The Pixie Dust Energy Source – John Ransom – Townhall Finance

 

The Pixie Dust Energy Source – John Ransom – Townhall Finance .

Solar is the power of the future and the power of the past. What solar isn’t, is the power of the present. That’s because using solar power to generate electricity is expensive. Still. And that’s not going to change anytime soon, no matter how many political fundraisers are held by solar advocates.

According to Bloomberg, recent price decreases in solar equipment have driven costs from about 25 cents per kwh to 17 cents per kwh for photovoltaic (PV) powered solar energy, the least expensive form of solar power deployable at scale. But that’s a far cry from the average retail price for electricity as of June 2011. In May, according to the US Energy Information Agency, customers paid 9.70 cents per kwh for electricity generated by conventional means, nearly half of solar’s cost.

For decades, solar’s advocates have predicted that economies of scale, technological advances and pixie dust will soon kick in allowing the world to hold hands, sing songs and enjoy the “free,” and limitless power of the sun. 

The amount of energy available through solar is astonishing and bewitching, true. Because of the huge mass of energy available through solar, there’s no doubt that solar has potential to solve many of the earth’s energy problems. It just doesn’t do so right now. Nor will it ever be “free.” Heck, it might not ever even be cheap.

The sun does provide quite a bit of energy. According to NASA we use an equivalent of 1/10,000 of the sun’s available energy here on earth in fossil fuels. While 30 percent of solar energy that reaches us is reflected back into space, what’s left over is more energy in one year than all the energy that can be created by fossil fuels combined, ever.

Capture, conversion, storage and transmission of solar energy at costs close to fossil fuels however remains elusive.

So, the reality of the sun’s “free” energy continues to fall far short of the promise year after year despite rosy predictions. Devotees from Bloomberg New Energy and the IEEE have predicted that soon solar energy will compete with coal-the cheapest of all the energy sources- in price. Even assuming sunshine and salad days for solar, BrightEnergy.com says that “[b] y 2050, it is expected that solar PV will provide 11 percent of global electricity production, corresponding to 3,000 gigawatts of cumulative installed capacity.” That seems like a pretty modest target for an energy source that competes with coal for price. And it underscores the uncertainty of solar’s future.

The truth is that no one really knows what the future for solar is, in part because government is muddying the waters.

Take, for example, the world’s biggest publicly-traded solar company, First Solar, with a market capitalization of roughly $1.4 billion as of August, 2012. Last year at this time, the company was worth $6 billion.

First Solar makes photovoltaic solar panels and does a very good job of it. Their revenues have climbed from $500 million to $3.12 billion since 2007. But the stock has tumbled from a high of over $300 as Obama was elected to around the $17 range by the end of July. Why would a company that has seen its revenues grow six-fold, see its share price tumble $283?

Mostly the stock price volatility reflects on-again-off-again government support for solar company winners and losers. Europe has cut back subsidies while the federal government continues to muck up its loan guarantee program. First Solar won’t be as attractive to investors in the marketplace without generous subsidies provided by governments, especially those governments in Europe. 

“We believe that First Solar remains well positioned to flourish in a market with low or no subsidies once the market consolidates,” says brokerage firm Cantor Fitzgerald, “and we suggest that investors wait for a more opportune time to accumulate shares.”

Consolidation is broker-eese for “a lot of these companies are going out of business.”         

Government money has been put into converting customers to solar rather than into primary research aimed at brining costs down so that the marketplace can convert customers on the basis of economics. That because it’s been cheaper for solar companies to beg for government money than it has been to do research; and in the sort-term government money has been much more lucrative to shareholders and to consumers lucky enough to cash in on subsidies especially in Europe.

As to jobs? Forget about it. It’s a net negative.  

“In principle, tens of thousands of jobs have been created in the German PV industry,” says the leftist UK Guardian, a supporter of solar, “but this is gross jobs, not net jobs: had the money been used for other purposes, it could have employed far more people. The paper estimates that the subsidy for every solar PV job in Germany is €175,000: in other words the subsidy is far higher than the money the workers are likely to earn. This is a wildly perverse outcome. Moreover, most of these people are medium or highly skilled workers, who are in short supply there. They have simply been drawn out of other industries.”

That isn’t to say that research into cost cutting and innovation isn’t being done by solar companies today. But no one really knows how the solar market will survive if the governments- Europe, US, China- cut off life-support.

The patient might survive or it could be brain dead already.

