subsidies


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.

Ontario plans to become a leading green economy in North America.  And those who stand to benefit glibly repeat this mantra as if it is was something to be proud of:

Governments in Canada are now actively competing to become environmental leaders. No longer content to merely follow environmental trends, several Canadian provinces have introduced legislation and programs designed to make them leaders not just in their jurisdiction, but across North America. One area at the forefront of this trend is green energy generation: the generation of electricity from renewable energy sources such as wind, solar, water, biomass and biogas. Several Canadian jurisdictions have introduced legislation which offers economic incentives to generate green energy, removes barriers to access the market, reduces red tape in respect of permitting and approvals, and encourages the development of local content in such green energy projects. In Ontario, the Green Energy Act was designed to accomplish these goals and establish Ontario as a North American leader in green energy. British Columbia, Quebec and New Brunswick have also introduced programs and legislation to accomplish similar objectives.

But what does it mean to be a green leader? If California and Spain are any guide, today’s “green leader” is more likely to be tomorrow’s loser.  Is this rush to be green worth the risk?

You can now add the cost of compensating farmers plus lost rent to the cost of the Samsung deal.

A group of farm families are today vacating land on which they’ve toiled for decades to make way for a South Korean company’s plan to build wind and solar energy projects.

Nineteen farmers were advised a month ago they would need to make way for testing procedures by a consortium led by Samsung, which was given a controversial $7-billion deal by the Liberal government in January to create power facilities by 2015.

[…]

The 19 farmers who lease 35 properties have received letters but ORC spokesperson Caroline Knight would not provide a breakdown of how many have to leave the land and how many are required only to provide access, because she said it would impact Samsung’s proprietary information.

Kelly said they were at first leery about the move because of the land loss but the government late last week provided a compensation package that took some of the sting away. Kelly said the province is compensating farmers for what they would have received from the selling of produce, plus compensation for what they spent on growing crops.

The Kellys planted 32 hectares of corn before they received the letter telling them they were losing the 202 hectares they lease.

“It’s pretty good compensation considering that we won’t be able to plant our crops and we won’t be able to rent it anymore,” said Kelly, who declined to give the dollar figure. “No farmer ever wants to lose land.”

And what about the restrictions on the use of prime agricultural land? I guess those rules don’t apply to the government.

If anything good has come out of the recent global recession, the ongoing reassessment of the wisdom of throwing subsidies at renewable energy surely ranks near the top of the list.

The oil spill might have been expected to revive a sense of urgency that the world, and America in particular, should reduce its dependence on oil, not least by switching to cleaner, greener sources of energy. Instead it is increasingly common to hear investors asking gloomily, “Is green dead?

The economic downturn is clearly partly to blame for the decline in shares of renewable-energy companies. The industry is still policy-driven rather than market-driven, and the recession has increasingly called into question whether governments will be able to afford the sort of environmental policies they have been promising (including in their fiscal-stimulus programmes). These policy commitments had been an important factor in the bulging market capitalisations of green-energy firms two or three years ago.

Still, the Economist cannot resist arguing the case for more government intervention:

The danger of losing technological leadership in a crucial industry to a big geopolitical rival; and an oil disaster in its backyard. Surely America’s government cannot ignore the pressing need for new policies to promote its green-energy industries? By marking down the shares of renewables firms, the markets seem to be assuming that the government will indeed ignore it. Then again, as has been all too clear in recent years, the markets do not always guess right.

But presumably, governments do. Yeah right.

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.

Someone thinks Samsung is going to be a force to be reckoned with in renewable energy:

Samsung announced its plans for world domination Tuesday.

The South Korean conglomerate said it would invest approximately $20.6 billion and boost employment by around 45,000 as part of its expansion into solar, energy efficiency, light-emitting diodes and other green markets. Samsung has already said it wants to be number one in solar by 2015.

In January, Samsung said it would invest around $6.6 billion into solar and wind projects into Ontario.

If you work at a green company, this is probably really scary news.

Samsung may indeed have a good shot at dominating renewable energy markets. But as an Ontarian, I’m more afraid of how much it is going to cost me. Dalton’s Samsung giveaway is expected to be as much as $10 billion.

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