No such thing as a free lunch or free energy
The Independence Institute’s Todd Shepherd, along with this blog, have spent two years covering, and ultimately exposing, what is now the Abound Solar scandal. Understandably, much of the focus is now on Weld County District Attorney Ken Buck’s criminal investigation as well as a Congressional Oversight Committee inquiry into the bankrupt solar panel manufacturer.
Recently released emails on Complete Colorado indicate that, despite statements to the contrary, the White House politicized the Department of Energy (DOE) loan guarantee process for politically well-connected Abound.
But something else within those emails caught my attention reminding me of free market economist and Nobel Prize winner Milton Friedman’s famous quote, “there is no such thing as a free lunch.” In other words, even things that appear to be free have an associated cost.
This basic economic concept is lost on Colorado State Representative Max Tyler’s (D-Lakewood) who in a March 23, 2010, press release bragged about a government-dictated increase in Colorado’s renewable energy mandate:
With HB 1001 we will manufacture and install panels and turbines all over Colorado to capture free energy….The sun will always shine for free, the winds will always blow for free, and our energy production will be cleaner. Renewable energy, green jobs, and a cleaner future — what’s not to like?
At roughly the same time that Tyler publicly fantasized about “free energy,” a credit advisor for the Department of Energy (DOE) loan guarantee program James McCrea was concerned about “major issues” with Abound Solar’s marketability. In an email dated April 1, 2010, just seven days after Tyler’s press release, McCrea explained:
Another issue is the very limited supply of telluride, its potential price trajectory and other demands for it. Related to this is a question of the viability of the Abound panels as compared to other panels and whether there is sufficient benefit to allow the panels to be profitable if Te [telluride] prices really increase. If the price really rises will there be alternative uses that can afford it basically turning it into a non available input for Abound?
I don’t believe we have ever worked with an input material that is so limited. We need to think that through carefully.
Before going bankrupt this summer, Abound produced cadmium telluride (CdTe) thin-filmed photovoltaic solar panels. Cadmium and tellurium, used in the manufacturing of Abound’s panels, are two of the world’s 17 “rare earth elements” that are needed for everything from smart phones to solar panels to high tech weapons systems. My former colleague Michael Sandoval, now an investigative reporter with the Heritage Foundation, and I have written several columns on general issues with rare earth elements.
This email highlights the problem specific to Abound, and McCrea was right to be concerned. According to the December 2011 DOE Critical Materials Strategy the price of tellurium has been going up since 2007:
The price dropped in 2006, but in 2007 resumed its upward trend owing to increased production of cadmium telluride (CdTe) solar cells.
Furthermore, China controls the vast majority of rare earth elements. In August 2012, the Chinese announced an ambitious plan to increase its stranglehold on the world’s available supply of rare earths. According to China Daily the country:
launched a physical trading platform for rare earth metals as part of its efforts to regulate the sector and strengthen its pricing power for the resources.
As the world’s largest producer of rare earth metals, China now supplies more than 90 percent of the global demand for rare earth metals, although its reserves account for just 23 percent of the world’s total.
The article reiterated what Michael and I have said on numerous occasions, mining rare earths comes with a significant environmental cost that green zealots like Tyler completely ignore when claiming solar energy is free and clean:
Mining the metals greatly damages the environment. In recent years, China has come down heavily on illegal mining and smuggling, cut export quotas and imposed production caps, stricter emissions standards and higher resource taxes to control environmental damage and stave off resource depletion.
However, these measures have irked rare earth importers, who complained about rising prices and strained supplies.
But China did exactly what it said it would do in 2009. It drove up prices with reduced output as global demand increased.
China’s rare earth output fell 36 percent year on year to 40,000 tonnes in the first half of the year. Prices of major rare earth products in July remained twice as high as prices at the beginning of 2011, although down from the beginning of the year.
In July 2009, about a year before President Barack Obama announced a $400 million loan guarantee for Abound, Jack Lifton, an expert on sources and uses of rare minerals, wrote a lengthy article for Resource Investor about the availability of tellurium for First Solar, a global leader in cadmium telluride solar panel manufacturering. Lifton’s conclusion should have served as a prophetic warning for Abound and any hope of profitability:
A company such as First Solar, which is critically dependent on a secure supply of tellurium to exist and on an unsustainable growth in the supply to it of tellurium for it to grow and achieve competitive pricing is a big risk for short-term investors. The maximum supply and production levels attainable of tellurium are quantifiable even if the actual production figures are murky, and they do not bode well for the future of First Solar if it must make profits to survive.
The next time you hear a politician like Max Tyler tout the benefits of “free” and “clean” energy, remember Abound Solar because there is no such thing as a free lunch.
