President Obama is no fan of fossil fuels. Instead, he likes wind and solar.
Unfortunately, energy via winds and the sun is unreliable and extremely costly.
Part of the big costs come from government handouts. In his radio and online address on July 3, the president dressed up taxpayer subsidies as plusses for the economy.
Mr. Obama said, ìAnd weíre going to keep competing aggressively to make sure the jobs and industries of the future are taking root right here in America. Thatís one of the reasons why weíre accelerating the transition to a clean-energy economy and doubling our use of renewable energy sources like wind and solar power ó steps that have the potential to create whole new industries and hundreds of thousands of new jobs in America.î
Specifically, the presidentís announcement focused on $1.85 billion in loan guarantees for solar projects located in Arizona, Colorado and Indiana. This is part of some $90 billion being doled out for so-called clean energy under last yearís government stimulus bill.
Unfortunately, government spending lots of taxpayer dollars is not the path to economic growth, new industries, or job creation. In fact, itís just the opposite. Government takes resources away from private-sector businesses, investment and risk-taking, in order to subsidize inefficiency. That most certainly is the case with the ongoing political romance with wind and solar power.
After decades of subsidies, wind and solar remain noncompetitive, and a minor source for U.S. energy.
In 2008, wind accounted for 0.5 percent of energy consumed in the U.S., including 1.3 percent of all electricity. Meanwhile, solar came in at 0.9 percent of all energy, and a mere 0.02 percent of electricity.
Why do solar and wind make up such a tiny portion of the U.S. energy portfolio? Quite simply, they cost way too much.
Wind energy costs range between 40 percent and 130 percent higher than coal, and 75 percent to 190 percent more than natural gas. Meanwhile, solar runs from two-and-a-half to five times the cost of coal, and three to five times the cost of natural gas energy.
But arenít the wind and the sun free? How could they possibly be more costly?
In a June report on wind energy, the U.S. Energy Information Administration noted that ìcapital investment costs are significant,î and since wind is intermittent, ìa wind plant will generate less electricity than a conventional thermal or hydroelectric plant of the same size and over the same period of time.î The same problems apply to solar.
In fact, since the wind doesnít always blow and the sun is not forever shining, both wind and solar require back-up systems ó thatís right, fossil fuels ó further raising costs.
The Institute for Energy Research explains: ìAlthough solar energy is fueled freely by the sun, the cost of the technology relative to the amount of energy produced makes solar significantly more expensive than other more widely used energy sources. Further, often the costs of requiring back-up energy are not generally included in the assumed production costs of solar energy, making comparisons of true production costs with other energy sources even more difficult.î
In addition, transmission expenditures, including lost power over long distances, add to the costs.
Indeed, the only reason that wind and solar are being discussed is because of government, that is, politics trumping economics. Renewable mandates and subsidies are what wind and solar are all about right now.
In a report last year, Dana Joel Gattuso, a senior fellow in environmental policy at the National Center for Public Policy Research, noted that when counting all forms of federal support, renewables receive the largest share of energy subsidies. Using pre-2009-government-stimulus data, Gattuso reported: ìWind and solar receive far more subsidies for the amount of electricity they produce than other forms of energy. Where subsidies for all forms of electricity amount to $1.65 per megawatthour, subsidies for wind amount to an astounding $23.37 per megawatthour and solar $24.34 per megawatthour.î
Given the extremely bad economics, why the political push? The key word the president uses is ìclean.î Fossil-fuel energy is considered to be bad for the environment, despite the fact that, given advancements in technology, all fuels burn far cleaner today than ever before.
However, questions are mounting about just how environmentally friendly wind and solar are. After all, wind and solar farms would have to eat up massive amounts of land to achieve even a minor boost in their respective shares of U.S. energy, as would the related transmission lines. Plant and wildlife habitats would be lost, and massive windmills place birds and bats at risk. As a result, many concerned about the environment ironically wind up opposing wind and solar energy. For good measure, even if concerned about so-called man-made global warming, the small expected increase in U.S. energy produced from wind and solar would make no difference in terms of global carbon-dioxide emissions.
In the end, taxpayers pay a big price subsidizing wind and solar energy. They get to pay a lot more for energy, with no real benefits accruing to the environment. And all of the talk from the president about clean energy jobs winds up being complete economic fiction when all of the costs are tallied up. The political push for wind and solar is a lose-lose for the U.S.
Keating is chief economist for the Small Business & Entrepreneurship Council. He can be reached at email@example.com.