Guest Post by Willis Eschenbach
Sounds like a scam, huh? But it’s real. Let me explain how people (no, not you or me, don’t be foolish) can make a guaranteed 29% return on their investment. However, to make it clear, I’ll need to take a short digression. I ran across a National Geographic article on where the world gets its electricity. Here are their figures:
Figure 1. World electricity production by fuel type. Renewables (defined by AGW activists as solar-, geothermal-, wind-, and biomass-generated electricity, but not hydroelectricity) are 2.7% of the total electricity use. Data from National Geographic
You can see why the AGW supporters’ heads are exploding as the Durban climate party approaches. It is obvious from the chart that years and years of subsidies and tax breaks and IPCC reports and various urgings by well-meaning but clueless pundits and billions in wasted taxpayer dollars have not succeeded in getting renewables up to even 3% of the total electricity generated. Less than 3%. It must drive them round the twist to contemplate their stunning lack of success at making water flow uphill.
Despite that history, you know how they say on those TV commercials, “But wait! There’s even more!”? In this case, it’s “But wait! There’s even less!”
The reason that its even less is that Figure 1 just shows electricity. It doesn’t show total energy consumed, which is a much larger number. Total global energy consumption is shown in Figure 2.
Figure 2. World energy consumption by source. “Renewables” are solar, geothermal, wind, and biomass. Note that the traditional use of firewood for cooking is not included. Data from the BP Statistical Review
So although renewables have (finally) gotten to 2.7% of the electricity production, they still only represent 1.3% of the global energy consumption. And this is with heaps of subsidies.
And I don’t mean just a bit of money to get them over the hump. Huge subsidies. Because of the total failure of renewables to penetrate the market, the AGW supporters are desperately throwing money at renewable technologies. The New York Times showed a graphic for one such power plant in California. Their graphic is reproduced below as Figure 3.
Figure 3. Federal and State Subsidies for the California Valley Solar Ranch.
Unfortunately, the Times didn’t really discuss the business implications of this chart, so let me remedy that omission.
First, how much money did the investors have to put in? Since the project will start earning money once the key is turned and the market is guaranteed, the investors only had to put up the total capital outlay of $1.6 billion. Less, of course, the generous government grant of nearly half a billion dollars. Total invested, therefore, is $1,170 million dollars.
On that money, the investors stand to make a net present value of $334 million dollars … which means that due to the screwing of the taxpayers and ratepayers, a few very wealthy investors are GUARANTEED A RETURN OF 29% ON THEIR INVESTMENT!!!
How is this fair in any sane universe? AGW supporters talk about the 1% having too much money, and here the same folks are shoveling the money into the one percenters’ pockets. The 1% weren’t rich enough already, so I have to foot the bill for them to get a GUARANTEED 29% RETURN on their investment?
Note also that a huge part of the money, some $462 million dollars, is coming from the California electricity ratepayers, including yours truly, through increased charges for electricity. This means that these solar scam artists are being allowed to sell their power at 50% ABOVE MARKET PRICES!!! Not just a little bit above market. Fifty percent above the market price! Where is the California Public Utilities Commission whose job is to protect the consumer? Oh, I see … the are the ones who agreed to the 50% above market rate hike … for shame.
Pardon my screaming, but this insanity angrifies my blood mightily. Ripping off both the consumer and the taxpayer to allow millionaires to make a guaranteed 29% return on a not-ready-for-market technology, and charging ratepayers 50% above market for the electricity? That is reprehensible and indefensible. In particular, the rate hikes hit the poor much harder than the wealthy, so we are billing the poor to line the pockets of the 1% … and all this in the name of enlightened carbon fears.
A few last numbers to consider. Without the layers and layers of subsidies, the investors would have had to put in $1.6 billion, and they would have suffered a loss of $1.1 billion dollars. The investors wouldn’t lose just a little, they’d lose their shirts, their pants and their ties … and seventy percent of the money they put in. That’s how far this technology is from being marketable. Not just a little ways short of profitability. A long, long, long ways from being marketable, more than a billion dollars short of making a profit.
Finally, the total subsidies for this plant were $1,430 million dollars. So this single “successful” green project will cost the consumer three times what Solyndra cost. And in return … we get energy priced at 50% above the market. Thanks, Energy Department, glad to know you have my back.
You can see why I’m screaming … the inmates have taken over the asylum. Steven Chu, the Secretary of Energy, says we need more successful green projects in order to survive the depression … me, I fear we won’t survive Secretary Chu.
