Wednesday, September 14, 2011

Solyndra should wake up Delaware

Delaware must learn a lesson from Solyndra that even Spain couldn’t teach us.  A study of Spain’s focus on “green jobs” found that for every “green job” created, it cost Spain more than 2.5 jobs.  The study also found that the “green jobs” plan in Spain added so much to the debt that it actually delayed their exit from the economic crisis.  Spain’s model of green job creation is the model that President Obama used to create his plan for a new green economy.  This is the model that Jack Markell has embraced here in Delaware.

Delaware is seeing the effects of this policy although the blame is being laid on the economy.  The truth is that “green jobs” and alternative energy are nothing more than limited alternatives to be added to the arsenal of energy alternatives for a nation.  Solyndra is a perfect example of a “green jobs” company that could not compete within the market place.  The Obama touted company brought in $1 Billion (including $535 million in taxpayer funds) from investors and employed 1100 workers (that’s just over $909,000 per job) yet the solar power manufacturer failed and filed Chapter 11 bankruptcy this week.  The results of the Spanish policy show why this occurs in the alternative energy market.

The climate change and alternative energy supporters often clamor for more subsidies for their products and they complain about the massive payouts to fossil fuel companies.  The truth is that solar and wind each receives more than 50x the amount of subsidies as the coal industry does yet coal provides more than 43% of America’s power while alternatives muster just over 5% of our needs.  So we see that alternatives are far better funded than admitted and for far less output.  Where is the money going?  Well the answer is that not all of it is graft or misuse but some of it is.  Alternative energy, despite its lifespan to date, is still lacking some technological breakthroughs that would make it more viable.  These include finding a way to create a long term power storage plan and finding more effective ways to transport the energy to the places that need the power.  Offshore and onshore wind farms can generate massive amounts of energy but that energy is short term kinetic power that must be used right away or lost.  They are also built far away from the place where the power is needed and much of the energy is lost in the transmission of the energy.  So these logistical problems contribute to the trouble that alternative energy has with becoming a competing source of power.  Massive wind and solar farms must be constructed to provide even the most basic power needs in order to compensate for the unreliable and ineffective power generation.  Remember this, the wind is not always blowing nor the sun always shining and so even in places like Delaware, where we have a Renewable Portfolio Standard that mandates usage of a certain percentage of renewable energy, we also have 100% of that alternative power backed up by conventional sources (nuclear, coal, natural gas).  Sort of defeats the purpose and it greatly increases the cost.

It’s also worth pointing out that the Spanish study found subsidies “multiplied by five” in Spain between 2004 and 2010 while the companies charge 12x what it costs conventional energy to make the same power.  Government subsidies in the alternative energy field are direct payouts, not “tax breaks” as they are in conventional energy sectors.  You see, oil, gas and coal companies are allowed to write off the depreciation of equipment and land as the real value of those assets decreases (this is a standard deduction for any business from the local bakery to Exxon/Mobil) while Solyndra and Fisker receive checks from the government to subsidize the cost of their products.    These direct subsidies actually COST the American taxpayer while tax breaks simply allow the company to keep more of what they earned based on a loss of value in another area. 

A perfect example is Fisker.  When GM closed their Boxwood Road plant in Wilmington, Delaware leaders scrambled around for a replacement.  While companies like Hyundai, Nissan and Toyota expressed interest in the plant, Delaware’s alliance with the autoworker’s unions and the added costs scared them off but not Fisker.  Fisker is a 4 yr old auto company that only recently built and delivered the first of its all electric plug in vehicles.  The first thing that Fisker did is to design plans for a the plug in vehicle and the second was to begin begging the government for subsidies and look for places where they could get free room and board.  They found Delaware and our government was all too willing to accommodate them.  All told, Fisker has gotten more than $1 Billion in state, local and federal subsidies to build their cars.  Their first car, rumored a year ago to be set around $80,000 is priced from $96,850-$109,850 which makes it about as affordable as a home in the Greenville hills.  These will of course, be snapped up by environmentally conscious uber rich folks who can afford to have the charger installed at home and at their office but that won’t work for the average Joe which makes Fiskers plans to build an “affordable” version (rumors had it retailing around $40,000 last year but it’s more likely to be near $60,000) that Fisker plans to take over the car market with.  The problem, as noted by the folks at the Caesar Rodney Institute is that the numbers don’t quite add up for Fisker, especially in this economy.  Fisker is relying on their vehicle getting “98 miles to the gallon” to justify the cost of the car and the charging system (which we hope will be installed everywhere we park otherwise we might not make it home) and also hoping that you don’t notice the $1 Billion that you the taxpayer have already given them to build this car that they will now charge you a year’s salary to own.  The problem with that is that there are now DOZENS of high quality hybrids like the Hyundai Sonata Hybrid, the Prius and the Leaf at nearly half the cost who get similar mileage out of gas/electric engines.  That makes it unlikely that Fisker will own as much of the market as they expect to.  Hybrid sales average around 300,000 cars per year and Fisker plans to sell 100,000 of their electric cars in a year.  That means commanding 1/3 of the American hybrid market with a vehicle that is more than twice the cost of the hybrid sales leader, the Toyota Prius.

Any business owner can tell you, as a new company, expecting to compete with a well-known and well respected existing company right away is a fools folly.  This is especially true when your product is more expensive and less proven than the competitor.  Yet this is the “investment” that Obama/Markell’s “green energy” plan makes.  A company with no evidence that their product is viable in the long term or in the long run is given $1 Billion to produce it.  Meanwhile, conventional vehicles are being forced into higher costs to allow this new “investment” to compete.  The truth of the American car market is that fuel efficiency is important but American families are large and we enjoy comfort which means we like our vehicles larger than Europeans for instance.  The most recent list of top selling Ford vehicles did include the Fiesta but it also included the Explorer and the F-150.  Instead of driving these vehicles out of existence, we should be looking at ways to make them more efficient.

Delaware had a unique opportunity to lead in the auto market when Chrysler and GM closed their doors.  Both plants were setup to manufacture cars and SUV’s that Americans want to drive and both would have taken minimal effort to adjust for companies like Hyundai and Toyota to begin producing those vehicles with hybrid engines right here in Delaware.  It’s time for new leadership in Dover that will use common sense when confronted with these kinds of problems and that will look for ways to create jobs for Delawareans regardless of the effect on unions.  Delaware has turned away more jobs because we refuse to be a right to work state than we’ve lost due to the economic crisis.  This has to stop.  We need LEADERS in Dover who understand what the people want and need, not puppets who are beholden to special interest groups.  When I get to Dover, I’ll make sure that we get government out of the way so that businesses can thrive and create jobs.  Delaware deserves no less than that.

Reference: - Spanish government documents show that study of Spanish green jobs initiative was generous, damage to Spanish economy worse than previously thought. - energy sources - Fisker shenanigans - Fiskers numbers don’t add up

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