Wind power is great; government subsidies are not

The Christian Science Monitor has an article about wind power in a small German town. The article continues a depressing habit of completely ignoring the economies of wind power in favor of the cachet and charms of an alternative energy source. Since the article is more like a wind power hagiography than a dispassionate science article, it is hard to glean what the actual financial situation is in the small town. The author tells is that the townsfolk put in a 2.3 million dollar down payment on two wind turbines but goes on to mention that there are four windmills in the town. The author of the story says the investment on the first two windmill provided a 10% return but does not clarify if that is a gross return or net after maintenance, insurance, debt service, and other costs. Although the article avoids any direct cost numbers, the author inadvertently lets us see what is really happening in this German town. She says that one family uses solar panels to make 30kwh, and that is 50% more than they need. Then she goes on to say the grid pays them $24,000 for the surplus. OK, so that means they use 20kwh and sell 10kwh, 50% more, to the grid. So this means the grid is paying them $2.40 per kwh. In contrast the rate we pay in California is $0.13 per kwh. So the family is being paid 18 times the US rate for their power. What is interesting is if you look at the wholesale cost of power, which is what this should really be compared to, then they in the US they should have been paid $0.045 per kwh. That represents a cost 53 times lower than what the German government pays the family to pump electricity on the grid.

Now I have nothing against wind power or solar power. I do have problems with articles that gush and fawn over something without clearly explaining the cost tradeoffs. In fact I wonder if the CSM article had the numbers right, a commenter to the article points out that Germany pays something more like $0.66 a kwh to PV power generators. The commenter also says the German power rates are something like $0.29 per kwh. What is even more disturbing is when the commenter says, “Each Renewable Energy source has different rates of support (Wind, Geo-thermal, Wave, Ocean Current, Bio-fuels, organic farming, Eco-friendly material production, etc).” Boy, you can see the handouts were more designed to increase the size of the bureaucracy than do any sensible energy policy. The tragedy of this German policy is that the government, about the most technically incompetent bunch of people you can find anywhere, is picking winner and losers. Oh, I am sure they can point to mountains of paper studies that supposedly lead to the various hand-out rates for the different energy sources, but the real deal is like with politicians everywhere, each industry put their brown envelopes under the table, or reminded the commissar about that “incident” at a party back in college twenty years ago, or just schmoozed an laughed at jokes until they got their handout allocation.

This is not energy policy, this is fascism. Having a strong central government working “in partnership” with big business is not democracy and it is never good, look at the two trillion dollars that our government is shoveling to Halliburton and its cronies. If you want to subsidize alternative energy you should set a fixed handout- 20, 30, 40, cents a kwh and let us technical types figure out the best way to get there. This is just a modern-day version of the farm handouts and dairy handouts and wheat handouts and a host of other subsidies that governments use to concentrate benefits (and brown envelopes) while diffusing costs. You are not doing anything sane if you tax the entire population and hand out incentives for people that want to put windmills up. The government is distorting the market and they are wasting the resources. But politicians always prefer to have the money sent to them and then doled out to their deadbeat relatives and favorite cronies.

I find it amusing that the same people who love centralized government demand decentralized business. They want a huge government that takes all our money and then hands it out in small dollops to make us behave the way the ruling elite wishes. In Red China Mao loved to see little steel mills in everybody’s back yard. The new advocates of big government now want us all to have wind generators and solar panels in our back yard. I agree with people that say we have to take away subsidies for big oil, but lets not then go on to hand them out to the folk-energy people. Either one is a betrayal of the public’s trust.

Here is another CSM article about a thermal solar plant. It turns out that using solar energy go boil water and fire steam turbines is also about ready to pay out. What is fascinating is that the same people that demand we have alternative energy at any cost don’t like thermal solar since you have to string power lines to the facility and it covers up the desert, something, along with tundra, that seems to need preserving in these people’s minds. The greenies hate for thermal solar is confusing. They hate PG&E but would rather subsidize solar and wind big business rather than the people that have been in the energy business for 100 years. Indeed, the most radical greenies don’t really want alternative energy at all —they will pine for electric cars and then fight the nuclear and coal power plants we will need to run the cars. This is because radical greenies demand equality. Not equality of opportunity, like is guarantied in the US Constitution, but equality of outcome. Since 80% of the world lives in mud huts and scratches in the dirt with sticks, the radical greenies’ goal is to reduce America to that economic status. Good thing Americans are overwhelmingly in possession of common sense. We don’t want to rape the planet and we don’t want to be wasteful, but we do insist on a lifestyle that gives us freedom of mobility and freedom of comfort and freedom of location. The radicals want us to live in hovel cities as dictated by the new urbanism movement, taking mass transit to our jobs in buildings without heat or cooling, all to be rewarded with a food pellet that drops out of the wall every few hours. I am sure the pellet will be vegetarian. Perhaps the more obedient will be getting canned food instead of dry. Sorry, this is America and we want our cars and our air conditioning and our suburban house. And best of all, Americans, especially the engineers, want these things for all the underprivileged people of the world too. We want to achieve equality of outcome, only we want to bring the rest of the world up to our living standard rather then reduce our to that of cave-people.

If we want to hand out subsidies, how about handing some out to my pals? My buddies over at National Semiconductor have developed Solar Magic, an integrated maximum power point tracker (MPPT) for solar panels. Jim Williams has done a great job designing some very clever battery monitoring circuits for electric vehicles. International Rectifier has come up with appliance motor drive systems that can cut the power consumption by 30 to 60 %. Fairchild, STMicro and Infineon are all working on green systems. Power Integrations is making wall-wart and standby per supply chips that use less than a watt, and that can be used in hundreds of millions of consumer products. All the companies I cover, TI, Freescale, Maxim, all of them, are working on products that will save energy or promote alternatives. Yet they don’t get any government subsides and the radical greenies will disparage them because they are working for “the profit motive”. Like TJ Rogers, I don’t want to see subsidies for anyone, but I submit that if the German government gave half of what it pays in electricity subsides to innovative analog electronics companies, the payback would be far greater in human welfare terms, although perhaps not in smugness or self -satisfaction. I guess all I am saying is that we have to let natural economic forces take their time to work—rushing headlong into one technology or industry is not good policy. We cannot be so impatient to think we can solve problems that have developed over decades. Now that oil is over 100 per barrel, there are huge new reserves of fossil fuels such as in oil shale, as well as all the alternative energy systems that now make sense. Let’s be patient and let the market, meaning all of us in concert, choose the winner rather than letting some government bureaucrat decide to pay 50 times the going rate for electricity.