I know we won’t survive if we follow Chu’s brilliant plan for ‘successful green projects’ that do nothing but line the pockets of the 1% with billions in subsidies. That path is the poster child for the concept “unsustainable”, and Secretary Chu is the poster child for the brilliant idiot. He is undoubtedly a genius in his scientific field, but whoever unlocked his ivory tower and let him loose on the business world has some serious explaining to do.
Here is the problem with Energy Secretary Chu. His failures are bad enough. But his successes are lethal.
w.
So, if the world gets 41% of its electricity from coal, but only 30% of its energy from coal, does that mean that switching to electric vehicles will increase coal use?
So, since coal produces more CO2 per unit of energy than other fuels, doesn’t this mean that electric vehicles will increase CO2 as compared to oil based vehicles?
Just asking.
Several studies and tests have concluded that your average EV, run entirely on coal-generated electricity, will be roughly the same for emissions as a very fuel-efficient petrol auto.
The only link I can find at the moment is a rather old one from Slate:
http://www.slate.com/articles/health_and_science/the_green_lantern/2007/12/the_electric_vehicle_acid_test.html
It’s probably worth pointing out that, even if you consider EVs to have a “long tailpipe”, their emissions would be confined to generation plants, where they could be better managed or sequestered, and there would be no emissions, such as ground-level ozone, sulfur dioxide, etc in population centers that are typically well away from coal plants.
Also, in most of the Western world, the power generation capacity is more than enough to handle the most optimistic adoption of electric vehicles. What does need considerable effort, in many places, is the local grid
Gail Combs says: (November 19, 2011 at 6:08 am)
“Obama Signs Landmark Wild & Scenic Rivers Bill”
I wonder if some future president might need to have an act passed by congress that allows him to clear-cut and strip-mine national forest and park lands to pay off the national debt? According to Bill O’Reilly, the Governor of California might need that type of authority very soon.
Redistribution of wealth both within and among nations is absolutely essential”” John Holdren, Obama’s Science Czar – Human Ecology: Problems and Solutions (1973)
Does that mean the 250+ millionaires in congress are going to give the rest of us some of their money?
“Bill Illis says:
November 19, 2011 at 5:15 am
The money should be going into research of new methods which will be efficient enough rather than continuing to use this assumption that economies of scale and small incremental improvements will reach the goal – because it won’t.”
Theoretical efficiency is limited by physical laws, and our current understanding of them. Nature has been working on solving this problem for quite a long time and so far hasn’t come up with anything more efficient than photosynthesis.
Maybe some day someone will discover a low cost paint that you can spray on your roof that will generate electricity. The current approach appears to be centered on solar panels that can over their 20 year lifespan generate as much energy as it took to produce them.
However, with subsidies this can be improved – not so they generate more power – but to reduced the costs and thereby hide the amount of power it took to produce the panels.
Cecil Coupe says:
November 18, 2011 at 4:19 pm
It’s worse than you thought. The company is SunPower (SWPR) and this only one of their efforts. There’s been a lot of shareholder value removed. Everybody is getting the short end of the stick.
Not everyone. The folks that made it happen, with friends in high places, they made out like bandits.
Kelvin Vaughan says:
November 19, 2011 at 6:56 am
Maybe so. But if somone says “quadrillion”, I have a fair notion of what they mean. Is someone says “billiard”, I get out my cue.
Mr. Spock had very little real world experience.
Do we have a dollar for dollar comparison on all coal and oil vs energy produced with renewables? Comparing what $1 produces in renewables vs $1 of oil or coal would be the best way to compare. Comparing subsidized renewables with what the free market spends doesn’t give an honest look at renewable’s shortcomings. It still makes a great point: Government subsidies can’t even make a dent.
I would love to see a complete cost-benefit analysis, including all “externalities” of fossil fuels, renewables and nuclear.
Do any such studies exist?
ferd berple: So, if the world gets 41% of its electricity from coal, but only 30% of its energy from coal, does that mean that switching to electric vehicles will increase coal use?
So, since coal produces more CO2 per unit of energy than other fuels, doesn’t this mean that electric vehicles will increase CO2 as compared to oil based vehicles?
maybe. maybe. It depends on whether a conversion to electric vehicles occurs faster than a conversion away from coal. Personally, I doubt that purely electric vehicles will ever make up a large share of vehicles. But I am sure that I can not “see” further than 10 years into the future, if that.
ferd berple: The current approach appears to be centered on solar panels that can over their 20 year lifespan generate as much energy as it took to produce them.
You are behind the times. Current generation pv panels produce more electricity than they have consumed after about 1 1/2 years. They produce at least 80% of rated peak power for at least 30 years. The estimated rate of energy return (energy harvested divided by energy input) is greater than with the Canadian tar sands; but the latter produces a nice liquid fuel.