Spookiness at the DOE
Instead of figuring out what happened to your tax dollars with the bankrupt Colorado-based Abound Solar (leaving that to Congress and the Weld County District Attorney Ken Buck), the Department of Energy continues to be the PR firm for the Big Green agenda by promoting energy themed pumpkin carving patterns. Give them credit for including nuclear, but noticeably absent are any patterns for coal, natural gas, and oil, which are the sources for most of the power that Americans demand.
For those kiddos who want to carve pumpkins this Halloween, you can really spook trick-or-treaters with a solar panel or CFL themed jack-o-lantern. The smart kids will carve carbon-based energy sources because they know that affordable, reliable, and abundant energy is what powers our economy.
The Limits of Wind Power
An Independence Institute and Reason Foundation project, The Limits of Wind Power.
Author: William Korchinski
Project Director: Julian Morris
Introduction:
Environmentalists advocate wind power as one of the main alternatives to fossil fuels, claiming that it is both cost effective and low in carbon emissions. This study seeks to evaluate these claims.
Existing estimates of the life-cycle emissions from wind turbines range from 5 to 100 grams of CO2 equivalent per kilowatt hour of electricity produced. This very wide range is explained by differ- ences in what was included in each analysis, and the proportion of electricity generated by wind. The low CO2 emissions estimates are only possible at low levels of installed wind capacity, and even then they typically ignore the large proportion of associated emissions that come from the need for backup power sources (“spinning reserves”).
Wind blows at speeds that vary considerably, leading to wide variations in power output at different times and in different locations. To address this variability, power supply companies must install backup capacity, which kicks in when demand exceeds supply from the wind turbines; failure to do so will adversely affect grid reliability. The need for this backup capacity significantly increases the cost of producing power from wind. Since backup power in most cases comes from fossil fuel generators, this effectively limits the carbon-reducing potential of new wind capacity.
The extent to which CO2 emissions can be reduced by using wind power ultimately depends on the specific characteristics of an existing power grid and the amount of additional wind-induced vari- ability risk the grid operator will tolerate. A conservative grid operator can achieve CO2 emissions reduction via increased wind power of approximately 18g of CO2 equivalent/kWh, or about 3.6% of total emissions from electricity generation.
The analysis reported in this study indicates that 20% would be the extreme upper limit for wind penetration. At this level the CO2 emissions reduction is 90g of CO2 equivalent/kWh, or about 18% of total emissions from electricity generation. Using wind to reduce CO2 to this level costs $150 per metric ton (i.e. 1,000 kg, or 2,200 lbs) of CO2 reduced.
Killer solar panels and the sobering reality of “green” energy
More solar panels and wind turbines are not solutions to the eco-left’s obsession with global carbon emission according to a new book from University of California – Berkeley visiting scholar Ozzie Zehner titled Green Illusions: The Dirty Secrets of Clean Energy and the Future of Environmentalism.
Zehner said in an interview with the Huffington Post,
‘Alternative energy is not a free ride, just a different ride…and there’s no reason to believe it will offset fossil fuel use in a society that has high levels of consumption and is growing exponentially.’
Put another way, renewable energy only makes sense if undertaken in concert with other, more fundamental changes in the way we deploy and make use of energy in our everyday lives. At the moment, we’re really paying attention to the technology end of things, Zehner argues, and without a holistic approach, these innovations get us nowhere.
Zehner wants people to consume less. But there is more to his book than conservation. He argues that some green technology is actually worse than traditional fossil fuels that simply dump CO2 into the atmosphere
Green Illusions explains how the solar industry has grown to become one of the leading emitters of hexafluoroethane (C2F6), nitrogen trifluoride (NF3), and sulfur hexafluoride (SF6). These three potent greenhouse gases, used by solar cell fabricators, make carbon dioxide (CO2) seem harmless.
The main point is that “green energy” comes with a price, both economical and environmental. Go into it with your eyes wide open.
Fun with Fracking…
Energy Policy Center Director Amy Oliver Cooke has fun talking energy, especially when wearing a hot pink “Mothers In Love with Fracking” t-shirt. Thanks to Tom Barry of The Villager for this photograph and his article on the American For Prosperity (AFP) event that featured Dick Morris. AFP invited Amy to be the warm up act to discuss Obama’s energy policy.
Independence Institute Energy Policy Center Director Amy Oliver Cooke has fun talking energy, especially fracking!
Frack Attack: Cracking the Case Against Hydraulic Fracturing
IP-10-2012 (July 2012)
Author: Donovan D. Schafer
PDF of full Issue Paper
Scribd version of full Issue Paper
Introduction:
A ban on fracking would not satisfy those who present general arguments against any kind of development. Acceptance of these arguments would require an outright ban on all oil and gas activities, new wind farm construction, electric transmission construction, residential housing developments, road construction, and the like. Before accepting any argument against fracking as sufficient grounds to restrict or ban its use, one should take that argument to its logical conclusion and consider the full set of repercussions. For if such arguments are granted valid status, they will be used again and again by whichever parties can benefit from shutting down any particular form of development.
