONLY reason anyone in the solar industry is actually getting a job.

    Add this to the experiences of the Danes with wind power, and Spain with solar power and "green jobs" in general, I think there is a coffin somewhere rather clearly missing its nails.

  • NL_

    I like how the author frames the storyline like conservatives are using solar energy as a political scapegoat in the culture war. I'm not going to defend Republicans or their predilection (along with Democrats) of basing policy decisions on the popularity of the the affected parties. But the reality is that Democrats have advanced solar power and alternative energies for decades, and the result has been to mark these things as somehow sanctified or culturally prestigious for those on the left.

    The extent to which conservatives have a cultural opposition to solar energy is mostly just a reaction to the attempt by Democrats to claim solar power for themselves. Democrats have claimed solar power, so Republicans are somewhat cool towards it. And this article is just furthering the dynamic.

    The real question is why business models should be politicized in the first place.

  • Smock Puppet, Piloting The Economic Seas Betwixt Scilla and Charybdis

    >> By the way, I am a huge fan of solar, in theory. I honestly think that solar will some day be the power system of choice in this country, as companies figure out how to roll solar sheets out of the factory as cheaply and quickly as carpet comes out of Dalton, Georgia.

    You are mistaken, sir, because you don't grasp in any way the actual numbers involved.

    Solar Power: Flat-Out Wrong For All Time

    Solar SOUNDS like it ought to be good, but the numbers really, really are NOT there AT ALL. And that's not numbers we can "engineer" better numbers from with technology. The best POSSIBLE numbers -- law-of-gravity numbers -- would require covering a mass of area literally, not figuratively, the size of a state. It's flat out irrational when we have nuclear energy, which is clean AND safe AND cheap, once you get the BS out of the way.

  • Smock Puppet, Piloting The Economic Seas Betwixt Scilla and Charybdis

    >> The extent to which conservatives have a cultural opposition to solar energy is mostly just a reaction to the attempt by Democrats to claim solar power for themselves. Democrats have claimed solar power, so Republicans are somewhat cool towards it. And this article is just furthering the dynamic.

    Oh, "Shenanigans". If there WAS money to be made in solar, then the "conservatives", as you put it, would be the ones doing it.

    So any actual objection is based on the simple, fiscally obvious fact that there IS no money to be made in solar, hence the fact that, thirty and forty years on, it STILL needs to be heavily subsidized JUST TO BREAK EVEN.

  • Roy

    Smock, got to thinking about your link when I jumped to it from NOFP last week. Followed your reasoning: assuming optimum numbers with best transformation of sunlight to electricity, need have some sort of gizmos covering an area about that of Delaware. So mused on whether that was a definitive obstacle vs merely a major civil engineering challenge. Just for grins, decided to google what area totality of U.S. roads take. Answer: more than area of Delaware.

    These roads have many of the liabilities you correctly asserted re solar. Beyond merely taking up space, requires stuff to build 'em, some of it polluting, have to maintain 'em, drainage, etc. Not to mention that new roads give Greenies fits.

    Conclusion (albeit very shaky, significantly tentative): still think your conclusion right re solar ever providing most of much less all U.S. electricity needs. Yet I can envision solar providing some significant portion. Every time I drive or fly across American SW, I see lots of area which, even with transmission costs, seems very unused, begging for development, and, well, appropriate for solar if somebody can ever figure out how to make it pay.

  • Orion

    Well, my understanding is that there is a way for solar to work, but they can't do it now and aren't even close. For it to work the panels have to be able to absorb and hold energy when the sun is shining and then convert to electricity when the sun isn't shining (IE, at night). From there you have to be able to store it. Currently solar absorbs energy and converts it all at once, which severely limits its usage. Two major areas need to be fixed for it to work. That said, humans are remarkably adept at finding solutions, I am sure someone will someday.

    Area the size of Delaware? Who cares. That is for the entire nation. How about a lot of little tiny patches adding up to Delaware. I dunno, maybe rooftops or something uncommon like that.

  • gn

    Hard to see any of the "clean" energy solutions as truly scalable or even feasible once they get past the "cute" phase and try to handle base loads. Using their acquisition cost as a proxy for the all-up energy required to design/build them (which seems reasonable) if a solution requires subsidies to pay off money-wise over its lifetime it must not pay off in terms of net energy added to the system over its lifetime, either.

    Nuclear is the only viable long-term solution. Any country that falls far behind in the race to replace fossil-fuel baseload generation with nuclear is going to regret it bigtime in 20-30 years.

  • Ted Rado

    Unless someone comes up with a feasible scheme for energy backup and/or storage, intermittent energy sources will never go big time. They are only feasible when subsidized and get free backup.

    Hydraulic and compressed air storage can be shown by any engineer to be terribly uneconomic in a few hours study.

    Backup with open cycle gas turbines doesn't work because the lower efficiency (compared to base load generating facilities) eats up the fuel savings made when the sun shines/wind blows. Do the calcs! Other types of generating facilities cannot take the rapid swing loads.

