Alternative Energy Projects: Who Pays for These Boondoggles?

Not only do these taxpayer-funded projects fail to produce jobs, but the bottom line is that alternative energy is expensive energy. Work is almost completed on the Crescent Dunes Solar Energy Project, located near Tonopah. The developers had received a $737 million loan guarantee from the U.S. Department of Energy, so if the project fails like Solyndra did, taxpayers will be on the hook for all that money. Even if we don’t have to ultimately make good on the loan, we’ll still be paying for it in lots of other ways.

Harry Reid and his Progressive followers seem determined to force Nevadans to pay for so-called “clean energy,” no matter what it costs. Maybe it’s because they really believe in the threat of “global warming” or “climate change,” or whatever they’re calling it this month. Or maybe it’s because these projects present great opportunities to award contracts to politically connected supporters like Nancy Pelosi’s brother-in-law, who was implicated in the Solyndra scandal that cost taxpayers $535 million.

As Nevada Policy Research Institute President Andy Matthews said last year, “It’s time that Senator Reid address the accumulating evidence — regularly reported in the national media and seen right here in Nevada — that state and federal government subsidies for so-called ‘clean energy’ initiatives are only a huge, wasteful, crony-capitalist boondoggle.”

Harry Reid likes to brag about all the alternative energy projects he brought to Nevada, but how many jobs have they created? Solar plants like Crescent Dunes bring in some construction jobs while they’re being built, but they require a very small workforce once they’re completed. It’s estimated that Crescent Dunes will employ about 45 full-time people. The solar plants already in place near Primm and Boulder City have only seven full-time employees combined, although they received $12 million in tax rebates from the state. At the same time, Reid has used his clout on several occasions to kill coal-powered plants in rural Nevada, which would have brought in desperately needed jobs.

Not only do these taxpayer-funded projects fail to produce jobs, but the bottom line is that alternative energy is expensive energy. NV Energy pays 3 to 5 cents per kilowatt-hour for natural gas and coal-fueled power, 8 to 10 cents for geothermal and wind energy, and 11 to 13 cents for solar photovoltaic energy. These costs are of course passed on to the rate-payers in the form of higher power bills. According to the Energy Information Administration, Nevada’s residential electricity rates are about 26 percent higher than those of other Intermountain West states and 7 percent higher than the national average.

NV Energy isn’t to blame for this situation. In 2005, Nevada politicians passed a law requiring public utilities to purchase the higher-priced electricity. According to the Nevada Renewable Portfolio Standard (RPS): “The percentage of renewable energy required by the RPS will increase every two years until it reaches 25 percent in 2025. Included within the RPS is a requirement that at least 5 percent of the total renewable energy in the portfolio must be generated by solar facilities through 2015 and at least 6 percent must be generated by solar facilities beginning in 2016.”

Because the RPS keeps racheting upward, the situation is not going to get better any time soon. In fact, on May 2, NV Energy filed a proposed rate hike with the Public Utilities Commission that would amount to about a 1.85 percent increase for residential customers. So, thanks to Harry Reid and other liberal politicians, Nevada citizens are being forced to take money out of their pockets to subsidize expensive feel-good projects that bring in only a handful of jobs and put U.S. taxpayers at risk if they fail.

By Whose Authority?

For more information on my Commentary and to see some of the backup research, or if you wonder why I take the position I take, go to www.LyleBrennan.com.

  • EnergyInsight

    Your article represents an opinion, but few accurate facts. Some real statistics: With regards to job creation, to date, the Crescent Dunes project has supported more than 2.5 million man-hours of craft workers on site over the last two years – union and non-union, peaking at more than 1,000 workers on site. There is currently more than 800 workers on site. Don’t tell the construction industry that these jobs aren’t worthwhile, because they are “temporary”. The project has purchased goods and services in more than 25 states across the US creating a total of more than 4,000 direct, indirect and induced jobs in equipment supply and manufacturing, engineering, transportation and other value-added services. Once the project goes into operation the workforce is “just” 40 full-time positions, but the project will expend more than $10 million per year in salaries and operating costs, most spent locally, and is forecasted to generate more than $70 million in total tax revenues through the first 20 years of operation – contributing to workers’ paychecks, service businesses, local school systems and police and fire departments.

    The DOE Loan Guarantee Program is actually a money maker for the US government as the program is a loan and the recipients pay the costs plus interest at rates higher than many home mortgages these days. The DOE program has a success rate of over 97%, far greater than forecasted when the program was passed by congress and greater than most commercial banks, despite a very small number of failures of which Solyndra was the most politicized. Regardless, the program is under the budget that was passed on a bipartisan basis by the House and Senate; a program that was initially enacted under the Bush administration and realized under President Obama. Most of these projects have competed for and were awarded long term revenue contracts with investor-owned utilities for 20-25 years, as is the case with the Crescent Dunes Project, insuring they will be successful activities for decades and have the revenue to pay back the loans with interest.

    With regards to power pricing, people typically and mistakenly compare power pricing costs of new power generation facilities, such as Crescent Dunes, to just the fuel costs while ignoring the capital costs on old outdated technologies. Additionally, the expected escalation costs are ignored on fossil fuels, only stating the “today” price, not the expected costs over the next 25 years (including capital replacement costs on old facilities). The Crescent Dunes power price was made public during the CPUC hearing process and its price escalates at just 1% per year for the next 25 years regardless as to escalation on oil or natural gas. Today, solar is far more cost effective than a ‘new build’ coal facility or nuclear and is more cost effective than a new natural gas power facility if natural gas prices escalate at just 2-3% per year (natural gas prices have doubled in the last 3 years alone). Solar and wind power provide diversification and a hedge on fuel escalation and some analysts credit renewables with keeping natural gas prices in check, as opposed to an environment where natural gas was the only source for new power generation and was priced as a monopoly fuel.

