Alternative Energy Collapse
by Jeffrey Folks
Issue 205 – June 6, 2012
Green energy is in trouble. Most of the solar companies that have not gone bankrupt already are just getting by. Investment in wind and biofuels have plummeted. Sales of electric cars have been disappointing. In fact, every category of green investment touted by the Obama administration has proved to be a failure.
Yet some people—and some presidents—will never learn. At practically every stop in his reelection campaign, President Obama’s reiterates his support for alternative energy. The administration’s Blueprint for a Secure Energy Future devotes much space to discussing such topics as how to “Harness America’s Clean Energy Potential” and “Win the Future through Clean Energy Research and Development.” It speaks of building a “21st century clean energy economy” and of more funding for “innovative clean technologies.” And it reiterates the President’s unrealistic goal of “having one million electric vehicles on the road” by 2015, as if by setting an audacious goal for green technologies, those technologies will somehow magically fall into place.
That goal of one million electric vehicles is just 30 months away. According to MotorTrend, as of October 31, 2011, a total of 8066 Nissan Leafs and 5003 Chevy Volts had been sold. That is 13,069 vehicles out of an estimated U.S. fleet of over 255 million passenger vehicles.
As for the future, GM has now abandoned its previous estimate of 45,000 Volt sales for 2012. Leaf sales slowed to 478 units in February, an annualized rate of 5736. At these rates, there would be no more than 100,000 electric vehicles on the road by 2015, and as such they would constitute .0004% of passenger vehicles in service. Considering the President’s goal of one million vehicles, that is a colossal failure. It’s as if President Kennedy had announced the goal of landing a man on the moon and returning him safely by the end of the decade—and then only got him into low orbit.
In reality, the entire green energy undertaking is collapsing. At least one company supplying advanced batteries for electric vehicles continues to report large losses and has reportedly hired a strategic advisor to explore “other options”—including, one supposes, reorganization. A123 Systems, Inc. recently reported a preliminary loss of $125 million for the first quarter of 2012. That’s the same A123 Systems that was approved for $249 million in Energy Department grants. As of this writing, A123’s stock was selling for 93 cents a share, down some 85% in the last year.
The sad thing is that, if markets had been allowed to operate freely, American consumers would be enjoying cheaper electricity and better, more efficient gas-powered vehicles. One has to ask whether the large investment GM has made in the Volt might better have been spent improving its gas-powered models to compete with foreign automakers. The success of the Chevy Cruz, for example, demonstrates that GM can compete. Similarly, Ford’s popular Fusion and Focus models, along with its F-150 pickup, are market-leading options. Plug-in electric vehicles are proving to be a costly diversion.
The President’s “Clean Energy Potential” document also promises that by 2030 America will be producing 80% of its electricity from “a diverse set of clean energy sources.” Among this “diverse set” the President fails to mention oil- and conventional coal-powered plants, and yet according to the World Energy Outlook (published by the International Energy Agency), oil will remain the world’s largest fuel source through 2035 with renewables and biomass each constituting approximately 3% of the total. Coal and natural gas together will supply over 45% of global needs. Obama’s statement that “clean energy sources” will power 80% of U.S. electricity by 2030, suggesting that wind, solar, and biomass will be major contributors to this number, is disingenuous, at best. According to ExxonMobil’s reliable annual report, Outlook for Energy, even by 2040 coal, gas, and oil will continue to power two thirds of global electricity generation. Wind and solar together will supply no more than 5%.
Still, as has been widely reported, Obama has “doubled down” on his support for green energy funding. The President seems to have the odd notion that failing business models can be made to succeed if only enough government subsidies are devoted to them. According to this logic, a company that is losing $125 million in a single quarter with revenues of no more than $11 million can be made to succeed if some $114 million in additional subsidies are directed their way. At that point, the company is no longer “losing money”—it is merely losing the taxpayer’s money. It remains “an innovative new technology” as long as it continues to be funded with taxpayer subsidies.
That is a very odd view of economics, but it is not unlike the view of every other intellectually challenged Marxist economist. In the former Soviet Union, a state-run economy that produced widespread corruption and shortages of basic goods ultimately collapsed under its own weight, but right up to the end, it was defended by Soviet economists as more efficient and equitable than the capitalist economies of the West. In North Korea, ruinous subsidies of state-controlled industries have resulted in a per capita GDP of 20% of its neighbor to the south. The state-run economy of Cuba, with over 50 years to achieve its goals, has rewarded its citizens with a per capita GDP of $5,200 versus $48,400 for the U.S. (CIA Factbook estimates for 2010 and 2011, respectively) In the Democratic Republic of the Congo, Mobuto Sese Seko subsidized a similarly closed society for over three decades, erecting lavish palaces for the benefit of himself and his entourage, until the entire society devolved into social and economic chaos. The American economy under Obama’s central planning is headed in the same direction.
Jeffrey Folks is the author of many books and articles on American culture, including Heartland of the Imagination (2011).