Spain’s Solar Energy Bubble Bursts. California is Next. The First of a Series of GanGreen Asset Bubbles Bursting.

Abstract: Well-meaning but idiotic government workers in Spain subsidized a hopeless solar power project that is now essentially worthless. The cost was astronomical and the government is now withdrawing the subsidies as even the most dedicated leftist can work the numbers and see that this project is terminal and will never work out. This is a classic debt-driven asset bubble formation folly and now it comes crashing down in disgrace. Clumsy excuses are offered for this mess by the Times and we are encouraged to hear that the government regulators in Spain are still ‘learning’ how to subsidize a worthless project. Maybe some of them can rush over to California and show them some new tricks before that state crashes in debt.

The New York Times, aka the Walter Duranty Papers[1] features a raster of computer keyboard finger-gepokers who can blend any news item, save  very few, with the goals of bigger government and higher taxes into high song and  noisy glory. We can always appreciate how such an advance [pick one at random] can ‘create jobs,’ ‘save the polar bears’ or bring peace and justice to our society with your tax monies. This is so wonderful that  we wonder why the Times is not the  Star Chamber Central clearing house for the world where our conduct, products and governments can be streamlined and continually improved by their careful analysis and expertise.

Then, a marvelous concept like busing, Social Security, War on Poverty, Cash for Clunkers or other enthusiastically sanctioned project[2] goes bust and the embarrassing necessity to offer justifications becomes paramount. Here, the excuses abound but are almost always focused on the evil capitalists. Today, the NYT reluctantly reviews what went awry with Spain’s magnificent surge into solar power as their green bubble appears to be bursting. The analysis is interesting as it discretely skirts around several salient points while avoiding the central issue:

[I offer extensive quotes in this blog so that the reader can view the exact language and can be confident that nothing was taken out of context or that nobody was misquoted. The easiest way to take in the salient points is to read the emphatic points in the quotes and then peruse my comments. Comments on my comments are always welcome.]

The Promise and the Glory!

“PUERTOLLANO, Spain — Two years ago, this gritty mining city hosted a brief 21st-century gold rush. Long famous for coal, Puertollano discovered another energy source it had overlooked: the relentless, scorching sun.”[3]--Solar Industry Learns Lessons in Spanish Sun By Elisabeth Rosenthal, New York Times, Published: March 8, 2010 [Emphasis is mine in all quotes.]

“Soon, Puertollano, home to the Museum of the Mining Industry, had two enormous solar power plants, factories making solar panels and silicon wafers, and clean energy research institutes. Half the solar power installed globally in 2008 was installed in Spain”-- Solar Industry Learns Lessons

The government is behind us! A stimulus! Jobs!!

“Armed with generous incentives from the Spanish government to jump-start a national solar energy industry, the city set out to replace its failing coal economy by attracting solar companies, with a campaign slogan: “The Sun Moves Us.””-- Solar Industry Learns Lessons

Ooops? What went wrong??

“But as low-quality, poorly designed solar plants sprang up on Spain’s plateaus, Spanish officials came to realize that they would have to subsidize many of them indefinitely, and that the industry they had created might never produce efficient green energy on its own.”-- Solar Industry Learns Lessons

Where was the quality control governance? Didn’t the government have ‘experts’ on hand to inspect the wonderful new facilities?? Where was Phil Jones or Michael Mann? If they had used high-quality parts and service would this have changed the outcome??

“Puertollano’s wrenching fall points to the delicate policy calculations needed to stimulate nascent solar industries and create green jobs, and might serve as a cautionary tale for the United States, where a similar exercise is now under way.

For now, electricity generation from the sun’s rays needs to be subsidized because it requires the purchase of new equipment and investment in evolving technologies. But costs are rapidly dropping. And regulators are still learning how to structure stimulus payments so that they yield a stable green industry that supports itself, rather than just costly energy and an economic flash in the pan like Spain’s.”--Solar Industry Learns Lessons

This is unusually harsh for the NYT to point out the manifold  warts in a marvelous social program like green job creation. The ‘lesson’ we learn here is that government ‘regulators’ are still learning how to subsidize an unworkable program that was doomed to failure in the first instant. They cliché here is that somebody didn’t do their homework, but we are talking about government people and lackeys.

