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.
davidmhoffer says:
November 18, 2011 at 5:29 pm
“…and what businesses that are already there and are energy intensive will pick up and move for the same reason? Worse, if you’ve decided to move, you may as well consider all the options. Texas, Nevada, China…”
Texas has over 25% of the US total installed wind turbines. Over 3 times as much as California.
There’s nothing inherently wrong with wind power. It works out fine in states with conservative governments. Evidently the inherent, intrinsic wrongness in all this is giving the looney left a seat at the government table.
Re:Jesse says:
November 19, 2011 at 9:52 am
“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….Why can’t our corporations be happy with a 10% return on investment for a while?”
I believe you are confusing “risk capital” with corporate returns on capital investment. Most corporations would be quite pleased to see a 10% return on their capital investment. Investments cobbled together by investment bankers and sold through unregistered security offerings is where you’ll see expectations of higher returns because of investor perceptions of higher risk. The problem with such investments being underwritten by the U.S. government is that the investor risk disappears while the fancy return remains intact. The risk for which such rewards are rationally exchanged have been shifted to the U.S. taxpaying public.
@davidhoffer
“They” say that, huh? Do you have a link or is that just more of the crap you constantly make up out of thin air to support your stupid rants?
Dave Springer says:
November 19, 2011 at 10:15 am
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.
Photovoltaic s are mostly glass and metal frames. The ‘solar part’ is maybe 1/6th of the total installed cost right now. The last I checked plate glass was a fairly mature industry.
Tim says
All because it was decided in the 70s by flower power hippies that nuclear power is immoral and you must never speak of it
Henry@Tim
They were right. Nuclear energy is no good.
http://www.letterdash.com/HenryP/nuclear-energy-not-save-and-sound
Isn’t hydro renewable?? Greenies only seem interested in wind for some reason
Green activists are only interested in a technology until it becomes economic; at that point it becomes anathema. Their real goal is not to maintain our current energy consumption (and hence, lifestyles, since energy consumption is an almost perfect proxy for standard of living) in a “sustainable” way – it is to reduce our standard of living. Their OWN standard of living (qv, Gore, Suzuki, Moore and their houses) – well, not so much.
The U.S. Environmental Protection Agency defines hydroelectric as a renewable energy source:
http://www.epa.gov/cleanenergy/energy-and-you/glossary.html#R
“Renewable Energy”
“The term renewable energy generally refers to electricity supplied from renewable energy sources, such as wind and solar power, geothermal, hydropower, and various forms of biomass. These energy sources are considered renewable sources because they are continuously replenished on the Earth.”
The proper term, the one used by the EPA, for renewables other than hydro is (big surprise) “non-hydroelectric renewables”.
For example:
http://www.epa.gov/cleanenergy/energy-and-you/affect/non-hydro.html
Interestingly enough the dimbulb who wrote the non-hydro article above classified “landfill gas” as a renewable. Like nature what generates the trash that goes into them. Duh. Where do they find these people?
Re:Dean Cardno says:
November 19, 2011 at 11:05 am
“Green activists are only interested in a technology until it becomes economic; at that point it becomes anathema.”
As a former “renewable energy” developer, I can attest to that one. So long as we were pouring money down a research rat-hole trying to get geothermal power into the economically viable range, environmentalists were cheering us on. We easily got a “negative declarations” on potential environmental impacts for most anything we chose to do. However, at the precise moment we developed the technology to the point where profit-making geothermal plants were possible they turned on us like mad dogs. The last geothermal plant I built was tied up for 5-1/2 years by “environmental intervenors” and it was a binary, “zero emissions” plant; the most environmentally benign plant I ever constructed.
Dean Cardno says:
November 19, 2011 at 11:05 am
“Their real goal is not to maintain our current energy consumption (and hence, lifestyles, since energy consumption is an almost perfect proxy for standard of living) in a “sustainable” way – it is to reduce our standard of living. Their OWN standard of living (qv, Gore, Suzuki, Moore and their houses) – well, not so much.”
I don’t believe that’s quite right. The real goal is to have fewer humans in the world. These people are all Paul R. Erlich disciples only without the stones to admit it because Erlich is so widely discredited.
Like minded people were behind the eugenics movement which was quite the fad in the United States around the time of Erlich’s birth. The name changes but the sentiment remains the same – the earth is being overrun by “useless eaters”. These days the useless eaters are anyone who questions the catastrophic climate change narrative. Oh, and old people with terminal illnesses. This is where the so-called “death panels” that Sarah Palin so aptly named come from. In that case it’s people uselessly consuming health care resources that are better spent on younger people with more to gain per public health care dollar spent. In the climate change game the unwashed masses are uselessly eating fossil fuels that should be conserved for a smaller world filled with enlightened people and descendnents of the elite liberal left. The Nazis called their scapegoats “Life unworthy of life”. I hate to run afoul of Godwin’s Law but there’s an exception for cases where it really is appropriate and I (naturally, as predicted by a corrollary to the law) think the case I made is one of the exceptions. These people are Nazis!
