How Well Has Government Investment in Clean Energy Worked?
A commenter notes: The U.S. Department of Energy and other government funding institutions have invested vast sums in failed projects.
This is true (depending on how one defines “vast”), but grossly misleading. Overall, 80% of all businesses fail within the first 18 months. Of DoE-funded projects, only 17% fail, and, as of three years ago, these projects had already attracted over $625 million in private funding.
Craig.
I expect Marco Polo will give you and your readers a salutory lesson on this subject. A well needed lesson I will add.
Lawrence Coomber
The most famous failure, Solyndra, a thin film solar collector that was supposed to undercut the price of solid panels failed because the solar rebate program worked so well that the price of solar dropped so fast that their business model which had counted on a 10% drop in price of solar panels per year no longer worked. The other “failure” Flywheel Energy Storage was bought out by Beacon Energy who has three utility scale energy storage systems working on the East Coast.
I thought the failure was based on the fact that their solar technology (CIGS) lost out to polycrystalline silicon in terms of price.
Having written extensively about Beacon power, and having been in contact with corporate personal before and during the bankruptcy and buyout I find the subject of that company somewhat interesting. They paid back the loan that was secured from the federal government. The people who lost during the bankruptcy seem to be primarily stockholders not other creditors.
Essentially they had a good system that was finding good contracts in the shortest response time and now most highly priced energy storage market. Just after the bankruptcy federal rule changes brought additional revenue to the company which expanded the number of its projects.
Calling the company, the technology or marketing a “failure” seems to miss a few details and suggests repeated (false) material that is often found on the web.
Flywheel energy storage is as much or more a method of conditioning the grid energy as energy storage. As battery technology evolves the long life available in flywheels (up to 100,000 cycles) may eventually be superseded by batteries. An older article that reviews the complexity of the energy storage market: http://www.purdue.edu/discoverypark/energy/assets/pdfs/SUFG/publications/SUFG%20Energy%20Storage%20Report.pdf
More of the details on Beacon Power: http://www.slate.com/articles/business/the_juice/2014/08/beacon_power_the_department_of_energy_loan_recipient_is_making_a_comeback.html
Craig,
If you must quote me, please do so accurately, fully and correct context.
But if you want to misrepresent my observations to make your own comment more valid, well.., I suppose that’s okay, but it kinda indicates a certain desperation.
Let’s clarify a few things, shall we ?
1) I’m not, and never have been, opposed to government incentives, subsidies or investment. This sort of activity is a legitimate function for governments as managers of the economy.
2) All investment entails risk and a certain percentage of loss is the cost of innovation and advancement.
3) Government investment should be accountable, prudent and based on clear economic benefit not political or ideological motives.
4) The difference between government and private investment is the taxpayer gets no choice in where taxpayer funds are invested.
5) Governments shouldn’t use mandates,regulations etc, to distort of shield the consequences of failed projects or policies.
6) If you had quoted me accurately, you would have noticed I identified the US DoE as one of the more responsible government lending institutions.
Your comparison of 80% of businesses failing, as opposed to 18% of DoE projects, is disingenuous.
There’s a vast difference between a failed restaurant started with private money and a failed multi-billion dollar project funded with taxpayer funds !
Even the 17% figure is disingenuous because it doesn’t make clear how this figure is derived. Is this 17% of 100 projects with receiving equal funding, or the failed projects representing 47% of the losses ?
The Obama regime wasn’t the most profligate and irresponsible of government investors during the green boom. Probably that dubious distinction goes to Australia.
However, Germany, France the USA led the developed world in propping up failed projects for political or ideological agenda.
The misuse of complex mandates, regulatory policies, subsides, distorted accounting, invented costs, incomprehensible reporting methods, etc, by governments desperate to continue justifying failed investments is inexcusable.
That’s the difference between public and private capital. When privately funded enterprises fail, they’re either liquidated or sold to better managers.
Governments can rig the market so unprofitable enterprises continue operating at the expense of taxpayers and consumers.
There’s no need to list the failed enterprises that could never have operated without an imprudent government some sort of government incentive. Likewise, listing the truly colossal sums wasted on these enterprises, would take more room than this format allows, and would be very depressing.
Some government funding institutions have a better record tha, other. The DoE enjoys some measure of success as well as failure. Other government institutions,(not just US), were far more profligate.
