Solar Power: Can we learn from “Old Europe?”
In Mr. Obama’s weekly radio address at the beginning of July (that was Day 75 of the BP oil well disaster), he touted the country’s transition to a “clean energy economy” and announced the Department of Energy’s “award of nearly $2 billion in conditional commitments to two solar companies.”
One government beneficiary is Abengoa Solar, a Spanish engineering company, that has agreed to build a solar power plant in Arizona. The other beneficiary is Abound Solar, a Colorado company, which will use $400 million in loan guarantees to expand solar-panel manufacturing plant in Colorado and to open a new plant in Indiana.
Leaving aside for the moment the possible shenanigans abounding in the Abound Solar deal where one of its executives is Russell Kanjorski, the nephew of Rep. Paul Kanjorski (D. Penn.), chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises,
Mr. Obama is willing to risk $2 billion in taxpayer money on projects that, in total, will create only will 1585 permanent jobs according to the companies themselves. That’s $1.25 million per permanent job for those of you keeping count.
Perhaps that’s unfair - these are just two companies and two specific projects. What’s $2 billion when the deficit is a trillion.
Let’s look at the bigger picture. Where is the U.S. headed on solar?
Mr. Obama approvingly uses Europe as his model for renewable energy goals. But, as Mr. Obama pushes more solar investment by the federal government, Spain and Germany, two solar powerhouses in Europe, are cutting back solar subsidies. Does “Old Europe” know something that the Obama Administration doesn’t?
Europe has subsidized solar power through feed-in tariffs guaranteeing producers receive fixed wholesale prices for their output usually for 20-year timeframe. With budget deficits rattling Europe, Spain has cut subsidies for new solar projects and threatened to reduce retroactively subsidies in the solar sector by 30% “either by directly cutting the feed-in tariff or by capping the number of production hours receiving the subsidy.”
Spain probably will have to to backtrack from that “retroactive” proposal as investors have voiced their displeasure (to say the least ).
Nonetheless, Europe solar energy investments are under pressure as European governments look for any way to reduce deficits. It would be nice to think that the U.S. could learn something from Old Europe and take the good ideas and not make the same mistakes, but will we? Centralized decisions about the economy are always based on incomplete information as Hayek taught. Having the federal government picking the winners and losers in the renewable energy field may be treacherous.
Further reading:
http://www.bloomberg.com/news/2010-06-24/danish-pension-funds-with-37-billion-oppose-spanish-solar-subsidy-cuts.html
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/03/AR2010070302219_pf.html
Photo: http://www.flickr.com/photos/asterix/151969001/
Copyright 2010 - K.J.Collins