🙂
Dave Springer;
“They” say that, huh? Do you have a link or is that just more of the crap you constantly make up out of thin air to support your stupid rants?>>>
Obviously it was made up out of thin air due to my inferior intellect which produces a constant stream of stupidity. If only I was as smart as someone like you who got 100% on the math part of their SAT. If only I was as smart as someone like you who sat on a very important committee at a very large company evaluating ideas for patents. If only I was as smart as someone like you who can shoot a hole in something from 100 yards. If only I was as smart as you and could carry a gun and brag about how tough I am.
You are my hero. I’m blowing you a kiss.
Jesse says:
November 19, 2011 at 9:52 am
“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.”
As Claude Harvey points out you are mixing apples and oranges! Given that this project is 80% guaranteed by the U.S. Government, the returns should be equal to Treasuries. The risk on the 80% is not very high? Their are lots of people buying Treasuries, which are yielding 2% (10ys)! As Claude mentions, once the government gets involved all market logic disappears!
would it be snide for me to remark that the only thing “green” in “green energy” is the public dollar bills being abused ?
Claude Harvey says:
@November 19, 2011 at 10:35 am
Claude, you are correct. I was talking about venture capital. I worked for an engineering and construction management company and we were happy with a 10% profit. We often did estimates for start-ups in ethanol and gasification and those start-ups were the ones looking for subsidies. Worked out well for ethanol but not so good for the gasification people.
Dave Springer says:
November 19, 2011 at 9:01 am
Dave, I’d be overjoyed if people classed hydro with the renewables. That would be wonderful. But they don’t, hydro is not green enough for them or something. Duh.
California has a goal of 33% renewables by 2020 … and if you think they count hydro as a renewable, think again, my short-sighted friend. Check out the California Independent Systems Operator web site, they handle almost all the power in California. You can explain to them how wrong they are for saying large hydro is not renewable, I didn’t have much luck convincing them.
i suppose I should have mentioned why hydro is not counted as a renewable, to keep people like yourself from going off on a wild goose chase … hang on a minute, wait, I did mention that very fact, and you still didn’t get it. I said:
I took the trouble to point out exactly why hydro is not counted among the renewables, it’s because of AGW activists like you. … and despite that, in your pathological urge to attack me, you didn’t even read what was written. Here’s a whole post on the subject of renewables, please try to catch up, you’re holding up the rest of the parade.
Dave, your desire to find something, anything at all with which to attack me is leading you down strange paths of inanity. What drives me round the twist is how little thought you put into what you write. If you entered the conversation looking to make a contribution rather than looking to make an attack, you might even be able to convince folks that you should be listened to.
As it stands, though, all you’ve convinced us of is that you are not paying attention and you’re not here to make a contribution, you’re just looking to bite someone. Unfortunately, to date all you’ve managed to bite is your own posterior …
w.
Jesse says:
November 19, 2011 at 9:52 am
Say what? Most corporations in the US make about a 10% profit on their sales. So your claim that they are “not happy” with a 10% return is, quite simply, wrong.
w.
PS—Investors, quite reasonably, want a higher return because of the risk involved in the investment. But it’s not “20% or higher”. The return required depends on the risk, so you can’t set a certain figure.
Spector says:
November 19, 2011 at 7:17 am
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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
NAH, They already sold it outright to China. That is why Hilary was over there…. (Just kidding …I hope)
Dave Springer;
The real goal is to have fewer humans in the world. These people are all Paul R. Erlich disciples>>>
Do you have links to prove this? Or is it more of the stupid crap you make up?
Dave Springer;
Texas has over 25% of the US total installed wind turbines. Over 3 times as much as California.
There’s nothing inherently wrong with wind power.>>>
Your comment above was in response to a discussion of the reaction of businesses in regard to locating in jurisdictions with dramatically higher electricity rates. If rates are 50% higher in one jurisdiction than in another, businesses will act accordingly, and it makes no difference if their electricity comes from 100% windmills or 0%. As for the thought that there is nothing inherantly wrong with wind power, the fact is that windpower is intermittant, and when supplied directly to the grid, imposes huge costs on other generation methods to deal with the fluctuating wind power. The loss in efficiency in the balance of the generation systems, plus the need to provision the rest of the generation systems with additional peak capacity that is not used when wind is being used makes the costs of the entire system higher across the board. Maintenance of a large number of widely disrtributed small generation points is also much higher, and the extended grid costs to carry their output are also much higher, than the costs for centralized infrastructure with stable output. You’re idea to buffer the wind production by, for example, pumping water into a resevoir is not new, and has been shown to have value in small local implementations. Scaling such an approach to serve thousands of windmills has considerable additional challenges.
Dave Springer;
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.>>>
I see. The breakthrough in manufacturing cost of PV is obviously in sight, but the similar breakthrough in electrical storage costs is impossible. Got it.
