OC Register Misrepresents Green Energy Technology To Discourage Investments
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An Orange County Register editorial used the struggles of the electric car company Fisker to claim that all green energy technology is a poor investment for the government.
In the editorial (behind paywall), the paper cites several green energy companies that have not produced desired returns to support its argument that government should stop investing in green energy technology:
Either way, Fisker provides a business-school-worthy case study in how not to invest in start-up companies in nascent industries.
Indeed, in a presentation this past fall at MIT's annual EmTech conference, Bill Banholzer, chief technology officer for Dow Chemical, cautioned investors that it was mistake to throw money at green energy start-ups, which promise to bring disruptive technologies to market.
Mr. Banholzer's PowerPoint included a slide with a dozen green energy companies, including the aforementioned Solyndra, A123 Systems, which was to supply state-of-the-art lithium batteries to Fisker and other electric car manufacturers, and other much-hyped start-ups.
Congress should explicitly forbid the Obama administration from making any further "investments" in green energy companies, the failures of which should not come at the expense of taxpayers.
While the PowerPoint presentation by Banzholzer -- whose Dow Chemical just lost a suit over the $1 billion in tax deductions the company tried to put into tax shelters forcing it to pay a 20 percent penalty -- highlighted the failures of several green energy companies, this anecdotal evidence obscures key facts about the green energy industry as a whole. Due to increases in federal investment, the U.S. clean tech industry has grown rapidly. The cost of solar panels has dropped significantly over the last several years and is on track to be as cheap as our current electricity by 2020. Wind turbine manufacturing and installed wind capacity have also grown significantly. According to the National Association of Manufacturers, "US wind turbine manufacturing has grown 12-fold" since 2005 while "costs have been reduced by 90% since 1980."
Yet, much of the federal government's subsidies still support fossil fuels. Of the four major permanent (never expiring) energy tax credits, three are for fossil fuels and one is for nuclear energy. On the other hand, most of the major subsidies for green energy -- which came into effect in 2006 -- expired in 2011.
Subsidies for fossil fuels also have major international tax implications. As the International Monetary Fund explained in a brief on energy subsidy reform, on a "post-tax" basis, subsidies for the fossil fuel industry are $1.9 trillion or 2½ percent of global GDP:
On a "pre-tax" basis, subsidies for petroleum products, electricity, natural gas, and coal reached $480 billion in 2011 (0.7 percent of global GDP or 2 percent of total government revenues). The cost of subsidies is especially acute in oil exporters, which account for about two-thirds of the total. On a "post-tax basis" which also factors in the negative externalities from energy consumption--subsidies are much higher at $1.9 trillion (2½ percent of global GDP or 8 percent of total government revenues). The advanced economies account for about 40 percent of the global post tax total, while oil exporters account for about one-third. Removing these subsidies could lead to a 13 percent decline in CO2 emissions and generate positive spillover effects by reducing global energy demand.
Eliminating those subsidies, which encourage greater carbon dioxide emissions, would have saved the U.S. government, $12 billion a year on average from 2005 through 2009, while also helping to protect the environment.
Further, the OC Register claims the government "squander[ed]" $435 million on the now bankrupt A123, an electric car battery maker. In fact, A123 only used about $132 million of the $249 million it was granted. The $435 million figure includes the state tax credits and other funds.
Despite the increasing benefits seen in the green energy industry, media outlets --like the OC Register-- have chosen to focus on the bad reports while neglecting companies such as Tesla, which received $465 million in Department of Energy funding, not only making a profit in the first quarter of 2013 but agreeing to repay its loans five years early.