The Obama administration’s loan guarantee for the now-bankrupt Solyndra has garnered lots of attention, but the Shepherds Flat deal is an even better example of corporate welfare. Several questions are immediately obvious:
First: Why, as Browner and Summers asked, is the federal government providing loan guarantees and subsidies for an energy project that could easily be financed by GE, which has a market capitalization of about $170 billion?
Second: Why is the Obama administration providing subsidies to GE, which paid little or no federal income taxes last year even though it generated some $5.1 billion in profits from its U.S. operations?
Third: How is it that GE’s CEO, Jeffrey Immelt, can be the head of the President’s Council on Jobs and Competitiveness while his company is paying little or no federal income taxes? That question is particularly germane as the president never seems to tire of bashing the oil and gas industry for what he claims are the industry’s excessive tax breaks.
Over the past year, according to Yahoo! Finance, the average electric utility’s return on equity has been 7.1 percent. Thus, taxpayer money is helping GE and its partners earn more than four times the average return on equity in the electricity business.
A few months ago, I ran into Jim Rogers, the CEO of Duke Energy. I asked him why Duke — which has about 14,000 megawatts of coal-fired generation capacity — was investing in wind9energy projects. The answer, said Rogers forthrightly, was simple: The subsidies available for wind projects allow Duke to earn returns on equity of 17 to 22 percent.
In other words, for all of the bragging by the wind-industry proponents about the rapid growth in wind-generation capacity, the main reason that capacity is growing is that companies such as GE and Duke are able to goose their profits by putting up turbines so they can collect subsidies from taxpayers.
There are other reasons to dislike the Shepherds Flat project: It’s being built in Oregon to supply electricity to customers in Southern California. That’s nothing new. According to the Energy Information Administration, “California imports more electricity from other states than any other state.” Heaven forbid that consumers in the Golden State would have to actually live near a power plant, refinery, or any other industrial facility. And by building the wind project in Oregon, electricity consumers in California are only adding to the electricity congestion problems that have been plaguing the region served by the Bonneville Power Authority. Earlier this year, the BPA was forced to curtail electricity generated by wind projects in the area because a near-record spring runoff had dramatically increased the amount of power generated by the BPA’s dams. In other words, Shepherds Flat is adding yet more wind turbines to a region that has been overwhelmed this year by excess electrical generation capacity from renewables. And that region will now have to spending huge sums of money building new transmission capacity to export its excess electricity.
Finally, there’s the question of the jobs being created by the new wind project. In 2009, when GE and Caithness announced the Shepherds Flat deal, CNN Money reported that the project would create 35 permanent jobs. And in an April 2011 press release issued by GE on the Shepherds Flat project, one of GE’s partners in the deal said they were pleased to be bringing “green energy jobs to our economy.”
How much will those “green energy” jobs cost? Well, if we ignore the value of the federal loan guarantee and only focus on the $490 million cash grant that will be given to GE and its partners when Shepherds Flat gets finished, the cost of those “green energy” jobs will be about $16.3 million each.
As Rolfe-Redding said, the more people know about the wind business, the less they like it.
— Robert Bryce is a senior fellow at the Manhattan Institute. His latest book, Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future, was recently issued in paperback.