rent seeking


John Droz Jr. has posted a couple of brilliant little videos on MasterResource highlighting some very pertinent questions about the efficacy of wind as a source of energy.

Part 1: Dick & Jane Talk Wind Power

I found the rejoinder “compared to what?” a very effective method of countering the green mumbo jumbo that is often spouted by wind supporters. Though well meaning, they seem completely oblivious to the fact that their simplistic arguments in favour of wind do not hold up to scrutiny. Nor do they recognize that they are mindlessly repeating the talking points of self-interested green promoters. In this, Big Wind is little different from Big Oil.

Part 2: Jane Speaks With Her Town Representative

In this video, I like the way Jane turns the tables on wind developers. It should not be up to the citizen to prove the shortcomings of a particular wind project, but for the developers to prove its benefits. Of course, in the absence of any objective scientific study on the costs and benefits of wind power, the wind industry is understandably loath to go down this path. But that should not stop citizens from demanding it.

B.C. First Nations get it.

VICTORIA – B.C. aboriginals are accusing the Liberal government of playing dirty when it comes to the proposed Clean Energy Act.

Forty-seven B.C. First Nations and three major First Nations organizations are calling on the provincial government to delay passage of the bill, which they say ignores their concerns.

The act, introduced last month and currently being debated in the legislature, would allow major projects like the Site C dam in northeast B.C. to proceed without scrutiny from the B.C. Utilities Commission.

Union of B.C. Indian Chiefs Grand Chief Stewart Phillip said Wednesday aboriginals believe the government wants major dam, pipeline and mine projects to go ahead without consulting aboriginals or others.

He said the government is using the act to pave the way for what he called a modern gold rush of unopposed mega developments.

“Needless to say it’s running head-long into growing opposition from First Nations communities,” Phillip said. “They’re hell-bent on steamrolling over our constitutionally-enshrined and traditionally upheld aboriginal title and rights in favour of a global economic agenda designed to unleash an unprecedented wave of industrialization throughout the province in terms of mines, dams and pipelines.” (my italics)

This is just looney:

Canadian and provincial governments could spend $2.4 billion to build a large scale solar photovoltaic manufacturing plant and then give it away for free and still earn a profit in the long run, according to a financial analysis conducted by the Queen’s University Applied Sustainability Research Group in Kingston, Canada.

Queen’s University Mechanical Engineering Professor Joshua Pearce conducted the study — to be published in the August edition of the academic journal Energy Policy — to find out if it makes economic sense for governments to support solar cell manufacturing in Canada. He was surprised to discover the answer is an overwhelming yes even in extreme situations and feels governments should be aggressively supporting this industry to take advantage of the financial opportunity.

This is pure junk economics. By sponsoring such research, Queen’s University’s reputation as a credible educational institution takes a serious hit. But in currying favour with the McGuinty government, the authors are clearly aware of who spreads the butter on their department’s bread. 

What I don’t get, though, is if these researchers think it so blatantly obvious that governments should support such investments, why don’t they invest their own money in such enterprises? Logically, if their assertion that the business case for solar manufacturing is sound, then providing government support is totally redundant. Private capital should be more than willing to step in to fill the void.

Ultimately, this is just another industrial policy boondoggle. While theoretically, a case can be made for government to support industry in certain circumstances, subsidizing a bunch of branch-plant, solar panel/wind turbine assembly facilities falls far short of the conditions under which that theory might apply. Moreover, in virtually every case where strategic trade theory has been applied (e.g., aerospace), the accompanying rent seeking that goes with it has dissipated any potential “social” return (hello Bombardier).

Whenever governments throw money around, the opportunists and scammers will come out to play.

During the past two years, Ottawa, Ontario and the City of Toronto have handed out more than $1 billion in government rebates and interest-free loans to help homeowners and residential developers go green.

Despite the growing number of incentives — the list fills a 65-page document — the Star found there are few quality-control standards to protect consumers from incompetent “eco experts” looking to cash in on the booming industry.

As the examples in the article illustrate, the “green” industry has no more claim to virtue than any other. We are all marks in their confidence game, whether from lobbyists foisting their high-cost wind turbines and solar panels on electricity ratepayers, politicians wrapping themselves in green with taxpayer money to buy your vote or fly-by-night “eco-experts” trying to milk generous government programs and unsuspecting homeowners.

Considering their track record, could it be the answer to the energy problem is for government to stop trying to solve it?

Successive Administrations and Congress (with supplements from state governments) and lots of help from lobbyists have proposed and adopted dozens of tax breaks, credit programs and other subsidies that have had enormous impact on capital investment and other energy market decisions.  The US EIA recently issued a report that identifies more than 60 “federal financial interventions and subsidies in energy markets” that were in place during 2007.

In truth, these well meaning “interventions” are now distorting energy markets and, in particular, capital investment decisions.  Anyone with significant money to invest now understands that the safest investment with the highest return is to find something that qualifies for federal and/or state tax breaks and subsidies or qualifies under a credit program.  It make little sense for them to invest in (a) producing energy — e.g., from oil or natural gas — because the risks are higher and returns less assured, or (b) investing with some entrepreneur who might develop a new energy technology that could turn out to have commercial applications — which is also risky.

So, the smart money people “mine” Washington and state capitals for tax breaks, subsidies, and credit programs and, of course, they hire lobbyists.  A prime example of “mining in Washington” was T. Boone Pickens announcement that he was going to make a 25% return by building a $10 billion “wind farm”  — which current tax breaks will permit him to do.  Mr. Pickens has advertised both his planned “wind farm” and then his grand “energy plan” to make money by pursuing wealth via government subsidies.   Others (e.g., GE, FPL, Goldman-Sachs) follow the same strategy but “fly under the radar” while they capture tax breaks and subsidies.

The recent announcement that Loblaws will be installing solar photovoltaic panels on the rooftops of more than 100 of its stores is not cause for celebration by Ontarians. Despite the green spin the company puts on it, Ontario ratepayers will see their electricity costs go up as a result.

“This initiative is part of Loblaw’s overall effort, through the use of renewable energy sources to reduce our carbon footprint,” said Bob Chant, vice president, corporate affairs, Loblaw Companies Limited. “We believe green energy production using innovative technologies such as these pilot projects, supports our commitment to the environment.”

[…]

Based on the success of the initial four pilot projects, Loblaw will then evaluate the next phase of roll outs.”These projects will create a new source of income for businesses while providing new clean and green electricity in Ontario — particularly on hot, sunny summer days when demand soars,” said Brad Duguid, Ontario Minister of Energy and Infrastructure. “With our new domestic content rules, these projects will also help create new green collar jobs here in Ontario as well as major economic investments in equipment and services here at home.”

Ostensibly, Loblaws is doing this to be “green.” Yet while Ontario households typically pay on average 5.7¢ a kilowatt hour for their electricity (current wholesale rates are a little over half that), Loblaws will be receiving 44¢ a kilowatt hour for any power it produces, the cost of which gets fed back into your electricity bill. (I guess that’s why they call it a “feed-in tariff.”)  So, the more power Loblaws and the other 509 fortunate companies produce, the more our electricity costs go up.

For Loblaws, this is just their latest greenwashing scheme. The company has a long history of involvement with WWF Canada, which their clients unwittingly support every time they shop there.

It’s long past time to find a new grocery store.

According to Robert Bryce with John Stossel on Fox News:

The wind business…is the electricity sector’s equivalent of corn ethanol. It is a scam from beginning to end.

(at about the 6:30 mark).

ht: Allegheny Treasures

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