Toward Government-Renewable Energy Industry Complex

In 1961, President Eisenhower warned of an expanding “military-industrial complex”. Now the danger is government-renewable energy industry complex. Consumers and Taxpayers must be warned!

The problem is not only specific to the US military. It is a US wide problem which started with biofuels. The commercialization of first-generation biofuels relied heavily upon government programs such as Renewable Fuels Standard, biofuels tax credits, agriculture research and rural development programs, and biomass initiatives. They bolstered ethanol and biodiesel.

A recent Oil and Gas Journal editorial makes it clear: “A growing mandate for sales of something nonexistent shows yet again why Congress must correct its errors on biofuel.” True, the Environmental Protection Agency requires the sale of 10.45 million gallons of cellulosic ethanol, already a much lower amount that the US Congress stipulated for 2012 in the Energy Independence and Security Act of 2007. “Even at the drastically reduced level, however, the required amount of cellulosic ethanol probably won't be available. Despite volumetric mandates and generous subsidies, the substance has proven difficult to produce at commercial scale.” Then why Congress admits the error or repair the damage? Well, ask the congressmen. Why the US government institutions, particularly DOD, should be pushed to spend millions of dollars to industries that end up with failure. When praising these failed adventures the US officials should not say anymore that “it won’t cost taxpayers a dime.”

Another OGJ article (Renewable energy stool) looks at the recent failures:

The recent closing of Range Fuel Corp.'s cellulosic ethanol plant in Soperton, Ga, is an example. After 4 years (since November 2007) and more than $300 million in taxpayer and private investment, the plant was unable to produce quantities of ethanol from wood chips and other cellulosic material because there is no effective cellulose-to-ethanol, large-scale production process.

There is also little light for subsidized programs in solar energy, as illustrated by the $500 million taxpayer loss on Solyndra Corp., the result of going to market with a noncompetitive technology and process.

In the Nevada desert near the town of Ivanpah, ground was broken recently on a 4,000 acre Concentrated Solar Power project using a $1.6 billion taxpayer guaranteed loan.

The Obama administration is being accused of "picking specific winners" in energy technology instead of leaving the decision to the marketplace. That's not the real problem. The real problem is spending billions to prematurely push unworkable and uneconomic programs into production.

In the wake of failed federal loan guarantees for green companies such as Solyndra and Range Fuels, the alternative-energy industry is looking for solutions that decrease government risk and elicit bipartisan support.

Is the situation in the European Union different? No. Consumers and taxpayers are paying a premium for the ill-defined European energy policy.

European Union policies to promote the use of biofuels for transportation will cost consumers as much as 126 billion euros ($166 billion) between now and 2020, according to two environmental groups. Two reports released by the Friends of the Earth and ActionAid campaign groups contend that biofuels do little to combat climate change, while pushing up prices for European motorists, who stand to pay an additional €18 billion a year for petrol and diesel as a result. The research predicts that by 2020, bioethanol would be €0.19-€0.41 more expensive than petrol per litre, and biodiesel €0.35-€0.50 dearer. Yet the authors identify government agricultural subsidies for biofuels production in Germany alone amounting to some €370 million. 

The European Commission said that while biofuels cost more than fossil fuels, it’s “reasonable” for motorists to pay extra. So, for high salaried officials it is easy to say “reasonable.”

A draft Commission impact assessment, obtained by EurActiv indicates that the greenhouse gas emissions from biofuels such as palm oil, soybean and rapeseed may exceed those of fossil fuels when wider factors are considered. This is because tropical forests and wetlands are often cleared to compensate for lands taken to grow biofuels elsewhere, a process known as indirect land use change, or ILUC. “consumers and taxpayers are paying the price for a flawed green policy that delivers no environmental benefits,” said Robbie Blake, biofuels campaigner for Friends of the Earth Europe. “Motorists and the environment will bear the brunt of these ill-conceived biofuel targets – with higher prices at the pump and higher CO2 emissions.

A Bloomberg New Energy Finance’s report says that producers based on edible feedstocks have the potential to produce aviation fuel at US$1.20/litre if they move to large-scale production, on the basis of current vegetable oil prices. This is well above current jet fuel prices, which are around US$0.85 in early 2012. (Biofuels could be competitive as aviation fuel by 2020).

We like it or not, we have to live with fossil fuels for a long time. No matter what we do they will not only be with us but will account majority of the energy we will consume in the decades to come. This means we have to focus more on greening of fossil fuels. Financial resources are better spent on renewables research and development. In the meantime, new combined cycle natural gas plants can replace coal with greatly reduced environmental impact. The immense shale gas resources in the US could be used to produce liquid fuels at surely competitive prices.

The US government and military can use purchasing guarantee mechanism to boost the renewable energy industry. This is quite normal, as long as the purchase price is competitive and not more expensive than conventional fuel. Any additional benefit to the industry should get the approval of tax payers.

This is why I call all this government-renewable energy industry complex. Remove all kinds of subsidies that are paid from the pocket of consumers! (in Europe, especially the ones on agriculture).

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PS. A separate issue, US Government Accountability Office released a report on January 31, 2012 (GAO-12-336R) summarizing the 8 required energy efficiency reporting issues in the DOD’s Annual Energy Management Report for FY2010. GAO found that: On Issue 2, DoD did not address cost.On Issue 4: DoD did not assessed costs. On Issue 7, DoD assessed the feasibility of net-zero installations but costs were not assessed.

Good effort GAO. Do not let the DOD to hide costs.