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March 12, 2012
The Predestined Failure of Obama's Energy Policy
By Anthony J.Ciani
One of the greatest failings in leftist thinking stems from the mistaken belief that societies can be easily manipulated. President Obama's adopted energy policy makes for a wonderful example of this failure in thought. The entirety of "green energy" is filled with micro-thinking, where a cursory (at best) understanding of technology and engineering has combined with narrowed visions and worldly ignorance to create "energy solutions" which fail in technological readiness, suitability to purpose, or market support.
The failure of "green" becomes readily evident with one simple statement of fact: most "green" technologies are well over 100 years old, and there has been no significant scientific achievement in these technologies for approximately 30 years. With the possible exceptions of photovoltaics and batteries, the "green" technologies are all mature. For a mature technology to have little market presence or demand is highly indicative that it fails the cost-benefit analysis of its potential consumer. If the various "green" technologies provided desirable benefits at appropriate price points, then they would be booming, without massive government subsidies or dictates.
If the goal is "green," then there are only two solutions for dealing with the market problem. One possible solution is that the premise is wrong -- that the technologies are not actually mature, and require additional research to create "green" products which will succeed in the market. Those who lack an understanding of the technical issues may favor the funding of research, but that research money must ultimately pass through the scientists who know what can be improved and what might be done to improve it. In the end, there is a lot more money available for "green" research than there are viable research projects to spend it on, and that money makes up only a drop in President Obama's "green" bucket. In terms of public benefit, President Obama would have done much better to have spent two drops on research, funding even the long-shot projects, than to have wasted the bucket on costly market manipulation and kickbacks to his political allies.
The second solution is to manipulate the market, such that "green" wins the cost-benefit analysis. This is the solution which President Obama adopted. Market manipulation can take multiple forms, including production and consumption subsidies for "green" energy, dictates to use "green" technologies, dictates obstructing conventional technologies, excessive taxes on conventional technologies, and currency devaluation (e.g., through excessive national debt, to make imported energy more expensive). When Obama said, on multiple occasions, "energy prices will necessarily skyrocket" and "electricity rates would necessarily skyrocket," he meant it. Artificially inflating energy prices through dictates and taxes is just one way to make "green" technologies more marketable. The effects of inflating the prices of conventional technologies can be enhanced by simultaneously subsidizing "green" technologies.
The problem with market manipulation is that markets are highly dynamic systems, especially when it comes to energy. Energy is the ability to do work, work is money, money is energy. Energy, money, and work are economically synonymous. Oil is free. It just sits in the ground waiting for somebody to pump it out. The cost of oil is the work it took to pump it out, the work to transport it, the cost of refining it, the taxes levied upon it, and some amount of profit (which is limited by competition). This is true of all natural resources. The raw materials used in a $100 solar panel are cheap and abundant. There is as much silicon in a jar of pasta sauce as there is in that entire $100 panel, and we throw away the jar. What makes that solar panel cost $100 is all of the energy put into transforming dirt into solar panels.
The predestined failure of Obama's energy policy is becoming clear. If Obama doubles the cost of energy, then he doubles the cost of turning that free dirt into a $100 solar panel, which now becomes a $200 solar panel. The Obama energy policy is based on independently altering both sides of an equation, but the sides are closely dependent.
The average residential customer consumes approximately 4,700 kilowatt-hours per year. At an average cost of about 11.5 cents per kilowatt hour, it costs $540 per year per person. Ignoring inflation, because it increases costs but cheapens dollars at the same time and by the same amount, this is $43,000 for 20 years of electricity. For the average family of four to go off-grid would require a 6.5-kW solar photovoltaic (PV) energy system (~$7,000 for cheap panels), with a 12-kW inverter (~$6,000), 5,000 A·Hr of 12 volt batteries (~$12,000), and a 125-Amp (48V) charger controller (~$2,000), for a total of $27,000 in equipment. The batteries need upkeep and will probably require replacement after 10 years, so that brings the cost over 20 years to about $39,000, ignoring inflation and maintenance, just for the equipment. Add to that the cost of building a battery room and installing and maintaining the system, and total cost can easily exceed $60,000. If instead, this family wants to just offset their power usage with 2 kW of panels and a grid tie inverter, the cost is only about $3,500 for the parts, and maybe $2,000 for a bargain on installation, but this system can only "sell back" a maximum of $6,300 over 20 years. Most likely, it will only prevent the purchase of about $2,000 in electricity, because "running the meter backwards" is actually not all that efficient, and peak residential use occurs when the Sun is low. The utility does not pay top penny for electricity pushed back on the grid either.
Direct government manipulation of markets has never worked. Every child knows that if you touch a hot pan you will get burned, so attempting yet another version of failure makes no sense. Unfortunately, President Obama seems to believe that he can touch the hot pan and he will not be burned, because in his words, "we are the ones we have been waiting for." The problem is that his is not the hand he is pressing onto the frying pan. The hand is ours. What kind of man would force someone else's hand onto a hot pan and tell him that everything will be fine?