Craig, when you try to justify government losses by referring to private investment, that’s a double edged sword ! When governments guarantee private investment,taxpayer exposure can be hidden. Failure can be disguised by regulatory measures for long periods so an illusion of success is maintained.
That’s the negative side of government investment, when deceit and self-delusion by the bureaucracy and political class becomes so systemic, the lie becomes reality !
It becomes disastrous when nations like the US, finance this sort of spending on borrowed money! The losses that accumulate can’t be “written off” in the accepted sense, instead continue to accumulate for generations.
That’s the main difference between PRC policy makers and Western leftist governments. PRC policy makers, know the truth, but don’t care since their lies can’t be challenged. Western leftists lie first to themselves, so they become incapable of objectivity and fiercely maintain illusions, believing the illusion to be reality.
That wouldn’t be so bad, except the delusions are always financed with other peoples money!
Government spending, particularly investment lending, needs careful, objective monitoring and scrutiny.
Let me further add the obvious: government spending is in general, or perhaps always, less accountable than private spending. It may amuse you to learn that when my kids were little, and that’s only 15 years ago, I was a Libertarian, on the basis that there is nothing the government can do more efficiently than the private sector. More recently, I’ve realized that government, as screwed up as it may be, is the only thing that will keep greedy people from ruining our environment.
Craig,
” is in general, or perhaps always, less accountable than private spending ”
WTF ?! Government spending should be more accountable than private spending because it’s other people money, extracted under duress and spent without consultation !
“greedy people from ruining our environment” !
Your emotive reply is the watchword for every ideologically motive waste of public money and a licence for incompetence and corruption.
Yes because the price of polycrystalline silicon dropped by 50% because the solar rebate program worked so well. Until then the price of polycrystalline silicon dropped by less than 10% a year for 20 years.
I see. Good point.
A good example of government support propping up an industry that could not exist without government support is atomic energy. Not only did we support the development of the technology, we exported it around the world. The government insures atomic power plants so if there is a problem we are all on the hook to pay the costs.
The disaster at Fukushima will be repeated if a tidal wave ever hit the east coast because the back up generators at our plants are similarly vulnerable to being put out of commission by the tidal wave. Imagine the Jersey Shore being uninhabitable with radioactive waste polluting the waters of the estuaries around the ruined plants. There are atomic plants up and down the east coast all in danger.
It’s not just the Nuclear industry getting huge subsidies. A 2011 study by the consulting firm Management Information Services, Inc. (MISI) estimated the total historical federal subsidies for oil, natural gas, and coal for the years 1950–2010.
In 2010 dollars –
Oil Industry: $369 billion
Nat. Gas: $121 billion
Coal: $104 billion
Imagine if we put that money instead into renewables and retraining coal workers.
Beau Bennett,
There are just two problems with your reasoning.
1) Most of these “subsidies” are in fact ordinary tax concessions and deductions available to all US taxpayers.
2) Without the revenues generated by the investment in these industries the US economy would be in no position to invest in anything, let alone renewable energy.
It’s not as simple as inventing a simplistic scenario you can solve with a fanciful solution.
It’s always seems so easy when spending other peoples money to avoid economic realities.
I might point out that if there had not been such an amazing drop in lithium battery prices Beacon Power would be doing much more with their fly wheel energy storage
Here is a good video “The Great Energy Disruption is Happening Faster than Anticipated” of change that is coming.
https://youtu.be/Kxryv2XrnqM
I like all the graphs and historic context but the real question is what are the unforeseen disruptions going to be? I think it is going to be local energy independence. With this new “inexpensive” storage it is going to be pretty easy to get energy independent with no need to share with the grid. I see micro-grids popping up where the PUC allows (not PA)
At issue here is the central question:
What is the goal of government investment?
If the goal is to maximize returns for the investor, then you care a great deal about how every single company in the portfolio is doing. If the goal is to find a solution within a timeframe, you might well be happy if even 1 out of a thousand companies bears fruit and makes something viable.
In short, is this the space race of the 50’s and 60’s, or do we treat the DoE as a venture capital investment firm?
