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Page added on December 31, 2011

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Renewable energy still not cost effective

Alternative Energy

Sooner or later, the laws of economics prevail, even in heavily subsidized industries such as solar power. The latest evidence that government manipulation cannot overcome economic reality is the decision by BP PLC, the giant British energy company, to leave the solar power business.

BP has developed solar energy for 40 years and for more than a decade touted its “Beyond Petroleum” campaign. The Wall Street Journal suggested, however, that BP’s solar experiment was more gimmick than serious investment. BP spent millions trying to go green, but simultaneously spent billions on its traditional gas and oil business.

International competitors, particularly China, turn out solar panels more cheaply, even as global demand has slowed. When supply outstrips demand, higher-cost providers suffer, as BP learned. Even government subsidies, without which solar manufacturers couldn’t begin to compete with less-costly, conventional energy, couldn’t keep BP competitive.

A similar lesson was learned this year by Solyndra, the bankrupted Northern California solar-panel maker that burned through $535 million in federal guaranteed loans. Last week, First Solar, the only pure-play solar-panel maker in the S&P 500 stock index, issued a profit warning for 2012, as profit fell to a four-year low, and the company said it will shift to large-scale utility projects rather than residential solar panels.

“(B)eyond the United States,” the Journal reported, “there have been a rash of recent solar company failures in Germany as well.” The failures come as China, which heavily subsidizes its solar manufacturers, flooded the market with less-expensive products, and as other governments ratcheted back their own tax-financed subsidies.

Solon became the first publicly traded solar company to file for bankruptcy in Germany, unable to repay loans of 275 million euros. Since 1990 Germany has imposed mandates that utilities must pay higher-than-market prices for solar and other so-called renewable energy sources, driving retail costs 46 percent higher than conventional sources, Bloomberg New Energy Finance says.

California government mandates designed to stimulate renewable energy mean that utilities “are committed to spending — and their ratepayers to financing — at least $6 billion in above-market power costs, with more to come,” according to columnist Dan Walters. Electric bills for U.S. consumers skyrocketed in the past five years, adding $300 a year to household costs, USA Today reported.

This should be unsurprising. President Barack Obama three years ago said to move the nation off traditional energy sources and on to these impractical alternatives, “electricity rates would necessarily skyrocket.”

So-called renewable energy is possible only if government demands those sources replace conventional energy, and subsidizes their manufacture, purchase or operation with tax dollars. Even then, there isn’t enough subsidy — let alone demand — to make these systems cost-effective. Sooner or later, economic reality prevails.


3 Comments on "Renewable energy still not cost effective"

  1. DC on Sat, 31st Dec 2011 11:09 am 

    Well, guess what, fossil-fuel energy was never really cost effective either, but its amazeing what a few trillion dollars in taxpayer subsidies and writeing off enviromental disasters for over a century will do for the bottom-line.

    Right BP…Exxon…Chevron…Shell…..

  2. Kenz300 on Sat, 31st Dec 2011 3:25 pm 

    The Cato Institute calculated the cost of subsidizin­­­­­g oil to be in the range of $78-150 billion per year. That is tough to compete with.

  3. Bob Owens on Sat, 31st Dec 2011 5:50 pm 

    Sooner or later solar power will be all we will HAVE! Get the picture? Expensive or not it won’t matter. Time to get with the program.

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