Steven Chu, Energy CEO
Bill Illis: The subsidies are given on the basis that economies of scale and continued small incremental improvements in the solar panels will eventually make them efficient enough.
But that looks to have been a false assumption. They will NEVER be efficient enough.
How efficient is “efficient enough”? The high temperature (concentrated solar) PV cells are about 40% efficient. As they are mass produced (just starting) there will be continuous improvements in the manufacturing processes (as there are every year in almost all manufacturing, and specifically in producing pv panels) that reduce labor and material input and reduce overall cost. “Never” is too absolute a concept.
John Runberg says:
What is the cost to maintain this equipment compared to a fossil fuel plant?
How is generation calculated?
With solar (as well as wind) rather a lot of the equipment is likely to be outside in all weathers probably requiring all sorts of vehicles for people to even get to it.
Whereas using steam turbines. (Regardless of if the steam is produced by burning coal, methane, oil, wood, etc. Even a nuclear reactor.) Means that the plant is inside a building. Which eliminates the equipment having to cope with weather. Access to machinery which needs servicing also tends to be easily available.
Much of the same also tends to apply to hydro-electric, including pumped storage plants.
The sun does’nt shine every day and winter days are shorter.
The power output is likely to vary even from minute to minute. Probably not too big a problem if you are heating water (or even a battery powered illuminated road sign.) But a big problem if the aim to to generate electricity. The same applies to wind power.
Throughout history animals, slaves, steam engines, internal combustion engines and electricity have wound replacing wind power because “reliable” beats “free”.
Mike Hebb says:
A lot of homes in South America, India, China, Africa and Asia use wood, yak dung, or other animal dung dried or as methane for cooking and heating.
Presumably the dung is a by product. If it wasn’t being used as a fuel it would probably be waste which would cost money for disposal.
@Willis
“billions in wasted taxpayer dollars have not succeeded in getting renewables up to even 3% of the total electricity generated. Less than 3%. It must drive them round the twist to contemplate their stunning lack of success at making water flow uphill.”
“Hydro” is renewable and is 16% which brings the total for renewables to about 19% of the total. Duh.
What drives me around the twist is how little thought you put into what you write.
Mark says:
November 19, 2011 at 8:30 am
“Throughout history animals, slaves, steam engines, internal combustion engines and electricity have wound replacing wind power because “reliable” beats “free”.”
Actually Mark it’s hard to think of anything more reliable than the sun. It’s been rising on time every single day for billions of years.
You are confusing “reliable” with “on demand”. Solar and wind power are very reliable but they aren’t available on demand without some sort of buffer.
There’s a windmill a few hundred feet from away from me that still spins nearly every day pumping water uphill into a holding tank where the water is then available on-demand. It’s extremely reliable. The wind energy is thus buffered into gravitational potential energy. One could, if one wanted, use that gravitational energy to (for instance) drive a water-wheel that might be attached to a mill that grinds grain or the shaft of a generator shaft that supplies electricity. Then it would be both reliable and available on-demand.
Septic Matthew
As they are mass produced (just starting) there will be continuous improvements in the manufacturing processes (as there are every year in almost all manufacturing)
Here is the manufacturing productivity trend for the US for the last 20 years.
http://www.bls.gov/news.release/prod5.t01.htm
A couple of percent a year productivity increase is about normal. Various industries go thru rapid productivity increase then the increases slow to a trickle.
Regarding “billing” (bilking)” the poor on their electricity…more than likely in Commiefornia there is a generous subsidy for low-no income people. The hardest hurt are the working middle class.
Let’s start a ” We are the 50%ers movement” (the 50% who pay taxes), we’ll need to change our name often to reflect the current %, but…
janama says: November 18, 2011 at 3:59 pm
Will – here in Oz the government encouraged the installation of solar panels on people’s homes. To assist they would pay 60c per kWhr which is 3 times what the utilities were charging!! Not far from me is a storage shed complex and the owner has put 40 solar panels in two rows of 20. Assuming the panels are 180W panels it will produce 7,200W or 7.2kW. Over 6 hours per day that’s 43.2kW per day. @60c that’s $25.92 per day or $9,460.8 per year. Considering the storage sheds don’t consume electricity once the panels are paid for it’s all profit.
Jamama, I recently installed a 5kW system, AGL have a 5kW limit but pay $0.68 kWh but your estimation of output is way opimistic, my system puts out between 1.3 and 18Kw per day averaging 12kW per day for the last 7 weeks. Inefficient is one way to describe solar, rort is another.