I was highly offended by Soylindra, and am equally offended by Tesla. For me, this is a crisis; and the government’s job is to find and target radical technologies that have a chance at becoming disruptive. Part of the accountability here is evaluating whether the technology truly has a chance at becoming disruptive. With Soylindra, the technology required a ~2.5-fold increase in the surface area of thin-film panels along with a substantial increase in cost of glass shielding for the panels, all for a ~30% increase in the capacity factor of the panels. It was supreme stupidity at its finest, and the investment choice had to be motivated by corruption…
But in many cases I lament the chances not taken far more than I lament the attempts that failed. We have to find disruptive solutions to the greatest challenge in the history of mankind, and those disruptive solutions must be capable of changing things on a scale that can radically lower emissions within 50 years. That doesn’t mean only making bets that are absolutely certain which themselves are minor tweaks on already mature technology…
You have to make bold plays. Most of those will – by the nature of the beast – fail. But there should be some honest ability to defend the choices taken. You should be able to show a reason why you believe the technology had a shot at becoming disruptive. Soylindra, and many others, fail utterly at this test and are rightly panned.
That doesn’t mean we should stop government investment into possibly disruptive technology. It means we should change the method of choosing what technologies to invest in so as to make certain the selection process is defensible, and then radically increase (10-fold) the total investment into potentially disruptive technologies, damn the costs.
Craig,
Glenn makes an valid point when he asks,
” What is the goal of government investment?”
Governments don’t have a magic money tree to accommodate every public expenditure !
For every dollar spent propping up a political/ideological unprofitable project, a hospital is denied life saving equipment, aging infrastructure delayed, programs for the needy not funded, education neglected, etc, etc.
All the while public debt keeps increasing.
Glenn argues, as do many others, that the issues of climate change are so important they merit priority over prosperity and prudent economic management.
Maybe so, or maybe this is a even greater threat ! Poorly managed, debt burdened economies will never afford the sort of expenditure Glenn advocates.
Economies of the Western World are still reeling from the impact of 10 years of excessive expenditure, funding ideologically conceived projects and industries proved politically popular.
Meanwhile, damage to the economy was masked by yhe growth of prosperity for an articulate, well educated, tech savvy urban elite.
Most Western nations have not only developed two-speed economies, but a two-speed society ! Prosperity and productivity is a cruel illusion.
The real tragedy is by politicizing and not prioritizing “green” targets, real opportunities will be lost in preference for expensive, unproductive, “symbolic” projects.
Maybe Advocates like Glenn should not abandon their environmental concerns, but re-think with a greater degree of objectivity and responsibility, the logistics and priorities of achieving the goals of their grand crusade.
Marcopolo,
Your attacks ring quite hollow here.
As of 2014, the DOE had lost 780 million dollars in the prior decade of investment in renewable energy, and the program has done significantly better after Chu came in and wiped out hydrogen transport and algae oil programs (total waste).
While I’ve stated the selection process needs to be better organized, so as to be more defensible (hypothetically resulting in a lower portion of failure), the idea of scaling the program up to that we could afford ~8 billion in losses over the coming decade would not break the bank.
You could pay for that many times over by eliminating the purchase of one f-35 jet.
Investing in disruptive technology costs very little compared to most of the top-line budget items… It could easily pay off by tensfold, and by tens-of-thousandsfold if you avoid the temptation to do silo budgeting accounting.
The gnashing of teeth over small budget items on this scale have nothing to do with fiscal concerns… and everything to do with knee-jerk obstruction of progress.
Glenn,
“The gnashing of teeth over small budget items on this scale have nothing to do with fiscal concerns… and everything to do with knee-jerk obstruction of progress.”
You seem obsessed with defending the US DoE. If the DoE were the sole government funding instrumentality, and the US Federal government the only government on earth, you might have a point.
However, the Doe is only one of a myriad of government agencies, while the US Federal government has 50 states also funding schemes. Nor is the US the only government! 196 national governments around the globe, many with state or provincial governments also use public investment as means of managing the economy.
In addition, there are countless international economic bodies also funded by taxpayers.
Your myopic viewpoint is either genuinely xenophobic or disingenuous. The discussion is one of principle, not individual instances.
I thought you defined the principle when you posed the question;
” What is the goal of government investment?”
Obviously, for you the goal of government investment is the pursuit of political/ideological agenda, regardless of cost to the economy.
Your defense of public waste and reckless spending is expected from those who believe governments have unlimited money to waste on imposing ideological solutions, regardless of cost.
