The role of government in energy sectors, particularly solar, has been hotly debated in recent weeks. Job-creating agendas, deficit reduction strategies, and the recent bankruptcy of Solyndra have received much attention as we enter an election year. Tell me if you’ve heard a political figure in the US publicly declaring something to the effect of, “Government shouldn’t be in the business of choosing winners and losers.”
A recent article in the New York Times focused on clean energy subsides awarded by the Obama Administration, focusing particularly on NRG’s California Valley Solar Ranch. The article compares energy resources based on costs/MWh, and cites “windfall” profits at the expense of local taxpayers when clean energy companies receive government loan guarantees and Treasury grants. Inciting the “free-market” mentality, the article suggests private equity investors do not have enough “skin in the game”.
But these arguments do not take a holistic nor historical view of government’s role in energy industries. Two considerations regarding the extent of the private sector’s risk in these multi-MW solar operations. First, energy companies do in fact invest quite a lot of money – $400 million in the case study from the Timespiece – in these projects. And not all government loans are guaranteed, meaning in many cases companies like NRG are still on the hook in the event of a default.
Second, government loan guarantees might shield risk of default, but that doesn’t equate to keeping an uncompetitive company in business. Just ask executives at Solyndra or Evergreen Solar.
A government is meant to represent and advance its people’s interests just as a corporation does for its shareholders. Solar technology isn’t shadowed by a looming disaster that destroys property values or jeopardizes fishing and tourism industries. Nor does it require the decapitation of mountain ranges or risk groundwater contamination. We don’t have to generate (or compete for) the fuel it requires, and we won’t run out of it.
So again, why isn’t taking risks for this technology very much the business of government? To reiterate rebuttals to the Times article, fossil fuel subsidies totaling $409 billion outpaced the $66 billion for renewables globally in 2010. Mature industries still need six times the government support to remain competitive with solar and other renewables. Sound like a wise investment?
Yes, government failed by investing in a company and technology that was trumped largely by Chinese competitors. But it would be a much greater failure if we did not capitalize on the opportunities solar offers. Venture capitalists don’t halt operations when they make a bad investment, and neither should our government.