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BRADLEY: Renewable energy running scared
This may be the beginning of the end of the energy welfare state
The ethanol, wind and solar industries are running scared from a House proposal to reduce federal subsidies for renewable energy by 25 percent for fiscal 2012. A surefire sign of the trouble with big government is that you run out of other people's money.
The environmental left is running scared, too, at least when it comes to wind and solar. Federal cutbacks, leftists fear, will shrink the business lobby needed for their grand energy-transformation plan. In the parlance of political economy, the teetotalers need the help of bootleggers to sell their message to the voters.
Federal cutbacks have put wind and solar on the spot. Despite decades of promises, these energy sources remain uneconomic and misaligned with the need for reliable, flexible power. Left unsubsidized and without mandates, electricity generated from wind or solar would not find nearly enough buyers.
Meanwhile, deficits rage and voters want fiscal sanity. Can you imagine the opinion-poll results if respondents were asked to choose between spending fewer taxpayer dollars on renewable energy or basic government services? I doubt the American Wind Energy Association or the Solar Energy Industries Association would commission such a poll.
Solar power actually has a market niche and would exist as a small energy industry in a nonpolitical world. Off the electrical grid, solar panels can absorb and store sunlight as electricity until scale economies allow far cheaper central-station power to be transmitted by high-voltage lines. In this sense, renewable energy can be a bridge to conventional energy, not the other way around, as is often touted.
But wind power is another story. Wind for making electricity is almost wholly an artificial industry that would die without government largesse. Such industrial-sized machines are very different from the small windmills on farms that pump water.
Wind cannot compete against either natural gas or coal in electrical generation. Wind technology has improved, but so have conventional energy technologies. General Electric's newest combined-cycle plants can convert natural gas into electricity at 61 percent efficiency and can reach full power within 30 minutes of startup. Back in the 1970s, by contrast, the best efficiency rate was closer to 40 percent, and a full rev-up took hours.
Nor are we reaching a physical peak in fuel production for conventional power plants. The shale boom has ushered in a new era for oil and gas extraction. We are not running out of fossil fuels; we are running into them. Contrary to what critics have been claiming for decades, the hydrocarbon energy age is still young.
Politically correct renewable energy has had quite a feast at the public trough for decades. The American Wind Energy Association's recent gala with Jay Leno shows just how rich this club of crony capitalists has become. Their laughs were at the expense of taxpayers, but taxpayers are poised to have the last laugh.
Yet President Obama is digging in hard against any cutbacks in wind and solar subsidies. His "green dream team" - John P. Holdren, Lisa P. Jackson, Ken Salazar, Steven Chu, etc. - knows that a death spiral could be triggered if an industry contraction leads to future rounds of cutbacks. It is the political capitalism model in reverse: Declining government favor leads to less rent-seeking business.
Could this be the beginning of the end of the energy welfare state?
The anti-market environmentalists have only themselves to blame for their current predicament. They picked the wrong horse, or, more accurately, they picked the donkey to run against the horse. The meager flow of energy from solar and wind could never match the dense energy content of oil, gas and coal.
The future belongs to the efficient. The faster government-dependent energy gets cut down to size, the better it will be for the U.S. Treasury, for consumers and for the real energy entrepreneurs and capitalists.
Let's start now.
Robert L. Bradley Jr. is CEO of the Institute for Energy Research and author of "Edison to Enron: Energy Markets and Political Strategies," to be published next month by Scrivener Publishing and John Wiley & Sons.
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