Sunday, May 27, 2012

Alternative Energy Not Ready For Prime Time


You've probably heard of the reliability problems that plague alternative energy sources.  Wind doesn't blow; electricity doesn't flow.  Sun don't shine; electricity won't be mine.

What you probably won't hear is the 10% failure rate for wind turbines.  No, not failure to produce electricity because of calm winds.  Failure to work... period.
Statistically, based on the sample, 1 in every 10 turbines has been shut down because of significant damage. This sample is collected from 2006 to 2010, so in the first 4 years of operation, 237 failure incidents. The wind industry needs to get serious about testing and the DOE needs to get serious about new technology that will make wind energy a success. [source]
Regardless, the government feels compelled to push the U.S. away from fossil fuels toward alternatives.  President Obama has targeted coal with the hope that dramatically reducing coal generated electricity will force a move to wind and solar power.  Instead, it has forced a move to natural gas.

Congress said "enough" and refused to extend the Production Tax Credit for wind power although the wind power industry is lobbying fiercely for such credits while claiming all sorts of miracle improvements in wind power and reduction in the megawatt costs.

Solar power has been a basket case.

Here is a brief list of government-back alternative energy failures from economist Mark J. Perry:

● Raser Technologies. In 2010, the Obama administration gave Raser a $33 million taxpayer-funded grant to build a power plant in Beaver Creek, Utah. After burning through our tax dollars, the company filed for bankruptcy protection in 2012. The plant now has fewer than 10 employees, and Raser owes $1.5 million in back taxes.
● ECOtality. The Obama administration gave ECOtality $126.2 million in taxpayer money in 2009 for, among other things, the installation of 14,000 electric car chargers in five states. Obama even hosted the company’s president, Don Karner, in the first lady’s box during the 2010 State of the Union address as an example of a stimulus success story. The company has since incurred more than $45 million in losses and has told the federal government, “We may not achieve or sustain profitability on a quarterly or annual basis in the future.” Worse, the company is now under investigation for insider trading.
● Nevada Geothermal Power (NGP). The Obama administration gave NGP a $98.5 million taxpayer loan guarantee in 2010. The New York Times reported last October that the company is in “financial turmoil” and that “[a]fter a series of technical missteps that are draining Nevada Geothermal’s cash reserves, its own auditor concluded in a filing released last week that there was ‘significant doubt about the company’s ability to continue as a going concern.’ ”
● First Solar. The Obama administration provided First Solar with more than $3 billion in loan guarantees for power plants in Arizona and California. According to a Bloomberg Businessweek report last week, the company “fell to a record low in Nasdaq Stock Market trading May 4 after reporting $401 million in restructuring costs tied to firing 30 percent of its workforce.”
● Abound Solar, Inc. The Obama administration gave Abound Solar a $400 million loan guarantee to build photovoltaic panel factories. In February the company halted production and laid off 180 employees.
● Beacon Power. The Obama administration gave Beacon — a green-energy storage company — a $43 million loan guarantee. At the time of the loan, “Standard and Poor’s had confidentially given the project a dismal outlook of ‘CCC-plus.’ ” In the fall of 2011, Beacon received a delisting notice from Nasdaq and filed for bankruptcy.
●  This is just the tip of the iceberg. A company called SunPowergot a $1.2 billion loan guarantee from the Obama administration, and as of January, the company owed more than it was worth. Brightsource got a $1.6 billion loan guaranteeand posted a string of net losses totaling $177 million.
● And, of course, let’s not forget Solyndra — the solar panel manufacturer that received $535 million in taxpayer-funded loan guarantees and went bankrupt, leaving taxpayers on the hook. 
It's not that government is wrong to push new technologies.  It's just that there doesn't seem to be a lot of business acumen in the way it is done.  Apparently, all that is needed is a marketing presentation with the word "green" prominently displayed and the government literally throws money at them.

There is always the argument that entrenched forces will make it impossible for new alternatives to reach the marketplace.  You know, the airplane would never take the place of passenger trains.  Cars would never take the place of horse-drawn carriages.  Light bulbs would never take the place of gas lamps.  But they all did because they were better alternatives and were developed without the government picking a winner or subsidizing them.  Private individuals took the risks and proved their products were superior.  With that proof came plenty of investors willing to risk their money... not the taxpayers' money.

The marketplace recognizes a better idea... and a worse one.

2012 IS HERE


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SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)