You, like many others, are great spenders of “other peoples money” ! Taxpayer funds are entrusted to governments to be spent providing services and good governance for the the benefit of the taxpayer and economy.
Wasting vast amounts of public money on schemes with no other value than furthering a political-ideological agenda is a breach of trust.
That’s the fundamental difference between government investment and private investment. Private investors can do what they like with their own money, but governments must act as prudent trustees. (all the more so since the individual taxpayer has no option and little say in government expenditure).
The continued US government support of the corn based Ethanol industry, is a good example of how even well intentioned government policies can go wrong and become impossible to eliminate.
Corn Ethanol is a US government created economic and environmental disaster. The negative effects have global consequences, yet the problem remains. The industry survives because it wields huge political power, well organized by the self interest of those involved.
That’s the danger of government investment. Unlike private enterprise, governments can, and do, continue to prop up failed, even harmful projects at great cost to the economy and public purse.
The issues about military spending are a separate argument,but the principle is the same. The first job of government is to secure national defense.
The effectiveness of taxpayer funded military expenditure needs to be effective, prudent and accountable.
That principle should apply to every taxpayer funded investment.
And once again MarcoPolo shows that he absolutely no concern for progressing the discussion. He just repeats the same ideological nonsense that he uses as a distraction whenever he’s losing an argument.
*shrug*
If you cannot respond to what I actually wrote, and progress the argument, then we’re done. I’m not feeding trolls today.
Glenn,
Argument ? Curious, and here was we of the mineral based persuasion. thinking a discussion was about an exchange of viewpoints, but obviously things are different where you live than our poor mountains.
Ah well, never mind, we brought our own food for our little party under this fine bridge.
You should have stayed, it’s your sort of place, after all somebody else paid for this fine bridge….we don’t even mind if you gnash your teeth….
Many economists believe that the trade-off between a strong economy and environmental stewardship is a false dichotomy. I happen to share that perspective.
Now, if your point is that governments can’t afford to waste money, I think you’ll get zero push-back there, but it’s totally noncontroversial; it’s like saying that cancer is bad or rain is wet.
Craig,
I agree, good environment practice and a strong economy don’t have to be mutually exclusive, in fact it’s demonstrable that wise conservation policies are beneficial to the economy.
However, were the controversy begins is when governments pursue wasteful policies to accommodate a political-ideological agenda.
Governments are not in the business of being in business. The role of governments is to provide overall economic structure and policies for a sound economic environment.
That’s why I think Glenn nailed it when he observed, ” What is the goal of government investment?”
Well, as I said below, the fact that governments can’t afford to waste money is true but hardly controversial; it’s like saying drunk people shouldn’t drive.
I also don’t think you’ll find too many people who think that government should take on the duties that have traditionally performed by the private (for-profit) sector.
Well, as I said below, the fact that governments can’t afford to waste money is true but hardly controversial; it’s like saying drunk people shouldn’t drive.
I also don’t think you’ll find too many people who think that government should take on the duties that have traditionally performed by the private (for-profit) sector.
I tend to agree with you Glenn if only on the basis that such spending will also increase economic development and have presently unknown benefits in many industries… as did the space race.
Marco while you condemn careless government spending a corollary issue but rarely mentioned is careless government seeking revenue. Governments have been infected with the idea that they must be “run like a business” and it seems as if almost no opportunity is missed to increase government income. From this we have the shameful and potentially unconstitutional laws of civil forfeiture, we have many government regulations that seem centered around producing income, and then increasingly subsidies and tax “relief” for the wealthiest.
There are some who are saying that “the people” have lost control of government which is now serving corporate interests. Corporations could act like the proxy called the “electoral college” if every citizen had a part of all the corporations. But this is not the case either.
In a perfect world, government would neither gather excess income nor do excessive spending however much of what the government does is a balancing act. Government is a force outside the market where politics determines economic winners and losers. It has always been so.
Breath,
You are correct when you point out no perfect utopia exists.
Governments, Constitutions and Social structures are not perfect and seldom accommodate all the dynamics of rapidly changing social factors completely.
Over the last 150 years, corporations have emerged as the dominant participants in economics. With very few exceptions, individual wealth has been transferred into the more collective wealth of corporations which have developed many of the cultural attributes of older social institutions when it comes to participating in representatives government.
