The Case Against Section 1603 Grants ($5 billion easy pieces)
Congress is rightfully concerned about closing the huge, systemic budget deficit. In this climate, eliminating Section 1603 grants for politically correct renewable energy should be considered an easy target.
By way of background, this particular subsidy came about due to persistent pressure from lobbying groups like American Wind Energy Association (AWEA). Their main argument is that these grants will promote jobs and economic benefits. Of course, as lobbyists this is what they are paid to say. But in these times of more focused financial prudence, we need to critically look at such expenditures in a more objective light — especially since we are talking about some five billion dollars.
The 1603 Grants should be cancelled entirely. In my view the best way to see how ineffective these expenditures are is to consider what the alternatives are for this same money. In other words, if the U.S. Congress wants to subsidize the energy business (a matter that is beyond the realm of these brief comments), then the real question is: Are 1603 Grants the most effective way to do this? If not, then they should be defunded.
Claim One: Jobs
1) If the Five Billion was spent on other, more reliable forms of energy (e.g. gas, nuclear or geothermal) it is very likely that MORE jobs would be created.
2) Numerous independent reports have concluded that the cost per job that these and similar grants generate is VERY high.
3) Some independent studies have concluded that when we look at the big picture, that there is actually a net job LOSS from subsidizing renewables. One of the key reasons for this is that the electricity produced by renewables is higher than our conventional sources, which leads to business and consumer cut backs. There is no such job loss for building economic forms of power generation; quite the opposite.
4) Some independent studies have shown that many of the jobs created when supporting renewable energy are actually foreign jobs. Is that a good use of our limited funds?
Claim Two: Economic Development
The fact is that if this same money went to fund reliable, clean, sustainable energy like nuclear power, that there would be just as much (if not more) economic development that will result. A particular area of importance is mini-nuclear. Providing political and economic support for that one area would be a game-changer in the energy business and have profoundly beneficial economic results for the US. We need to be the leader in this technology of tomorrow. (See here for more info.) There is also merit to supporting industrial geothermal. This could provide reliable 24/7/365 energy (which wind and solar do not) and be a sustainable, CO2 free source of electricity. An MIT study also concluded that it would be economical.
Claim Three: ‘Energy Independence’
Funding wind energy with 1603 Grants does nothing for energy independence which is really about oil imports and transportation fuel, not electricity generation.
Also consider the fact that in every wind turbine there is something like 4,000 pounds of rare earth elements. China produces 95± percent of these rare earth elements, so the more turbines we buy, the more dependent we are on the China–hardly a good or “sustainable” energy-related strategy.
Claim Four: CO2 Reduction
Despite all the claims of the wind lobbyists there is zero independent scientific proof that wind energy makes a consequential reduction in CO2.
One reason is that there is no such thing as wind generation by itself. Wind must ALWAYS be augmented by a conventional source of power, usually by a low-cost but low-efficiency version of gas turbines. Thus the net CO2 savings of this combination are very low — significantly less than would be attained by the same amount nuclear or geothermal capacity.
Mini-nuclear and geothermal are stand-alone power sources, in contrast, and produce no CO2.
Claim Five: Handouts Needed
Wind lobbyists are always pleading poverty, which is also what they are paid to do. The fact is that wind energy development is one of the most profitable businesses in the country. T. Boone Pickens stated that as a wind developer, he expected to make at least 25% ROI per year! Why do we need to subsidize such a lucrative business?
Additionally the OMB and Treasury found severe problems with “the economic integrity of government support for renewables.” Such an assessment should give Congress severe pause for continuing such handouts when sooner or later, the bubble industry will pop.
When all is said and done, Section 1603 Grants (and other such nostrums) support a high-cost, low-benefit sources of energy. Clearly resources can be spent better from any political perspective. The Right can say that the resources belong in the private sector for better deployment. The Left can chose human-need budget items over aiding rent-seeking corporations.
We should focus on solutions that have a genuine scientific assessment (i.e. technical, economic and environmental) that prove that they are cost beneficial. No such assessment exists for industrial wind and off-grid solar projects that are government dependent.
Afternote: Here is a new report about the record profits of Spanish wind company Iberdrola. The statement is made: ”The Group has benefited from more than $1 billion in U.S. government incentives for wind power, the largest obtained to date by any renewables company.” So why are we borrowing a Billion dollars from China to enrich the coffers of this very profitable foreign company? What am I missing?
Note: This brief introduction can be supplemented by this blog on windpower: http://tinyurl.com/343wrzv.