One giant problem in our capitalist system of business is that investors won’t invest unless they get 20% or higher return on their money. Developers play all sorts of games with their financial models to show what the investors want to see. If the project comes up short, they look to the government subsidies to make up the difference. Any time there is a government subsidy, what it really means is a tax on the people. Why can’t our corporations be happy with a 10% return on investment for a while?
michel says:
November 18, 2011 at 11:46 pm
The NPV measures (theoretically) what I could sell the future income stream of a project for in cash today.
So to use your example, when the project is completed, in theory, they will be able to sell the finished plant for 130% of what they have into it.
How is that not a return of 30% on their investment? What am I missing? Yes, this is not the IRR, but where is the error in my calculations?
w.
Septic Matthew says:
November 19, 2011 at 12:33 am (Edit)
Thanks, Matt. Man, I’d have to see a citation for that claim, because it truly is surprising (and not all that believable).
Again, cite? Which “earlier subsidies” are you comparing to which “current subsidies”? Your claim is meaningless as it stands.
w.
Bill Illis says:
November 19, 2011 at 5:15 am
Never say never, Bill. It isn’t a matter of efficiency, per se. It’s a matter of cost efficiency and more than that it’s a matter of competitive cost efficiency. I went through the numbers. I’d have photovoltaics supplying all my electricity and selling excess generation back to the grid at a profit if it were going for $0.44kWh. Can’t do it when I can buy off the grid at $0.11/kWh. I figure breakeven (absent any calculation for maintenance cost over 25yr service life) is about $0.22/kWh.
“Mther nature did invent an efficient method billions of years ago. Solar photons get converted into chemical potential energy allowing plants to grow and reproduce.”
Yes, but it isn’t really all that efficient. Sugarcane, one of the most efficient at converting solar to chemical energy, is about 8%. That’s about mid-range for production solar panels (6-10%) and just a fraction of highest achieved laboratory panels (40%). The advantage plants have is they’re self-reproducing, self-reparing, and built out of air, water, and dirt. So cost efficiency even for a cultivated crop like sugar-cane is higher than photovoltaics.
The remaining problem with plants is that starches, sugars, and even wood isn’t really desireable as an energy source without further processing which vastly decreases the competitive cost efficiency relative to fossil fuels. No one’s looking for more expensive sources of energy except misguided environmentalist whackos.
The thing of it that nature does provide the basic technology we need. The end products we want like fuel-oil and ethanol are metabolic by-products and/or products the plant only needs in small proportions for survival value. Evolution doesn’t reward waste. Genetic engineers however can reward whatever genetic engineers want so if we want an algae that produces far more oil than it needs and grows in an unnaturally poisoned environment that no wild competitors can tolerate then we’ll have a renewable source that’s far cheaper than digging progressively more difficult to reach fossil fuels out of the ground.
Here is everyone’s chance to have a direct say:
Being a large landowner (in a wind corridor), the windmill people were quick to approach me regarding the erection of large 4MW generators. I sent them packing as I could not agree with the business model. Now I am the only area for miles NOT looking at windmills (also the only one not receiving subsidized income).
Now the solar panel people have arrived. All I have to do is sign on the line, and with government guaranteed loans and a 30yr guaranteed contract, I would be in the solar “business”. The business model makes no more sense than windmills, but hey, subsidies are money… are they not. The promise is a 6 yr payback on the initial capital outlay.
So the question is:
Should I send these people packing also or suck up to the public teat, like everyone else??
What would you do, fellow skeptics, and more importantly… why?
What would y’all advise? GK
@Bill illis
“Some kind of new process or new methodology looks like it will be needed since the current technologies, solar panels and reflective mirrors concentrating the solar radiation, just doesn’t look like it will ever be efficient enough.”
They’re efficient enough right now. The manufacturing and maintenance cost is too high. Manufacturing has a history of constant cost decline. This is true for just about everything but it’s particularly true for solid state electronics and photovoltaics are mostly solid state electronics. Electrical energy storage cost is the thornier problem. Electrical storage is expensive and progress is glacial with no conceivably practical breakthroughs in sight. That’s why hydrocarbon fuels are going to be with us for a very long time to come IMO. They’re very cheap and practical for energy storage and vast infrastructure is already in place to do it. We just need to produce those fuels directly from air, water, and sunlight via synthetic biology instead of digging it up out of the ground where natural biological processes accumulated it.
Philhippos says:
November 18, 2011 at 4:44 pm
“So a new bumper sticker is needed”
KILL A PENSIONER – BUY A SOLAR PANEL
You could print this off and apply it with some clear adhesive backed plastic (Fablon in the UK).
http://www.maxfarquar.com/wp-content/uploads/2011/11/Kill-a-pensioner-Buy-a-solar-panel.jpg