Energy and the Marketplace

Congressional critics made sure that Americans heard about the “scandal” of Solyndra, the green energy start-up that failed and defaulted on its government loan. But we haven’t heard much about the federal government’s renewable energy loan program since then–probably because there hasn’t been a subsequent opportunity to twist results in order to make political hay.

Since 2005, the Department of Energy has loaned $34.2 billion to a variety of businesses to spur development of clean-energy technology. A recent NPR report notes that– while there have indeed been defaults (amounting to $780 million, or 2.28 percent of the total)– DOE has also collected $810 million in interest payments, for a profit of $30 million.

The default rate on these loans is well below the rate of commercial loan defaults typically experienced by traditional banks, according to data maintained by the Federal Reserve. NPR went back to those who criticized the loan program three years ago, but none of the critics would comment for the record.

Energy Secretary Ernest Moniz pointed out that the loan program had funded the first of five huge solar projects in the West. Before that, developers couldn’t get money from private lenders, but now they can.

“We have to be careful that we don’t walk away from risk, because otherwise we’re not really going to advance the marketplace,” Moniz told NPR.

This is precisely the way government loans are supposed to work: to “prime the pump.” When new technologies are deemed too risky for the private marketplace, when the rehabilitation of depressed neighborhoods makes it impossible to get traditional mortgages–in short, when the private sector is not willing to encourage the sort of entrepreneurial activity that benefits us all–governments can step in and jump-start the process.

Of course, once the pump has been primed–once a market has been established and risk moderated–government needs to withdraw and allow the private marketplace to operate. The problem in our (increasingly oligarchical) system is that industries are happy to continue (excuse my vulgarity) sucking at the public tit. So we end up continuing to subsidize companies that have enjoyed years of obscene profits, are sitting on huge cash reserves and have absolutely no problem obtaining necessary financing.

Fossil fuel companies, for example.

In the United States, credible estimates of annual fossil fuel subsidies range from $10 billion to $52 billion annually. These numbers do not include the significant costs attributable to externalities related to the climate, or to the other environmental and health impacts of the fossil fuel industry. We taxpayers also pay those costs, which are another form of subsidy.

Here’s my question to all the critics who screamed bloody murder about Solyndra and the DOE program generally: where’s your indignation about the immense and counterproductive costs of continued fossil fuel subsidies?

 

5 thoughts on “Energy and the Marketplace

  1. I’ll guess we can suspect that any indignation the critics of renewable energy investments might have for the immense fossil fuel companies subsidies is easily alleviated by the immense fossil fuel companies campaign contributions.

  2. Thank you Prof K. Important topic. We need all the clean energy we can get. And we need it NOW. Wind, Solar, Wave, Geothermal, Algae Fuels, Hydrogen. We need it all. And we do NOT need Atomic power. Russia, Japan and the USA have already proven that it is a terrible idea. Thanks to Pres O we are a little closer to renewable energy. Lets keep it going. Germany has already passed the 50% mark for clean energy. They are phasing out ALL of their nukes over time. Lets go America. Coal was great in the 1800’s but today we know better.

  3. the word we ought to focus on is “externalities”. Why?

    Corporations by law are engines of profit. Those who manage them are charged with maximizing the return to the owners of the means of production by compensating those whosupply the labor as little as possible and ignoring externalities (costs to others). In other words, making as much money as possible regardless of the cost to others.

    Not the gods that some people worship but useful institutions for creating value to consumers in products while organizing labor into productive use of skills.

    One of the tools of oligarchy is to buy public opinion to elect officials who will define externalities in ways most favorable to the distribution of wealth towards investors by shifting costs to taxpayers.

    A simple current example is that our law allows the fuel industry to dump their waste carbon into our atmosphere where we know for sure it will have effects that will cost taxpayers trillions of dollars and citizens of all countries thousands of lives. Externalities to the fuel industry.

    Why would we as consumers, taxpayers, investors and victims allow such stupidity?

    Oligarchy. Those who own the means of production buy public opinion and therefore politicians to pass (or not) laws that favor the distribution of wealth their way.

    Are we that easily mislead to our own destruction?

    Apparently.

  4. For those of you who do not watch “The Newsroom,” check out its segment on climate change at S03E03. Also, Mother Jones wrote a fact-checking article on what was reported in the supposedly fictional interview at We Fact Checked Aaron Sorkin’s Climate Science.
    It is one thing to blindly allow consumption and demand for fossil fuels to continue to threaten the planet. It is another, unacceptable thing for our government to subsidize it.
    $10 billion to $52 billion? Really? Just the economics of it is outrageous when considering the profitability of these companies.

  5. One of Senator Coat’s “newsletters” promoted the use of coal to “create jobs” and save Hoosiers millions of dollars in utility costs. The millions saved are costing hundred of millions in carbon emissions and environmental damage – not just from burning coal, but from mining it, processing it and transporting it and dealing with the wastes and wastewater. As you all have pointed out, more welfare for the wealthy on the backs of the rest of us.

Comments are closed.