Solar Power—"It makes no sense for the U.S. to try to out-compete China for domination of a money-losing industry."

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Jimmy Carter's vision of our solar powered future

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

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.

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  1. But they [renewable energy systems] 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.

    And that is the crux of the issue: Just how many tax dollars will it take to out-compete the Chinese subsidies in a dead-end industry. Looks more like a “Keeping Up With The Joneses” game and just as productive.

    1. But if we don’t out subsidize Chinese solar power today they will have a monopoly on money losing solar power forever.

      1. We must not allow a money-losing solar industry gap!

  2. Interesting that the graph does not include the costs of nuclear power.

    1. and the enormous backend costs of decommissioning.

      1. Re: Moo?

        and the enormous backend costs of decommissioning.

        I’m sorry, O3, I wasn’t paying attention: Did you moo something?

      2. Nuke owners are required to pay into a decommissioning fund for each unit. Read their annual reports, you’ll see the costs are accounted for.

  3. “Mr. President, we must not allow a red ink gap!”

    Who would have thunk Chinese politicians and bureaucrats suck just as badly at picking winners and losers as those in the United States?

    1. Re: Fist of Etiquette,

      Who would have thunk Chinese politicians and bureaucrats suck just as badly at picking winners and losers as those in the United States?

      But they do it while eating nothing but white rice and insects. I thus consider their effort quite the greater feat.

    2. Who would have thunk Chinese politicians and bureaucrats suck just as badly at picking winners and losers as those in the United States?

      LIES!!11!!1111

  4. 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.

    Won’t somebody think of the cronies?

  5. The Myhrvold article misses the point. Government subsidies aren’t really designed to promote green energy development. They’re just a politically popular way to fund their friends’ companies. Or at least they were popular until their friends’ companies started going bankrupt.

  6. Ronald, people: let’s not forget that fossil fuels are heavily subsidized with taxpayer money and artificially low oil prices due to billion of dollars of U.S. military spending in the Middle East.

    Not mentioning this is convenient, but misleading.

    1. How is the fact that industry A is subsidized (although much of the taxpayer subsidy is actually depreciation of extracted assets) an argument for subsidizing industry B?

    2. Then we should stop propping up the oil rich states of the Middle East. Let them fund and staff their own militaries.

  7. Doesn’t Intellectual Ventures get all its revenue from a government-created/protected/enforced market in IP?

    Of course that does not mean Nathan is wrong, just that he is a douchebag.

    1. Is IV a patent trolling company, or am I thinking of something else?

      1. You might be thinking of Righthaven but IV has troll DNA.

      2. They’re definitely patent trolls.

  8. RB: U.S. Constitution, Article 1, Section 8, Clause 8:

    Congress Shall have Power “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries….”

    1. Constitutionally sanctioned rent-seeking is still rent-seeking, and patent trolls are neither inventors, nor does their extortion of actual inventors and innovators promote the progress of science and the useful arts.

    2. And patent trolls are just another unintended consequence.

    3. if a copyright is indefinitely extended, is it still “limited”?

      Also, the threshold for “discovery” has gotten awfully low hasn’t it?

      1. “Hey guys, I discovered I can make it so that a customer generates a purchase with only one click of the mouse.”

        um…. yeah.

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    The system i constructed following those instructions reduced my enegy bill arround 65-70% in summer and 50% max at winter, and it cost me under 1.000$, so the money back is pretty fast.
    If you are interested and handy person don’t hesitate to build such a system. Solar panels are the energy resource of the future.

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