Over at Bloomberg, former Microsoft executive and founder of Intellectual Ventures Nathan Myhrvold has a sharp commentary on the stupidity of subsidizing inefficient power technologies:
This month, the U.S. Department of Commerce launched a formalinvestigation into complaints, lodged by the U.S. solar-cell manufacturers, that the government of China is funneling loan guarantees, grants and subsidies to its solar-cell companies.
Apparently, the Commerce Department is shocked, shocked to learn that a government would subsidize the solar industry.
A few days later, the New York Times described a "gold rush" under way in the U.S. as builders of wind and solar farms cash in on grants and loan guarantees offered by both the federal government and various states. These incentives effectively allow players at every level of the renewable-energy industry to lock in profits of 10 percent to 30 percent a year for the 20- to 30-year life of their plants—not bad considering 10-year Treasury bonds are paying only 2 percent.
Both of these developments are symptoms of a larger problem with the world's current approach to renewable energy. The range of prospects being tried now is dizzying—from high-tech windmills to biofuels, from corn to algae, from silicon photovoltaic cells to boilers heated by thousands of reflected sunbeams. But they all share one thing that makes them appealing to investors: taxpayer dollars. One of the ugly secrets of the renewable-energy industry is that its products make no economic sense unless they are highly subsidized.
He cites figures from the Energy Information Administration showing that levelized costs (includes capital and fuel costs for the life of the projects) of current versions of renewable energy technologies are much more expensive (and will remain so) than conventional sources of electricity generation.
Comparing the Costs of Electricity
Myhrvold makes this excellent point:
Some people fret that China will reap the green jobs of the future, but no economically viable green-energy product exists. It makes no sense for the U.S. to try to dominate a money-losing industry, especially by guaranteeing profits to inefficient power plants for 30 years.
Well, yes. Go here to read the whole article. For more background, see also my June 2009 article, It's Alive: Alternative energy subsidies make their biggest comeback since Jimmy Carter.