CO Green dream proves nightmare for taxpayers
GIGAOM reports that, as of last week, General Electric is putting on hold its plan to be a major solar panel manufacturer in Colorado. According to the self-described emerging technology blog GIGAOM:
General Electric was set to become a major solar manufacturer when it announced a 400 MW factory in Colorado last year. Over a year later, though, it’s putting that plan on hold for 18 months or more while it works on coming up with a more competitive technology, Danielle Merfeld, general manger of solar technology at GE, told us on Tuesday.
It was only last month when a company spokeswoman told me by email that GE was still building its factory and hoping to start production in 2013. But the company reconsidered that plan in recent weeks after seeing solar prices tumbled significantly for over a year, and it stopped the factory building activities last week, Merfeld said.
When GE announced it was getting into the solar panel manufacturing business, several states chased after GE’s $300 million project and the promise of 355 green jobs with an average salary of $50,000. Colorado, specifically Aurora, landed the project after granting $28 million in state and local tax incentives. A glowing Denver Post house editorial from October 2011, called it a “coup,” explaining that “a growing green-energy sector in Colorado is a plus as the nation continues to confront issues of climate change and energy independence.”
Sounding like a broken record (for those who still remember vinyl), but we saw this coming in November 2011 when we predicted dark days ahead for solar manufacturers following layoffs from a Detroit based manufacturer .
A local news outlet, WOOD-TV, had the money quote: ”supply for solar products worldwide is more than double the demand, so there is no need to make more.”
This is bad news for Colorado because taxpayers just threw a bunch of incentives at General Electric to locate a solar panel manufacturing plant in the state. Colorado already has several solar panel manufacturers including Abound Solar, Ascent Solar, and PrimeStar.
While losing a competitor might be good for the remaining manufacturers, an over-saturated market means more dark days on the horizon for solar panel manufacturers and thus for taxpayers.
Since November 2011, Abound has declared bankruptcy, GE has pulled the plug on the PrimeStar project, and Ascent has moved away from panels and into new consumer solar products such as cell phone chargers.
Former Governor Bill Ritter’s green dream for Colorado is turning into a nightmare for taxpayers. The question remains how long can Ritter sustain his own $300,000 job as the green ambassador for Colorado’s New Energy Economy, which appears to be the only real job “created.”
Disgraced EPA Official Joins Sierra Club
The disgraced former EPA regional official forced out after Senator James Inhoff (R-Oklahoma) posted a video of his enforcement philosophy for fossil fuel companies has found a home with the Sierra Club and its anti-coal campaign.
Al Armendariz will take over leadership of the group’s “Beyond Coal” campaign office for Austin, Texas, on July 15.
He’ll coordinate efforts to move the Lone Star State away from coal-fired electric generation and toward wind, solar and other low-carbon alternatives, said Beyond Coal director Bruce Nilles in an interview.
Armendariz, former administrator of EPA Region 6, resigned last spring after a video surfaced revealing his “enforcement philosophy” for oil and gas developers to be analogous to the Roman crucifixion of the “first five villagers” in a conquered territory.
Just two years ago, the Rocky Mountain Chapter of the Sierra Club was instrumental in getting the Colorado General Assembly to pass HB10-1365 mandatory fuel switching away from coal to natural gas. That love affair ended abruptly last month when the national headquarters announced that it no longer supported natural gas as a “bridge fuel” for electricity generation.
Senator Inhoff told EENews that Armendariz’s new position was no surprise to him, “At least at the Sierra Club, he won’t get into so much trouble for telling the truth that their agenda is to kill oil, gas and coal.”
Flashback: Drunk on Sunshine
A mere seven months ago, the Denver Business Journal quoted Abound Solar President and CEO Craig Witsoe bragging that his thin-filmed cadmium telluride solar panel manufacturing company was the “anti-Solyndra,” referring to the scandalous and abrupt bankruptcy of the California-based thin-filmed manufacturer that saw the FBI raid its luxurious taxpayer-supported headquarters.
Cathy Proctor of the DBJ further reported that Abound was “doing well and growing,” according to Witsoe. Proctor also quoted solar industry experts who said Abound had “a good chance of competing in the market” assuming it could lower the cost of its panels.
And Eric Wesoff of GreenTech Media reiterated the Abound as the anti-Solyndra theme, “They’re not Solyndra. Solyndra spent money like a drunken sailor, and it doesn’t seem like Abound is doing that.”
With today’s bankruptcy announcement, Abound turns out to be nothing more than another failed solar manufacturer that got drunk on the promise of sunshine and easy (taxpayer) money.