    The Crescent Dunes project now represents the world’s leading technology for solar energy storage, as the project can actually store the sun’s energy to run during NV Energy’s peak electricity demand periods, day and night. As a result of this innovative flagship project that showcases US technology in Nevada and supported by the DOE, this technology is now being exported around the world in such markets as Chile, South Africa, China and even Saudi Arabia. Creating more jobs in the US and showing the world that the US is still a technology leader.

    Finally, if you really want a view of whether the Crescent Dunes project is a ‘boondoggle’, as you state, I recommend you ask the town manager of Tonopah or the County Commissioners of Nye County or the local residents and business owners in this heavy Republican area. This project, and projects like this have breathed new life into the local communities they serve at a time when desperation was more the order of the day.

    Kevin B. Smith – Chief Executive Officer, SolarReserve (the Crescent Dunes Solar Project developer)

  • jimbeau11

    You’re making a false comparison when you compare the “energy” from coal and natural gas to that of renewable energy sources. NV Energy gets guaranteed cost recovery from their ratepayers of coal and natural gas power plants. If there was a truly open and deregulated market in energy, no one would be building any power plants at all, because demand is not increasing fast enough to require capacity beyond what already exists, and many of the existing plants (coal and gas included) would shut down, because no one needs them.

    However, the “subsidy” of letting NV Energy have a protected, captive market and get a rate of return on what would be “unprofitable” power plants amounts to a multi-billion dollar subsidy that far outweighs what is usually a small, short-term cost outweighed by major ratepayer savings of using renewable sources with no fuel cost.

    Also, the “energy” you pay for from renewables is the all-in cost of the system. The 3-5 cent cost of coal or gas is solely for the variable cost of operating the plant (i.e. buying the coal and gas and other materials needed to simply operate the plant. That doesn’t count the 6-7+ cents of revenue/kWh NV Energy makes on the (often unprofitable) power plant infrastructure that ratepayers are forced to pay for that would not necessarily stand on its own in a competitive market. The cost of coal plants greatly exceeds that of utility-scale solar PV and of wind, and the cost of gas is competitive with large solar PV and wind as well.

    This doesn’t even include the billions in subsidies that natural gas and coal producers get from the US government in the form of tax breaks, depletion allowances, BLM-led cut-rate sales of coal-bearing lands.

    I don’t flatter myself to think that I alone would change your mind, but if you do continue to argue against renewable development, realize that it is that argument that is against liberalization of markets, and does not account for the true costs of all resources as currently paid for by the ratepayers under a regulated utilty market.

  • EnergyInsight

    Good point, Jimbeau11, on the billions of subsidies that go to the natural gas, oil, coal and nuclear industries. Subsidies that have been going on for decades and decades and that are embedded in the tax codes in the form of permanent tax credits, depletion allowances and a multitude of other breaks. Where is the outrage from the author on the continuation of those subsidies? New technologies generate less or zero pollution, use much less water, and create sustainable energy sources from clean and unlimited resources. Cheers to NV Energy for shutting down some of the oldest and dirties coal plants in the state (and the nation) and moving towards a cleaner future. NV Energy’s new owner, MidAmerican Energy, is one of the nation’s largest investors in wind and solar. Warren Buffet can be credited with that strategy.

  • George Harvey

    Look at the numbers. When the city of Austin, Texas went to buy 150 MW of power, the least expensive available was wind at 2.1¢/kWh (4.4¢/kWh without subsidies). They purchased solar because they wanted daytime power, at 4.9¢/kWh (7.2¢/kWh without subsidies). They could have got power from natural gas at 7.1¢/kWh, but there is no way of predicting the future price of the fuel, though many analysts say it is going up. Power from nuclear was over 10¢/kWh, and from coal was over 13¢/kWh.
    The assertion that renwable power fails to produce jobs flies in the face of reality. The solar power sector is creating jobs faster than any other in the US.

  • Paul Wood

    It would be nice to see a rebuttal from the author to address the facts listed in the comments. I would also like to ask the author, how many jobs does Nevada get from coal? Solar thermal power plants like the Crescent Dunes project will attract MORE jobs/MW than a coal plant does. Whether you think that’s positive or not, I’ll leave it to debate. I challenge anyone to find a more plentiful natural resource than solar energy in Nevada.

  • Sen3324

    Built by a Spanish company that doesnt pay contractors…..

  • Kelly

    Mr. Brennan, could you address the readers concerning the facts laid out in these comments? They are more compelling to most reader than your opinion based article.

  • Kelly

    Mr. Brennan, could you address the readers concerning the facts laid out in these comments? They are more compelling to most reader than your opinion based article.

  • SocratesNV

    Mr. Brennan is not very informed when it comes to anything beyond partisan politics. Nothing is more expensive than the heavily subsidized fossil and nuclear energy industries. In fact, we stand to pay the ultimate price for allowing these companies to use our environment as their sewer for so long.

    My personal experience with renewable energy is providing a nearly 20% ROI every year. It has completely paid for itself and requires zero maintenance.

    I have to laugh when I read articles like this. He must own stock in Exxon or Peabody!

    BTW, Solyndra was actually a very good company with a solid, well-engineered product. The numbers made sense at the time. It was a victim of massive and unexpected price drops in PV panels due to a flood of heavily-subsidized products from China. I prefer journalists (and I use the term loosely in this case) who tell the whole story rather than cherry-picking facts to suit an obvious agenda.