Dave Springer;
Never say never, Bill. >>>
Ah, yes. Other people can’t generalize becaue they aren’t as smart as you, but it is OK for you.
Dave Springer;
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”. >>>
The sun may be reliable, but the amount of sunshine available to a PV isn’t. Unless you live somewhere that the sun shines exactly the same every single day, one would think you would know that. Please do not confuse what you think shines out of your *ss with the actual sun. The logistics behind bulding a storage resevoire such as a water resevoir to produce hydro for a highly dispersed, highly variable energy source are far from trivial.
Dave Springer;
blah blah blah genetic engineering blah blah blah>>>
Yeah, genetic engineers can whip up plants that produce oil and grow like mad in a toxic waste dump. Gotta link for that? Or just another of your brilliant rants?
Did you catch my kiss?
Gail Combs;
NAH, They already sold it outright to China. That is why Hilary was over there…. (Just kidding …I hope)>>>
She tried, but insisted they take Arnie along with it, and they said no way. I heard she also tried to sell them Guam, but they heard it was “tippy”. Then she tried to sell them Taiwan, but they said they already own that. I heard she was going to try and sell them Alberta next.
Dave Springer says:
November 19, 2011 at 10:35 am
Texas has over 25% of the US total installed wind turbines. Over 3 times as much as California.
There’s nothing inherently wrong with wind power. It works out fine in states with conservative governments
ERCOT allows 8% for wind reliability in Texas. So basically you have to have 92% backup. It’s all fine and dandy if the backup already exists. If the backup doesn’t exist then you have to build an additional facility for backup plus the windmills.
T Boone Pickens, the guy who built most of Texas’s wind farms isn’t stupid. He is in the Natural Gas Business. Build a windfarm…need to build a Natural Gas ‘peaker’ for backup.
http://www.boonepickens.com/
So how much actual energy did the investment in Solyndra produce and would it have been more efficient to simply convert the cash to $1 bills and burn the currency to produce power?
Mark says:
November 19, 2011 at 8:41 am
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.
_______________________________________
No it would be made into compost and used to produce food.
Horse is the least “Valuable” of the manures but it can be used “Fresh” if you do not mind the weed seeds.
G. Karst says:
November 19, 2011 at 10:07 am
I have the same opportunity here, and I haven’t taken it. Why? Because forcing PG&E to buy power from me at way over market value just drives the price up for everyone else. That kind of “I’ve got mine, who cares what it does to your costs” attitude doesn’t sit well with me.
So to date I’ve passed up my chance to be a solar magnate at the people’s expense … doesn’t seem right.
w.
Anthony and Willis,
Have you run the numbers to see at what price point it becomes cost effective to run your own portable 5 or 10 kw generator on gasoline or nat gas or diesel ?
GW
That is assuming the “conventional” load. I have an idea that could change things dramatically if it were adopted on a wide scale. Part of the problem is that wind power is fickle and erratic. You can get 100 megawatts of power one day and none the next or even 30 minutes later the wind might go dead calm.
Now imagine I have a system on my property that works basically like an off-grid energy storage system. I can charge the batteries (lets say AGM deep cycle batteries) at night and not use any power during the day or charge them at a constant rate day and night regardless of my load. I basically convert my home from a demand load to a base load. Now lets say with the new smart meters the power company can adjust power rates in real time according to supply and demand. Lets say it is the middle of the day, the wind comes up, they have power to spare, they send a signal over the power grid that says “the price of power just went down” so my system responds by buying a little more of it. I slightly increase my charge rate to take advantage of the cheaper power. So the grid operator sees the electricity demanded respond to the supply. This allows me to buy power when it is cheap and store it for use when it is more expensive. So on a hot summer day power might be scarce, the utility broadcasts over the grid that the price of power just went way up, and my system responds by significantly backing off on the charge rate off the grid.
Such a system would use plain old ordinary free market supply and demand principles to modulate the demand in accordance with the supply. Currently, when the wind comes up, an operator might have to scramble to find a buyer for the power, maybe they sell it to the state next door for a few hours. This way they would see their own customer demand increase in response to a price reduction and could actually take advantage of that surplus. And it works just as well in the other extreme when they might see loads reduce when there is no wind but demand is high for climate control.
Additionally, if I want to install my own turbine or PV panels, all the infrastructure is there. I simply need to hook them up to the charge controller. We already have all of the technology required to make this work. No real major R&D is required.
Dave Springer says:
November 19, 2011 at 10:15 am
Sign me up if it can work. I suspect that synthetic photosynthesis (photosynthetisis?) may well be one of the future energy sources. The over-riding problem with sunlight is that it is so dispersed, both in time and in space, and cities need gigawatts of power 24/7.
I lived quite happily off the grid on solar power for some years, so don’t get me wrong, solar has its place. But then … I didn’t even use a kilowatt, and certainly not 24/7, while the world uses terawatts and definitely 24/7.
My point is simple. The only current options are fossil and nuclear. Period. Might change in the future, assuredly will change if we wait long enough, but for a while those are our choices.
w.