At a time when the federal government is debating whether to raise the debt ceiling, the U.S. Department of Energy’s Loan Programs Office (LPO) is offering guaranteed financing to First Solar Inc. for three solar panel projects in California for $4.5 billion. Not million but billion.
Carefully analyzed, these projects do little to fund efficient energy production or create permanent jobs. Such largesse is one of many rich targets for immediate deficit reduction in any budget deal.
LPO specifically targets projects that promote clean energy and includes “job creation; reducing dependency on foreign oil; improving our environmental legacy; and enhancing American competitiveness in the global economy of the 21st century.”
Specifically, these loan guarantees promote projects that include biomass, hydrogen, wind and hydropower, advanced fossil energy coal, carbon sequestration practices and technologies, electricity delivery and energy reliability, alternative fuel vehicles, industry energy efficiency projects, pollution control equipment, nuclear, and solar power.
Moreover, support by the LPO is for borrowers in case they default on their financial obligations while the project is constructed. Clearly, this is all about government picking energy winners at the expense of market preferences and forces.
The U.S. Energy Information Administration (EIA) notes that in 2010 only 1% of energy consumption was from solar power. Yet 15 out of the 23 generation LPO projects have been for solar power plants. The cost of these 15 projects has been $16 billion–40 percent of the total cost of all guaranteed projects.
In contast, nuclear power makes up 9 percent of all U.S. energy consumption has received $10.33 billion of support. And it is the one mass carbon-free electrical generation source outside of hydropower.
The benefits of these guarantees are exaggerated. Job creation from these three solar panel projects is estimated to be 1,400 new jobs, which is $3.2 million per job! And many of these jobs are temporary.
A previous $1.6 billion guarantee for a solar panel project, Bright Source Energy, produced 1,000 temporary construction jobs and 86 permanent jobs. That’s $18.6 million per permanent job!
This is a huge taxpayer commitment for an energy source that is already subsidized and supported heavily by the federal government, where the average amount provided by the federal government per kilowatt hour (kWh) in 2007 was $0.24 for solar. In contrast, nuclear was only supported by $0.16 per kWh. Estimated total levelized costs of new generating technologies to produce electricity in 2016 is estimated by EIA to be $0.21 per kWh for solar versus $0.11 for nuclear.
The high cost could be understood if the output of solar powered plants was high, but this is clearly not the case. For example, EIA data indicates that a solar plant’s capacity factor is expected to be 400 percent lower than a nuclear plant.
The lack of benefits and the substantial costs of these solar panel projects not only distort the energy market, but are a waste of tax dollars. The sources of energy we consume most (i.e. petroleum, natural gas, coal, and nuclear) are not on the government’s to-do-list, but they are on the list to phase out and create a less efficient economy in the process. When it comes to increasing energy efficiency and creating jobs, these LPO guaranteed loans are not the answer.
Vance Ginn, originally from Houston, earned a BBA in Economics and Accounting and minored in Political Science and Mathematics at Texas Tech University. Currently, he is working on his doctorate in Economics and teaches Intermediate Macroeconomics at Texas Tech.
Mr. Ginn is an alumnus of the Institute for Humane Studies, has interned for two U.S. Congressmen from Texas, was an energy-policy intern for the Armstrong Center for Energy & the Environment, and is a Koch Summer Fellow. His areas of interest include individual liberty, the effects of energy prices on the macroeconomy, environmental regulations, fiscal policy, and monetary policy.
In his spare time, Mr. Ginn reads non-fiction books and plays drums with a number of rock bands.