    Thus, we are back to square one. Unless someone has a COMPLETE plan, including building renewable energy plants, transmission lines, and storage/backup facilities, and shows that the total plan is economically and technically feasible, the whole thing is nonsense. Having a scheme for only part of it is not enough. If we had FREE solar panels, it still wouln't work. There is no feasible way to store or back up.

    The USG sponsors all sorts of studies for energy storage. A few calcs show that they are all an idiotic waste of money. However, people point to these projects and say "see, we are making progress". Yeah, we are making progress figuring out new ways to waste money.

  • Doug

    I think the "recent study" mentioned in the Roberts article is found here: http://tinyurl.com/3zp6jnh

    Just poking around web site of the study's creator, EuPD Research ( http://tinyurl.com/3vkazxt ), reveals that these guys have a VERY vested interest in solar. They appear to make a very good living at it, too. Now I don't have a problem with someone advocating something, and then doing research to back up his reasons, but if this outfit were a pro-oil research facility, and the article were about the benefits of subsidizing oil (or coal, for that matter), the greens would go ballistic about its "bias." Am I wrong?

    I'm a very impatient person and not good at reading studies, but if I interpret this one correctly, I see a chart on page 10 saying that if we would only "invest" a mere $308B in TGP (Treasury Grant Programs, cumulative of blue bars) between now and 2016, then we'd get somewhere around 500,000 new jobs in return. By my math, that's something like $600k/job.

    Imagine if Big Oil, or Big Coal, sought out such subsidies from the government and tried to pass it off as "good for the economy." Once again proving that government is incapable of doing ANYTHING efficiently.

    Incidentally, I maintain that there is no way that ANY big solar farm will ever be approved in this country. The enviro-nuts would come out in force against it, claiming it would harm an endangered earwig, then tie it up in court for decades. If this same bunch were around in the 50s when the country went on an interstate highway building binge, we'd still have only one-lane dirt roads across the country.

  • http://sailorette.blogspot.com Foxfier

    *blink* I thought that it was a post in praise of those "micro-loan" programs-- totally private, no government needed.

    It is rather sad to the see the assumption that gov't has to be involved.

  • Gil

    Actually there's plenty of coal to last for a few centuries yet.

  • Griffin3

    Smock Puppet, if you don't think we have enough desert lying around in this country to supply space as big as the state of Delaware, well, then ... I have a solar subsidy to sell you.

    Actually, just looked it up. The Mohave desert covers ~25,000 sq miles, versus state of Delaware with 2,940. I think you could squeeze it in there. I'd also bet that rooftop space in the US adds up to more than 1000 sq mi, which is fairly proximate to daytime usage (no source for that). Sure there are technical and pollution problems, similar to those that have been solved quite regularly since horse and buggy days.

    I am no fan of solar subsidies, but I have faith it could be a perfectly sufficient method of power generation sometime in the future. I'd throw out that nooilforpacifists link, though. It's based on crap arguments.

  • DrTorch

    Smock beat me to the point that solar _photovoltaics_ don't make sense, other than for niche applications. If you can find a place to make it cost-effective, more power to you, I won't begrudge you that. But for broad applications, it's never gonna work. I trekked out to ASU for grad school based on the hope that I'd be there for the solar energy boom. But physics has a way of keeping you realistic.

    Solar thermal is very competitive, btw. It is a regional solution, but useful and shouldn't be ignored. It also shouldn't be confused w/ photovoltaics.

    Nuclear needs to be recognized for what it is: a very good solution.

  • Mark

    Solar is a regressive tax on the poor. It requires 92% backup, because its output is less consistent than wind - even on a sunny day so power companies will have to continue to generate power, and yet rich folks who can afford Solar with the subsidy will get their power for free.

    So when the rich are all given free power, who is going to pay for the 92% backup generation? The rest of us poor folk. And I thought the GOP was suppose to hate the poor.

  • Ted Rado

    Griffin3:

    You might want to look into what happens when the sun goes down. There is no feasible way to store or back up solar or wind energy. Unless that problem is solved the solar idea is not possible on a large scale. Every conceivable method to store or back up intermittent enrgy sources has been studied ad infinitum with no success. If we spend money on solar without solving these problems, we are merely wasting money and R&D resources. We should put a moratorium on solar and wind until the TOTAL problem is solved. All studies show this possibility to be nonexistent.

  • John Moore

    Coyote, the cost of rolling out solar panels is already quite small (one reason Solyndra cratered) - it is the overall system cost that kills, and that cost has to include not only installation, maintenance, conversion electronics and all the usual stuff, but the killer: storage.

    Obviously, in the long term, we will have to end our heavy usage of fossil fuels, but I doubt if solar will emerge the winner. Some form of nuclear (new kinds of fission systems, fission/fusion hybrids, or maybe even fusion) have a lot of potential (but are no guarantee).

  • ErisGuy

    "how a cleaning products company turned donations to Democratic candidates into taxpayers subsidies for themselves."

    I have a hard time telling stories of the mafia apart from stories like this.