Gee, weren’t the economics of solar power generation known for some time?

ScienceDaily (Feb. 22, 2008) — Despite increasing popular support for solar photovoltaic panels in the United States, their costs far outweigh the benefits, according to a new analysis by Severin Borenstein, a professor at the University of California, Berkeley's Haas School of Business and director of the UC Energy Institute.”[4]-- Cloudy Outlook For Solar Panels: Costs Substantially Eclipse Benefits, Study Shows

Or:

““At the time of this writing, the installed cost of solar panels runs between $7 to $9 per watt, so a 5 kW system would cost on the order of $35,000-$45,000 and an 8 kW system would be anywhere from $56,000 to $72,000.  Many utility companies are offering incentives with some subsidizing as much as 50% of the cost of the system.  Even so, a system that generates an average of $73 of electricity per month would take a long time to pay for itself even if you could get it at half cost.  For example, a system that cost $18,000 would have a payback period on the order of 20 years.  The panel cost today is around $4 per watt and the extra cost that brings it up to $7 to $9 installed is to cover the installation labor and the electronics needed to tie it into your existing electrical system.”[5]-- How much does it cost to install solar on an average US house?

The ugly numbers on this folly:

“When it was announced in the summer of 2007, Spain’s premium payment for solar power was the most generous anywhere — 58 cents per kilowatt-hour — with few strings attached.”--Solar Industry Learns Lessons

Gee, I pay 14 cents to my power mongers and that is too high. Other losers are in this club including the Germans who should have known besser:

“In Spain, the tariff, now adjusted quarterly, is about 39 cents per kilowatt-hour for electricity from freestanding solar power plants, and slightly higher for panels on rooftops.

Germany’s tariff, 53 cents per kilowatt-hour, is expected to fall at least 15 percent this summer, and there are proposals before Parliament to eliminate subsidies for solar plants on farmland.”-- Solar Industry Learns Lessons

Did I mention I pay 14 cents and part of that burden is for off-shore counterfeit Bluewater Wind platforms[6] that are also inefficient? Is this simple incompetence or should we troll for stooges?[7]

But, there is hope:

“The bonus payments required to make solar energy financially viable vary, depending on local sunshine and the cost of conventional energy. Experts predict that, possibly by next year, Italy will be the first place where solar-generated electricity will not need subsidies to compete with electricity from fossil fuel. Italy has abundant sun and sky-high energy rates, given that it imports most of its fossil fuel.”-- Solar Industry Learns Lessons

But, did we do the arithmetic in the Italian case at the start? We wouldn’t want this to be another green asset bubble frothing over with gangrenous debt would we? No, we are confident that someday somebody might eventually break even on some remote project so that we can all be apprised that ‘we have the solution’ and can ‘save the polar bears.’ Joy.

The government wasted money on phony projects and the unemployment has not returned to pre nonsense levels.

“Unemployment, though now up around 10 percent, has not returned to the 20 percent figure. The city is home to a number of solar businesses: a new 50-megawatt thermal-solar plant owned by the Spanish energy giant Iberdrola created hundreds of jobs.

Although coal mines still dot the landscape and a petrochemical factory remains one of Puertollano’s largest employers, That new solar plant sits just next door, with more than 100,000 parabolic mirrors in neat rows on about 400 acres of former farmland. Clean and white as a hospital ward, it silently turns sunshine into Spanish electricity.”--Solar Industry Learns Lessons

We are back to mirrors? Isn’t this technology a bit old? Archimedes used this scheme but was it cost effective?[8] Is this new thermal-solar plant going to be cost effective?? Did they do some calculations?

Well, we could propose that certain bidders and power sooth-Sayers demonstrate that their inventions and innovations are cost-effective before we jump in and sink billions of dollars into a worthless pit. That sounds reasonable, but that is not how government works. So, why don’t we pick a few of these novel gigs to throw a few trillion dollars into and see if one of them hits then we can proclaim success! Yea!

We will do it for the polar bears no matter what the cost.

rycK

Comments: ryckki@gmail.com