Politics & Policy

Obama’s Green-Energy Mirage

A lithium automotive battery by EnerDel
American voters should not confuse hope with certitude.

President Obama is obsessed with green energy as a terrier is obsessed with a bone. He digs the issue up time and time again with a single-mindedness that is remarkable in contemporary politics. Last week, during his State of the Union address, he gnawed on that policy again, offering it to voters as the foundation of his economic recovery plan, a pillar of his foreign policy, and a hedge against global environmental catastrophe.

President Obama, of course, is not alone in this regard. For 40 years now, green energy has been one of the primary opiates of the educated elite, a drug imbibed in varying doses by politicians on both the left and right. But no president has so energetically and dramatically spent political and economic capital on green energy as has this one.

#ad#Alas, the green-energy economy is like the horizon; it’s always there before us, but it continues to recede no matter how energetically we race toward it. Yet green visionaries remain undaunted and continue to spin all manner of stories to suggest that the horizon is reachable. And that is what we got last week from President Obama.

“In three years,” the president said, “our partnership with the private sector has already positioned America to be the world’s leading manufacturer of high-tech batteries.” This appears to be wishful thinking. Only two days after President Obama’s speech, Ener1 — the parent company of EnerDel, the recipient of a $118 million federal grant to manufacture high-tech automotive batteries — filed for bankruptcy. Reported Bloomberg, “Ener1 has been affected by competing battery developers in China and South Korea, ‘which generally have a lower cost manufacturing base’ and lower labor and raw material costs, interim Chief Executive Officer Alex Sorokin said in the petition.” Manufacturers of batteries that connect to the power grid are faring no better, if last October’s bankruptcy of Beacon Power Corp., a firm that left federal taxpayers hanging for $43 million in loan guarantees, is any indication.

Even if a federal subsidy could give the U.S. some sort of advantage in battery manufacturing — so what? Only 0.2 percent of all cars sold last year in the United States — the most lucrative potential market for these batteries — were fully battery-powered. That’s because batteries powerful enough to run a car are so expensive that they are little but vanity purchases for the wealthy. The administration counsels patience; these costs, they tell us, will surely come down. But what makes them think that? The National Research Council of the National Academy of Sciences reported a few years ago that lithium-ion batteries — the sort used in electric vehicles today — are not “emerging” technologies at all but are instead rather mature technologies: “Li-ion batteries based on similar technology are already being produced in great numbers and are well along their learning curves. The steep early drop in cost often experienced with new technologies is not likely.”

“Because of federal investments,” the president claims, “renewable-energy use has nearly doubled. And thousands of Americans have jobs because of it.” This, however, is a Clintonian use of language.

#page# Renewable energy is a creature of government. Even the wind, solar, biomass, and geothermal industries acknowledge that without mandated consumption orders and massive production subsidies, renewable-energy production would largely cease to exist. So, in a sense, the president is being too modest. Because of federal “investments,” renewable energy use has far more than doubled.

But the most significant of these “investments” were in place before Obama became president. In 2008, just before Obama came to office, America consumed 6.68 quadrillion British thermal units of renewable energy, an amount that constituted 6.7 percent of total energy consumption. In 2011, America consumed 8.22 quadrillion BTUs of renewable energy, or 8.4 percent of total energy consumption. That’s only a 23 percent increase in consumption.

#ad#The president appears to be correct when he asserts that this federal green-energy blitzkrieg has yielded thousands of jobs. The U.S. Department of Energy, for instance, recently reported that $38.6 billion worth of federally backed loans to green-energy firms — part of the president’s stimulus package — has created 3,545 new permanent jobs. But that cost the taxpayers $5 million of Solyndra-style loan guarantees for every new job created, hardly a boast-worthy bargain.