It’s time to pull the plug solar and find out.

 

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The Year Solar Goes Bankrupt – John Ransom – Townhall Finance Conservative Columnists and Financial Commentary

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The Year Solar Goes Bankrupt – John Ransom – Townhall Finance Conservative Columnists and Financial Commentary.

Get ready for a new round of green bankruptcies, as Europe trims back subsidies for solar companies and taxpayers lose their appetite for subsidizing green power.

“The mini-bubble resulting from the rush to cash in on solar subsidies in European and U.S. markets is ending, as feed-in tariffs drop in Europe while loan guarantee and tax credit programs tighten up in the U.S.,” says a new report from Bank of America Merrill Lynch according to CNBC.com.

Germany is dialing back subsidies for solar this month by 29 percent with subsequent decreases each month, according to Bloomberg.com.

Rasmussen has recently released a survey of voters that show a diminishing number of voters support subsidizing the production of the Chevy Volt.

Only 29 percent of likely voters agree with Obama’s latest proposal to include a $10,000 subsidy in the federal budget to support the purchase of every electric vehicle.

The survey found that 58 percent oppose the plan, while 13 percent remain undecided.



And make no mistake, without subsidies solar, electric vehicles, wind power and other alternatives remain a chimera.      

 “Steven Cortes, CNBC contributor and founder of Veracruz Research, also sees solar stocks declining further and wonders about the impact of the recent natural gas boom on the sector.

“’As much as I love sun, I hate the solar space. This is not a real business, it’s a political construct,’” Cortes said on Fast Money Wednesday. “’And they can’t compete with natural gas at these levels.’”

According to the Associated Press the U.S. now has 2.433 trillion cubic feet in storage.

“That figure is 48.3 percent more than the five-year average, the Energy Department said,” reports the AP. “Natural gas fell 3 cents to finish at $2.27 per 1,000 cubic feet in New York. The price has fallen about 27 percent this year and is at the lowest level in a decade.”

Last week Abound Solar announced it would lay off half its workforce despite receiving a $400 million loan guarantee from the Department of Energy last year. The rating agency Fitch’s hit Abound over failures to meet stated goals, old technology, calling the company “highly speculative” according to ABCNews.

Reports ABC:

It remains way too early to determine whether Abound is poised to follow the trajectory of the best-known solar manufacturer to receive a sizeable government loan — Solyndra, the California firm that filed for bankruptcy in September after having burned through the bulk of its $535 million federal loan.

Perhaps.

However, there is an old saying in the market that the tape doesn’t lie.

And the tape on solar companies is horrendous.

In the second quarter of 2008 First Solar (Symbol: FSLR) briefly touched $300 per share. Today it trades at $27.49. That equals losses of about $24 billion in market capitalization in just four years.

In April of last year Trina Solar LTD (Symbol: TSL) was trading just under $30 and is now trading at about $7.31. Earnings estimates have gone in the last few months from Trina losing about 17 cents per share for 2012 to losing about 63 cents per share.

The Guggenheim Solar ETF (Symbol: TAN) has also moved down from around $300 per share in mid 2008, until it trades now at $27.02.

And the fundamentals aren’t getting better for solar soon, because solar can’t compete with coal-fired or nuclear generated electric.

“Fewer solar panels will be installed this year,” reports Bloomberg “as the first drop in more than a decade worsens a glut of the unsold devices that’s already slashed margins at the top five manufacturers, an analyst survey showed… Without government incentives, even record low prices for solar panels may not be cheap enough to encourage solar farm developers and homeowners to install them in the volumes needed to work through the glut, said Rozwadowski, the most pessimistic analyst in the survey. He expects installations to drop to 20.7 gigawatts.”

It’s important to note that the poor performance of the solar industry came at a time when government financial support has been at an all-time high world-wide. It only goes to show that politics and public policy are poor substitutes for free market economics.  

Expect the solar industry to continue to crash and burn as government money continues to dry up along with public support.   

A Stupid Energy Policy – Amy Oliver – Townhall Finance

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A Stupid Energy Policy – Amy Oliver – Townhall Finance.

By Amy Oliver and Michael Sandoval

If lawmakers really cared about consumers, they would ditch expensive renewable energy mandates that require a subsidized market for resources that are not practical on a large scale.  It’s a classic case of putting the cart before the horse; policy came before practical application.

