Claiming "green energy investments" are the route to job creation, President Obama has held up a California solar panel company as an example of what more federal spending on alternative energy can achieve. If this is the best solar success story he can find, the future looks dim.
That California company is Solyndra, which, in September 2009, received a $535 million handout from the Obama administration. Heralding Solyndra as the cornerstone of its $787 billion stimulus bill, the administration claimed at the time that the taxpayers' investment would create as many as 1,000 jobs. In November, however, Solyndra announced it would not expand as planned and would not hire 1,000 new workers. Instead, Solyndra announced the layoffs of 175 full and part-time workers.
It's not surprising. Green energy, including solar, requires tax breaks and government handouts to survive in the marketplace. Newsweek's European economic editor Stefan Thiel explains, "In theory, (green) subsidies are designed to create viable markets for climate-friendly technology by bringing down production costs, after which subsidies could be phased out."
But, this model has already failed in the heavily subsidized German solar market. According to Thiel, "As the share of renewable power has jumped from 3 percent in 2001 to 15 percent (in 2009), subsidies per-kilowatt-hour of renewable power aren't going down but up, meaning that clean energy is getting more expensive ... the country's lavish subsidies have blocked innovation and delayed the advent of cost-competitive solar power worldwide."
Worldwide supplies of solar panels vastly outpace demand. Through 2013, the subsidized solar industry will produce an average rate of 26 percent more product than it can sell. With supply exceeding demand, firms like Solyndra are forced to reduce prices, cut costs, or close.
Solyndra is not an isolated case. President Obama should ask his friend, Massachusetts Gov. Deval Patrick, about his green energy failures. In 2007, Patrick gave another solar panel manufacturer, Evergreen Solar, nearly $60 million of taxpayer money to build a plant in Devens, Mass. He promised his plan would boost green energy and create jobs.
On Jan. 11, 2011, Evergreen Solar announced it was closing its Devens operation and moving most of its production to China. This could send 800 workers to the unemployment line. Despite snagging the high-profile contract to provide solar panels to the White House, Evergreen claims to be "a victim of weak demand" and lower production costs in China.
Back in 2007, Gov. Patrick gave Evergreen Solar $58.5 million, which for Massachusetts was an unprecedented gift to a private company. Patrick confidently claimed, "I've said all along, if Massachusetts can get clean energy technology right, the world will be our customer."
It appears the world wasn't buying.
According to the Boston Globe, Massachusetts may only be able to recoup $3 million to $4 million, plus any unused future tax subsidies, from its nearly $60 million investment in Evergreen Solar. Meanwhile, Evergreen retains ownership of the Devens plant and the rights to lease the sizeable property for the remainder of the 30-year contract for just $1 a year.
The Evergreen and Solyndra disappointments are cause for reflection. Green energy subsidies distort markets and the Obama administration's promise of green jobs is based on a myth. Obama and Patrick failed to understand the market for green energy programs. As a result, they irresponsibly wasted hundreds of millions of taxpayer dollars.
Alternative energy may very well play a part in America's future, but it can only succeed through competition and innovation — not by relying on taxpayer subsidies.
Justin Danhof is general counsel at the National Center for Public Policy Research in Washingon www.nationalcenter.org