"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Thursday, September 29, 2011

File This Under You Gotta Be Kidding Me...

Not chastened by the Solyndra scandal, the Obama Administration is apparently pushing ahead with another billion dollars of "loan guarantees" to solar power companies, including one that is connected to the brother-in-law of former Democratic Speaker of the House Nancy Pelosi:

DOE announced a $737 million loan guarantee to help finance construction of the Crescent Dunes Solar Energy Project, a 110-megawatt solar-power-generating facility in Nye County, Nev. The project is sponsored by Tonopah Solar, a subsidiary of California-based SolarReserve.

The Energy Department said the project will result in 600 construction jobs and 45 permanent jobs.
Once again, the Regular Guy feels compelled to do some math and ask some questions.   First, the math:  at $737 million for 600 temporary jobs in construction and 45 "permanent" jobs (ask the folks at Solyndra how permanent jobs in the solar industry are), we're looking at -- I know this math might be difficult for the average government bureaucrat -- more than a million dollars per f***ing job!  Putting aside the permanent jobs for the moment, let's say the construction of the facility takes two full years.   We're still spending more than $500,000 a year per construction worker.   If we're doing this just for stimulus purposes, why wouldn't just handing out, say $50,000 per year in cash to ten times as many people do the trick?   Or $5,000 per year to a hundred times as many people (that would be 60,000 people getting $5k they could spend as consumers under the Keynesianism the administration believes so fervently in)?

Now the big question:  is solar power economically efficient, i.e., is it a good investment?   The answer is pretty clearly no:

Hydroelectric is the most cost effective at $0.03 per kWh. Hydroelectric production is naturally limited by the number of feasible geographic locations and the huge environmental infringement caused by the construction of a dam. Nuclear and coal are tied at $0.04 per kWh. This comes as a bit of a surprise because coal is typically regarded as the cheapest form of energy production. Another surprise is that wind power ($0.08 per kWh) came in slightly cheaper than natural gas ($0.10 per kWh). Solar power was by far the most expensive at $0.22 per kWh—and that only represents construction costs because I could not find reliable data on production costs. Also, there is a higher degree of uncertainty in cost with wind and solar energy due to poor and varying data regarding the useful life of the facilities and their capacity factors. For this analysis the average of the data points are used in the calculations.

Put bluntly, by definition if an investment is worth making, private investors would already be making it.   And, conversely, if an investment requires government subsidies, it's because the marketplace, filled with savvy people acting on good information and putting their own money at risk, has already decided that its a bad investment.

Government needs to get out of the business of subsidizing selected businesses, period.   It's bad economics, since they invariably will only subsidize bad investments that the private sector has concluded aren't going to produce good returns; and it's bad for our civilization, since it's so obviously an opportunity for graft and corruption.

No comments:

Post a Comment