Since government and the law hold corporations to many of the same laws as natural persons, ie; Taxation, Criminal sanctions, Civic responsibility etc, the rise of the “Corporate Citizen” was inevitable.
Such a development angers utopians who hanker after a mythical village society, or a society where the means of production, distribution and exchange are controlled by government
Economic prosperity is the uppermost concern for most citizens. Without a prosperous economy, managing other dynamics of society becomes very difficult. Excluding any participant in the economy from being heard is unproductive.
The idea of corporate citizens, may be difficult, but mot without precedent.
Marco, I would be interested if you could direct me to the historical acceptance of “corporate citizens” prior to the various US Supreme court decisions in the last two centuries.
Alternatively, if the US is going to hold corporations to US law and grants rights what about accountability and capital punishment for crimes. Then do we kill the corporation economically, just the board and management or all the stockholders as well? The death of 908 environmentalists in one decade might just be coincidental to their struggles to preserve the land, and US corporation may never get involved in such activities but this just sort of “beggers belief.”
http://www.slate.com/blogs/the_world_/2014/04/15/report_finds_908_environmentalists_killed_over_last_decade_half_of_them.html
Breath on the Wind
Obviously corporations are not natural persons in the strictest sense, yet corporate law has evolved to recognize that corporations have acquired many of the traditional obligations, responsibilities liabilities and duties of natural citizens.
Corporations and office holders can, and often are, prosecuted in both criminal and civil proceedings. Corporations are subject to a wide range of penalties.
I guess one precedent close to every American’s heart, would be the maxim, “No taxation without representation” !
The concept of “corporate citizenship” is wider than just profit making business entities. The concept extends to a wide range of organizations including such examples as the Sierra Club, Automobile Association, Veteran Associations, Unions, Universities, Trade and Professional bodies, etc.
It’s long been recognized these entities are participants in the dynamics of political life in a representative democracy.
It’s important for public debate to be enriched by the widest range of participants as possible, especially for stakeholders in the national economy.
You are only a supporter of free speech when you defend the right of people and organizations you dislike to exercise free speech.
I would just as enthusiastically defend the right of organized labour to contribute to the political dynamic as I depend the right of Corporate entities.
I’m not sure what relevance your reference to the deaths of 908 environmentalists in one decade, has to “corporate citizens”.
Most of these deaths seem to have occurred in Brazil as a result of local disputes. It’s sad, but difficult to see what action can be taken by forces outside Brazil to rectify the situation.
I have a friend who was a petroleum engineer for Exxon in the 80’s. When the price of oil was high he would be working, and when the price of oil dropped he was laid off. This despite the passage of the oil exploration tax credit which the industry claimed they needed to offset the cost of exploration. It was just more money in the company coffers and did not spur new exploration.
Why is it that when the oil and gas industry gets a tax credit it is eternal but renewable energy tax credits are always passed with an expiration date? Look at the jobs produced by the two industries and the cost and benefits of each industry. It is a no brainer that we should eliminate all tax subsidies for all energy sources and let the market decide!
Personally, insofar as renewable energy is public good, I see no moral problem with subsidizing it.
It’s certainly a no-brainer to pull the subsidies from oil, in that it’s a social evil, and the most profitable industry in the history of humankind. The problem, as I’m sure you’re aware, it’s that it’s written into our laws and thus needs an act of Congress to rescind it. When this comes up periodically in the Senate, it loses, and then we find that the people who voted to maintain the subsidies received 5 – 6 times as much in campaign contributions from the oil companies as those who voted to pull them. It’s pure corruption.
Craig,
I’m curious, could you please list these oil “subsidies” so corruptly written into legislation ? I’m having a problem actually finding any that aren’t either obsolete or very insignificant. I deduce from your passionate outrage you must have a lot of well researched material .
I note President Obama could only indentify less than $2.7 billion which is insignificant for America’s largest taxpayer and 28% of the US economy.
The oil industry is also an enormous foreign exchange earner, helping to redress some of the appalling US trade imbalance.
Could it be that as an American you’re biting the hand that feeds you ? I can’t believe you would just repeat poorly informed rhetoric due to a simplistic ideological bias ?
I’m sure that’s not your intention, so I’ll be glad to learn of the research material behind your assertions even President Obama wasn’t able to obtain with all his resources ?
correction, he was a petroleum geologist.