The Department of Energy (DOE) reports that 24 states and the district of Columbia have renewable energy mandates ranging from Maine’s high of 40 percent to Pennsylvania’s low of 8 percent.  Also known as a “Renewable Portfolio Standard” (RPS), these policies require that energy providers ignore practicality and price in order to obtain a minimum amount of electricity by a specific date from sources that environmental zealots consider “renewable,” such as solar and wind.

Five other states, North Dakota, South Dakota, Utah, Virginia, and Vermont, placate special interest groups while remaining more realistic with “non-binding goals” rather than an RPS.

Does it matter if the resources don’t exist to fulfill the RPS? No. Government will subsidize the manufacturing of those resources. Does it matter if those resources are little more than science projects? No. Government still will subsidize them.

The U.S. doesn’t have a corner on the market of misguided energy policy. Europe is also a major contributor to the myth of enlightened energy policies.

These mandates are rooted in a clean, green fantasy, and a market must be invented to fulfill it. If that isn’t ridiculous enough, government then cannibalizes the market it created by subsidizing companies where the market is already saturated.

Colorado, with its 30 percent RPS, is a perfect case study of an energy absurdity.  In particular, its highly subsidized solar panel industry likely is contributing to a global decline in the market that threatens the very fantasy it is trying to fulfill.

General economics of the solar industry

To say the taxpayer-supported solar panel industry is struggling is an understatement. The Economist explains that subsidized manufacturing and purchasing distorted the market.  Prices declined but subsidies didn’t. As a result, global “demand for solar panels doubled last year driven by soaring growth in Germany and Italy.”

American manufacturing, much of it subsidized with taxpayer guaranteed loans, ramped up in response to European demand as well as the push to meet U.S. state renewable energy mandates.

What a difference a year makes. Facing a massive debt crisis and the enormous cost of the subsidies to European electricity consumers, governments greatly reduced their subsidies and demand for solar panels plummeted.

The Economist concludes that the market is grossly oversaturated. “In expectation of more roaring growth, the world’s panel-making capacity was tripled over two years, 2010-11…Much of the excess capacity is being shut down, yet there are already plenty of unwanted panels out there. To avoid being stuck with old stock—a ruinous prospect when prices are falling rapidly—panel-makers are now slashing margins.”

This is a disaster for U.S. solar panel manufacturers, even low-cost ones. With a saturated market and cuts in European subsidies, manufacturers are stuck with panels they can’t sell at cost.

First Solar

Tempe-based First Solar, manufacturer of one of the world’s cheapest thin-filmed panel, is in a world of hurt.  Its stock price has crashed from a 52 week high of $175.45 to under $50.

Just recently, First Solar CEO Rob Gillette was fired and replace with co-founder Michael Ahern. Not even Ahern has complete faith in the company he started. He sold off “notable quantities of First Solar stock over the years, including about $150 million worth in March and August of this year, and $142 million in February 2010.”

Reuters reports a “massive oversupply of solar panels and the plummeting costs of polysilicon panels are putting pressure on First Solar’s core business. The firm’s thin-film panels are among the industry’s cheapest, but Chinese-made polysilicon panels are still cheaper—and increasingly so.”

“It has become a familiar story in the solar industry—and a key reason why Solyndra, another thin-film solar panel maker, fell apart. Government subsidy cutbacks have reduced demand, while cheaper panel prices have given an edge to Chinese manufacturers.”

If the largest producer of the least expensive, thin-filmed panels is struggling under the weight of too much supply (including cheap Chinese panels), not enough demand, and not enough taxpayer money, why would we subsidize more solar panel manufacturers and further distort the market? Good question.

Colorado, with help from the federal government, has done just that.

Narrowly Avoiding a Colorado ‘Solyndra’

In early 2009, then newly appointed U.S. Senator Michael Bennet (D-Colo.) touted the prospects of Ascent Solar, a Colorado solar panel manufacturer, and the plans for a new facility to add as many as 200 new jobs for the state’s “New Energy Economy.” Then-Governor Bill Ritter and U.S. Senator Mark Udall, joined their fellow Democrat in offering pleasant platitudes about the “green energy” panacea.

Ritter was effusive with his praise and optimistic about Ascent’s future. “The New Energy Economy is leading Colorado forward and will be one of the keys to bringing us out of this recession. Colorado and Ascent Solar’s success are a model for how America can and must re-tool our entire economy,” declared Ritter. Even the local media couldn’t help but promote such rosy projections.

