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LORIS: Solar, we have a problem
Question of the Day
Massachusetts-based Evergreen Solar Inc. made headlines this week, but not the kind that delight shareholders. The heavily subsidized solar-energy company filed for bankruptcy.
Corporate executives blamed everything but themselves: excess capacity, increased competition from a more heavily subsidized Chinese market and, of course, a lack of clean-energy policy in the U.S.
If U.S. clean-energy policy is lacking, it's not for lack of trying. No, Congress did not implement a "cap-and-trade" program or a federal renewable-energy standard. (For once, lawmakers listened to their constituents.) But, never fear, the Department of Energy has its own plan to make solar more competitive. Unsurprisingly, its strategy will waste more taxpayer dollars at a time when our country can't pay its bills.
It's called the SunShot Initiative, mirrored after President Kennedy's man-on-the-moon mission. DOE says we must aggressively pursue an equally important goal: cutting the cost of solar-energy technology by 75 percent within a decade. Quoth the DOE: "Reducing the total installed cost for utility-scale solar electricity to roughly 6 cents per kilowatt hour without subsidies will result in rapid, large-scale adoption of solar electricity across the United States."
The statement is fundamentally oxymoronic. The SunShot Initiative is itself a huge government subsidy - a $200-million-a-year, taxpayer-funded investment to reduce the cost of solar. Will it work? It doesn't matter. Government has no business trying to make private-sector projects cost-competitive. It's neither appropriate nor necessary.
One can safely predict that there's going to be a demand for electricity for the foreseeable future. The company that can make solar technology or any other renewable/alternative energy technology cost-effective will reap the rewards - megaprofits - for doing so.
According to analysis by HSBC Holdings PLC, the global market for low-carbon energy and energy efficiency will reach $2.2 trillion in the next decade. That's all the incentive solar needs. If a technology or a company cannot capture part of that market, it doesn't deserve to be in business. Our government should not artificially prop up any technology or company. That only invites more stories like the Evergreen Solar bankruptcy.
Proponents of government investments to commercialize technologies point to the Internet, computer chips and the global positioning system (GPS) as successful government-subsidized endeavors. But those examples are problematic.
First, there's the dubious assumption that those technologies would never have reached the marketplace if the government hadn't invested in them. Second, there's the fact that those government investments were not intended to meet commercial demand; they were born of defense-related research addressing national-security requirements. Entrepreneurs saw an opportunity in these defense technologies and created the commercially viable products available today.
When the government becomes involved in commercial decisions and attempts to force certain technologies into the market, it diminishes the role of the innovator and increases the role of the lobbyist. When government uses subsidies to pick winners and losers, it denies energy technologies the opportunity to compete evenly in the marketplace - the only proven way to develop market-viable products. When the government attempts to drive technological commercialization with programs like the SunShot Initiative, it circumvents this critical process.
The Department of Energy asserts that the SunShot Initiative will improve America's energy security, but the simple fact is that the United States already enjoys a robust domestic electricity market. The DOE is calling for man-on-the-moon-type missions, but we already have men on the moon. Their names are coal, natural gas, nuclear and hydroelectric power.
And we produce this electricity almost entirely at home. Canada provides some of our natural gas and uranium. Australia provides some uranium, too. But those are hardly hostile nations. In reality, the biggest threat to our electricity security is our federal government preventing access to our abundant domestic resources, most notably coal and natural gas.
Invoking the can-do language of the 1960s-era NASA, the Department of Energy's SunShot Initiative sounds more like a mission to land a man on the sun. It's an astronomically misguided initiative that will leave American taxpayers and energy consumers badly burned.
• Nicolas Loris is an energy analyst in the Heritage Foundation's Roe Institute for Economic Policy Studies.
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