Cape Wind: Another Solyndra boondoggle in the making
Despite the extraordinary advances in the production of natural gas through fracking, the Obama Administration continues to promote a fantastically unrealistic vision for America’s energy future in which base-load electric power needs will be met by renewable energy alternatives like wind and solar.
The facts are clear. Wind and solar technology are not advanced enough to meet the nation’s future energy needs, even if the economy continues its sluggish growth. Despite the United States Department of Energy’s best efforts to promote wind and solar technology through loan guarantees and other subsidies, these technologies are not likely to get any better in the near future. If we ever hope to return to robust economic growth, we must pursue an energy policy that actually works.
The department’s green-energy loan guarantee program, CNBC recently reported, “has been hit by some high profile failures.” Solyndra, VPG, Fisker, First Solar, among others, all went bust, leaving taxpayers on the hook for billions of dollars.
There is something very wrong with this kind of risky industrial policy practiced by President Obama and his allies in Congress. Highly speculative ventures are under-written by taxpayer-backed guarantees so that, should a high risk project fail, investors will be made whole at the expense of ordinary Americans.
One might think that such a record of spectacular failure might cause the Energy Department to rethink its strategy. However, Energy Secretary Ernest Moniz defended the program in his first major policy address, calling its performance “quite remarkable.”
That informed policy makers would support using hundreds of billions of taxpayer dollars to underwrite or guarantee highly speculative projects is indeed “quite remarkable,” especially when the costs of other subsidies are added in to the bottom line.
For all of that, things may be about to get even worse. For almost a decade, a firm has been seeking to begin construction on one of the world’s largest wind farm projects – Cape Wind – to be built on Horseshoe Shoal in Nantucket Sound off the coast of Massachusetts at Cape Cod. The problem is that private financing just isn’t there for such an endeavor, which means private investors believe Cape Wind is a loser.
If Cape Wind is ever to be completed, it would produce electricity at two to three times what ratepayers are typically paying for the same energy coming from coal, natural gas and nuclear power. The 130 monster turbines, nearly 500 feet tall, would resemble something out of H.G. Welles’ War of the Worlds, creating noise pollution, killing off birds who would fly into their path, presenting a hazard to civil aviation and potentially affecting the marine life on which those who live in the region are so dependent.
Cape Wind is a bad deal – which may be why the one bank that was willing to take on the challenge of coordinating the financing – The Bank of Tokyo – Mitsubishi UFJ – would reportedly do so only if the United States Department of Energy puts the American taxpayer on the line for the loan.
Ignoring all the concerns that taxpayers, free market energy activists and residents of Massachusetts have expressed about the project, the backers of Cape Wind are pushing to rush the loan guarantee through the Energy Department in order to meet statutory deadlines.
The department should say “No,” just as it did once before.
Cape Wind makes no sense economically. At a cost of $2.6 billion (or 20 million per turbine) the lease would allow it to generate power for just 25 years – at an initial estimated 23 cents per kilowatt hour. The electricity it would produce when the turbines were spinning is more expensive than most rate payers can afford, meaning Massachusetts would become even less competitive with other states and could even force what remains of its manufacturing sector to relocate to other states like Georgia, Virginia, or Florida.
Cape Wind is another Solyndra in the making. History has shown government backed loans fleece the taxpayer; the promised “green” jobs never materialize; and the mandated purchase of high-priced output does not alone make speculative projects economically viable. This project, really the first of its kind, is about as speculative as one can get. And they want the taxpayer to bear the risk.
The interests of the taxpayers must be protected. The Department of Energy should pull the plug on taxpayer support for Cape Wind. If private interests want to fund it, and assume all the risk associated with it, fine – just don’t leave the taxpayers exposed.
George Landrith is president of Frontiers for Freedom, a Washington, D.C.-based public policy organization advocating on behalf of limited government.