CO Solyndra: Pat Stryker’s Abound Solar Goes Bankrupt
Pat Stryker’s Abound Solar “will close its doors and file for bankruptcy” next week according to the Department of Energy (DOE) blog. Because the bankruptcy means roughly $70 million in lost taxpayer money, we take no joy in saying that “we told you so.” Back on January 11, 2012, we wrote:
Unfortunately for taxpayers who provided a $400 million loan guarantee for Abound, 2012 may be the year that the sun sets on Pat Stryker’s pet project.
Apparently taxpayers have been venture capitalists invested in Abound Solar since 2007, well before the controversial $400 million taxpayer-guaranteed loan:
In 2007, the Department awarded the company a grant to support a pilot project to demonstrate the viability of its manufacturing process. In December 2010, the Department issued a loan guarantee to support the construction of two commercial scale plants: one in Longmont, Colorado and a second new facility in Tipton, Indiana.
Perhaps Abound should have heeded Ronald Reagan’s warning when he said the nine most terrifying words in the English language are “I’m from the government, and I’m here to help.” John Keyes, founder of the first commercial solar energy corporation, knows this first hand. He explained in an interview that the worst thing to happen to the industry he loves was government involvement which began in the Carter Administration.
Rob Douglas wrote on WatchDog.org that the bureaucratic red tape involved with DOE loans ends up hamstringing businesses like Abound:
For example, the $400 million loan-guarantee agreement between Colorado-based Abound Solar and the DOE reveals that Abound Solar — and, it is safe to assume, all loan-guarantee recipients — had to comply with a staggering range of federal laws and regulations, including, but not limited to:
- The Recovery Act;
- The Davis-Bacon Act; Office of Management and Budget regulations;
- Environmental laws (including those involving “air emissions, discharges to surface water or ground water, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation or disposal of toxic or Hazardous Substances or wastes, or other environmental health or safety matters”);
- The Investment Company Act;
- The Employee Retirement Income Security Act;
- Buy American regulations;
- Lobbying laws;
- Foreign asset control laws;
- Prohibited person laws;
- Prohibited jurisdiction laws;
- Corrupt practices laws;
- The Anti-Terrorism Order.
Scratch the surface of any one of the above categories and you find requirements like this one, in the OMB compliance section:
“OMB shall have certified in writing (in form and substance satisfactory to DOE) that the DOE Credit Facility Documents and the Project comply with the provisions of the Omnibus Appropriations Act, 2009, P.L. No. 111-8, Division C, Title III, as amended by Section 408 of the Supplemental Appropriations Act, 2009, P.L. No. 111-32.”
Keep in mind that’s just one provision in more than 100 pages of detailed requirements that span the breadth and depth of federal laws and regulations. And in case the loan guarantee agreement by the DOE is not suffocating enough, the following legal, financial and regulatory blanket — as revealed in the Abound Solar documents — is placed atop the specific, enumerated rules and regulations loan-guarantee recipients are required to obey:
“All provisions of this term sheet are subject to the following (the “Program Requirements”): (i) the provisions of Title XVII, all applicable provisions of the Recovery Act, and the Applicable Provisions, (ii) all DOE or Federal Financing Bank (“FFB”) legal and financial requirements, policies, and procedures applicable to the Title XVII program from time to time, and (iii) the Office of Management and Budget’s Initial Implementing Guidance for the Recovery Act, M-09-10 (February 18,2009), Updated Implementing Guidance for the Recovery Act, M-09-15 (April 3, 2009), Updated Implementing Guidance for the Recovery Act, M-09-21 (June 22, 2009) and, in each case, any amendment, supplement or successor thereto (collectively referred to herein, the “OMB Implementing Guidance”).”
The Abound Solar loan-guarantee documents suggest that a newborn company, which lays down with the DOE, runs the risk of being smothered by the federal leviathan before ever bringing a product to market.
Not surprisingly, the DOE doesn’t take any responsibility for smothering the newborn. Instead, it blames China and then claims the answer is MORE taxpayer money. That might explain its cavalier attitude about losing taxpayer money:
While disappointing, this outcome reflects the basic fact that investing in innovative companies – as Congress intended the Department to do when it established the program – carries some risk.
Of course, there really isn’t much “risk” when using someone else’s money.
Complete Colorado’s Todd Shepherd reported, that Abound’s DOE loan guarantee had the appearance of more than just an investment in an upstart solar company. It looked a little more like political payback in a classic pay-to-play scheme. The billionaire heiress Pat Stryker could have financed the entire project herself, but instead used her political connections to put taxpayers on the hook.
For its part, in an online press release, Abound says it’s “appreciative of the significant investment from private investors and the U.S. Department of Energy.” Abound should be “appreciative” toward taxpayers who footed much of the bill for Styker’s and President Obama’s green fantasy.