The president’s suggestion that green jobs represent an increasing share of total U.S. employment is hard to digest. The Brookings Institution reported last summer that “today’s clean economy establishments added half a million jobs between 2003 and 2010, expanding at an annual rate of 3.4 percent. This performance lagged the growth in the national economy, which grew by 4.2 percent annually over the period (if job losses from establishment closings are omitted to make the data comparable).” By all accounts, these federal “investments” in green energy are producing fewer jobs than alternative “investments” might have produced in other sectors of the economy.

To his credit, President Obama implicitly acknowledged that we’re making slower progress than some might have hoped, but he argued that “our experience with shale gas shows us that the payoffs on these public investments don’t always come right away.” Come again? “It was public research dollars, over the course of 30 years,” the president said, “that helped develop the technologies to extract all this natural gas out of shale rock — reminding us that government support is critical in helping businesses get new energy ideas off the ground.”

This is nonsense. A history of hydraulic fracking recently compiled by the Society of Petroleum Engineers notes that fracking was first employed in the 1860s, when liquid (and later, solidified) nitroglycerin was used to help flush oil out of shallow hard-rock wells in Pennsylvania, New York, Kentucky, and West Virginia. In 1947, Stanolind Oil and Gas Corporation (which later became Amoco) pioneered modern fracking in the Hugoton gas field in Grant County, Kansas. Fracking quickly took off, hitting 3,000 U.S. wells per month during stretches of the 1950s, and incremental innovations in fracking fluids, proppants (used to hold fractures open after hydraulic fracturing has opened them up), and drilling, pumping, and blending equipment continued apace over the next several decades. The reason we’re talking about fracking now is that a small-time, independent oil man named George Mitchell spent decades developing — and betting all of his company’s meager resources on — a new, innovative mix of fracking chemicals and high-pressure fluid treatments that eventually unlocked gas deposits that were previously too costly to exploit.

#page#Sure, we can play detective and find government fingerprints on many of the technologies that George Mitchell employed to unlock the Marcellus gas field, but that’s like crediting the government for the airplane because the Wright Brothers used public roads to get to Kitty Hawk.

Regardless, hope springs eternal. The president colored his argument for green energy by quoting an employee at a wind-turbine plant who said, “I’m proud to be working in the industry of the future.” But the future is, by definition, unknown.

#ad#Sure, renewable energies might experience technological breakthroughs that allow them to vanquish fossil fuels in energy markets. But then again, they might not. In 1976, famed energy analyst Amory Lovins predicted that 30 percent of American energy consumption would be delivered by renewables in 2000. Actual figure: 7 percent. The DOE in that same year projected that wind energy would generate 20 percent of U.S. electricity by 1995. Actual figure: 0.1 percent. In 1980, physicist Bent Sorenson predicted that 49 percent of American energy would be generated by renewables in 2005. Actual figure: 5.8 percent. One could go on and on.

What does the administration predict? Less than you might imagine. For all of President Obama’s soaring political rhetoric, his own Energy Department believes that renewables will move from 8.4 percent of total U.S. energy consumption to 10.8 percent in 2035. And even that anemic growth comes not from improving economic competitiveness but from government consumption orders. That’s not much of a technological revolution, particularly when we total up the billions of federal dollars we’re putting into that energy basket.

The Energy Department’s analysts could be wrong, of course, as could the nay-sayers on the right. Revolutionary technological breakthroughs — such as George Mitchell’s innovations in hydraulic fracking — happen upon occasion without forewarning. But there’s no reason to believe that President Obama in particular or the federal government in general is a better forecaster of our energy future than are profit-hungry market capitalists, who stand to gain billions by making good bets on future technologies. The recent spate of bankruptcies of federal green-energy loan recipients and the amazing record of bad federal energy bets over the years (fission, fusion, coal-to-liquids, synthetic fuels, ethanol, etc.) caution against turning America’s commander-in-chief into America’s investor-in-chief.

The federal government should not confuse itself with Bain Capital, and American voters should not confuse hope with certitude.

— Jerry Taylor and Peter Van Doren are senior fellows at the Cato Institute in Washington, D.C. Peter Van Doren is also editor of Regulation magazine.

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