Politics & Policy

Paul Krugman’s Solar Eclipse

Why solar has failed

Paul Krugman may be a Nobel Prize–winning economist, but his most recent column in the New York Times, which condemns hydraulic fracturing and praises solar energy, displays an astounding disinterest in numbers and woeful ignorance of the facts.

Without providing any sources, Krugman writes, “We know that [fracturing] produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater.”

#ad#Huh? Over the past 60 years, the process of hydraulic fracturing has been used more than 1 million times on oil and gas wells here in the U.S. If fracturing were as dangerous as Krugman implies, then hundreds, perhaps thousands, of water wells would have been contaminated by now. And surely the public would have been made aware of those many contaminated wells.

Krugman could have consulted the Times’s own reporting on this subject. Over the past year or so, NYT journalist Ian Urbina has been writing extensively about the oil-and-gas sector and fracturing in particular. Urbina has spent months, some of it working with the Environmental Working Group, to document cases of water wells that have been contaminated by fracturing. Urbina’s finding: One water well in West Virginia was likely contaminated by fracturing in 1984. After laying out the details of the contamination, Urbina writes, “Drilling technology and safeguards in well design have improved significantly since then.”

Or, Krugman could have looked at the findings of a multi-year study on natural gas released last summer by the MIT Energy Initiative. The 170-page report addresses hydraulic fracturing directly, saying, “The fracturing process itself poses minimal risk to the shallow groundwater zones that may exist in the upper portion of the wellbore.” The report goes on, “The physical realities of the fracturing process, combined with the lack of reports from the many wells to date of fracture fluid contamination of groundwater, supports the assertion that fracturing itself does not create environmental concerns.”

Krugman, who continually writes about the need for more jobs in America, also might have considered the jobs that are being created by the oil-and-gas sector, both directly and indirectly. Over the past 18 months or so, some 48,000 people have been hired in Pennsylvania by companies working in the Marcellus Shale. In August, Halliburton announced it would hire 11,000 new workers this year in North America, most of them to work on shale-related projects. Better still, none of those jobs require Solyndra-style subsidies.

Hydraulic fracturing is driving down the cost of natural gas, which creates jobs in other sectors, including steel and petrochemicals. From 2005 to 2008, U.S. natural-gas prices averaged about $7 per thousand cubic feet, but today, the spot price is well below $4; the price drop saves consumers about $60 billion per year. In March, Nucor, America’s biggest steel producer, broke ground on a new $750 million direct-reduced-iron plant in Louisiana. The availability of low-cost natural gas enabled the project. Nucor may ultimately invest $3 billion in steel plants in Louisiana that could create as many as 1,000 permanent, high-paying jobs. Meanwhile, the abundance of low-cost natural-gas liquids has convinced several major chemical producers to announce expansions of existing plants as well as the construction of new facilities on the Gulf Coast and in Appalachia.

#page#None of this is to suggest that drilling for oil and gas is easy or free. It’s not. Modern drilling and hydraulic fracturing are water- and diesel-fuel-intensive processes that require hundreds, or even thousands, of truck trips on rural roads. But the drilling-and-fracturing process lasts only a few weeks, after which all that’s left is a relatively small well head and maybe a few tanks. And the economic benefits of the commodities being produced by the many wells drilled every year in the U.S. are readily apparent.

Krugman claims that we are “on the cusp of an energy transformation driven by the rapidly falling cost of solar power.” It is true that the cost of solar power has fallen steadily over the years, but that does not put us “on the cusp of an energy transformation.” The latest estimates from the Energy Information Administration (EIA), which is part of the Department of Energy, and the Electric Power Research Institute (EPRI), an industry trade group, show that solar will likely remain far more expensive than conventional forms of electricity generation for years to come. The EIA estimates that generating a megawatt-hour of electricity from natural gas costs $63, while the same amount of energy from solar panels costs $210. Meanwhile, EPRI offers a different set of estimates, predicting that by 2015, generating a megawatt-hour of electricity with natural gas will cost as little as $49 while that same quantity of electricity from solar energy will cost at least $242. And EPRI expects those figures to remain about the same through 2025.

#ad#Krugman ignores the issue of scale. In 2010, hydrocarbons — coal, oil, and natural gas — provided 21,000 times as much raw energy to the U.S. as solar power. If we reduce that figure by two-thirds to account for the energy lost in converting hydrocarbons to electricity,we are still getting 7,000 times as much energy from hydrocarbons as we are from solar. Even if solar were as “cost-effective” as Krugman claims — and the data show that it is not — his implication that solar can supplant our need for hydrocarbons is just plain silly.

Furthermore, Krugman writes that “if we priced coal-fired power right” — that is, by instituting a carbon tax — solar would actually be cheaper than natural gas. However, the evidence shows that artificially inflating the price of carbon-dioxide emissions isn’t the best way to reduce them. According to the International Energy Agency, the U.S. is now cutting emissions faster than Europe, even though the EU has instituted an elaborate carbon-reduction scheme. Why is this happening? It’s not due to increased domestic use of wind or solar. Instead, it’s simple economics. Cheap natural gas is displacing higher-carbon coal in the U.S. electricity-generation fleet. That option is not available in Europe, where natural-gas prices are more than two times those of the U.S.

Back in 1978, Ralph Nader declared that “everything will be solar in 30 years.” Nader’s prediction didn’t come true. Krugman attributes solar’s failure to a conspiracy (led by the energy companies and the Republicans, of course) against solar and renewable energy. But the reality is that renewables simply cannot provide the vast quantity of energy that the world demands at prices that consumers can afford. If Krugman were truly interested in creating jobs and growing the U.S. economy, his stance on energy policy would be simple: Make energy cheap, abundant, and reliable.

— Robert Bryce is a senior fellow at the Manhattan Institute. His latest book is Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future.

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