Fast-forward less than two years. Ascent, perhaps recognizing the fragility of the market, or at the very least, an unprofitable business model, conducted a “market pivot” and a change in business strategy. That switch meant cutting staff—instead of growth of nearly 200 jobs Ascent pared its staff back by half, mostly in production.

All of this occurred while Ascent had reached the ‘due diligence’ phase of the infamous DOE loan guarantee program, with the firm asking for $275 million in taxpayer assistance. But the change in business plans forced Ascent to reconsider its application and the request was quietly pulled—receiving almost no media coverage months after the announcement of DOE consideration.

The decision elicited just a few lines in its 10-Q filing for the first six months of 2011. “On February 23, 2011, the DOE informed us that our submission was selected for due diligence review by the DOE. Timing and funding requirements under the loan guarantee program did not correlate with our revised business plan and consequently, in April 2011, we informed the DOE that we were withdrawing our submission from further consideration under the program,” said Ascent.

Or perhaps it also had something to do with the $85 million write-down that Ascent would incur in altering its business plan, on top of the nearly $90 million in losses it had already accumulated in just five years. Measured against just a little more than $8.6 million in sales over the same time frame, Ascent was nowhere near profitability.

The DOE, however, saw fit to advance the company’s application to the ‘due diligence’ phase. But it would not be American taxpayers on the hook this time, as Asian investors made a $437 million last-minute bailout of the company.

But the consolidation of companies isn’t an indicator of the health of the industry, according to the San Francisco Chronicle. A worldwide price plunge in solar manufacturing has forced weaker (read: not viable) companies to merge or close.

So, without government subsidies there would be almost no supply of solar modules, but without government subsidies there is almost no demand. Artificial markets are doomed to failure. At this juncture, only low-cost Chinese manufacturers may stay afloat with more limited competition, while that country maintains a near-monopoly on the precious, non-green rare earth minerals critical to solar manufacture. Oh boy.

Despite Ascent’s retraction, Colorado is home to DOE recipients, including Goldman-Sachs subsidiary Cogentrix and its $90.6 million loan, and the darling of local Democratic donor Pat Stryker’s Abound Solar, which received a $400 million guarantee.

GE plans to build the country’s biggest solar plant in Colorado, a $300 million project. Their source for inspiration? First Solar. Both make the more harmful Cadmium telluride panels. And who does GE put directly at risk in the fragile solar market? According to the New York Times, it’s Abound Solar.

All while GE itself stands to receive more than $1.5 billion in government loans and grants for a windmill project in Oregon, despite being a company with $170 billion market cap and paying virtually no federal income taxes in 2010.

Considering that almost any DOE or any government subsidy these days is charged to the country’s credit card as debt financing, these government subsidies are actually turning into the dollars that China uses to subsidize its own solar firms. Financing not only your company but also that of your competition is sheer government malfeasance and economic suicide.

Conclusion

To say that both national and state energy policies on renewables – especially solar – are absurd is unfair to the word absurd. The fantasy of “green energy” as policy requires that government mandate, create, and, then, subsidize an economically impractical source of energy. It makes no sense. Just look at Ascent, Abound, Solyndra, First Solar, and, of course, consumers .

The Independence Institute’s environmental policy center estimates that Colorado’s RPS will cost Xcel Energy (our primary electricity supplier) ratepayers more than $100 million in 2011 alone.  That’s just one year in one state.

In its most recent compliance plan, Xcel admits what many “green” energy zealots won’t, that without massive taxpayer subsidies, renewable energy isn’t economically viable. 

Europe is also realizing how expensive it is and is slashing subsidies. A recent report predicts electricity prices will go up 100 percent by 2050.

At least one elected official in the U.S. has come to his senses. Maine Governor Paul LePage recently stated that his state must get rid of its job-killing 40 percent RPS because it raises energy costs putting the state at an economic disadvantage.

It is time for more common sense such as Gov. LePage demonstrated. Government must stop enabling the fantasies of green energy zealots with renewable energy mandates and massive taxpayer subsidies for failed companies and their science projects.

Amy Oliver Cooke is the founder of Mothers Against Debt (www. Mothersagainstdebt.com). She is also the director of the Colorado Transparency Project for the Independence Institute and writes on energy policy.  She can be reached at amy@i2i.org. Michael Sandoval is the Managing Editor of People’s Press Collective and a former political reporter for National Review Online.