Green Energy Is a Bust. Long Live Oil & Gas
In 2008 the incoming Obama Administration made bold predictions that there would be a green energy boom leading to lower greenhouse gas emissions, the creation of millions of jobs and the return of robust economic activity. In general, the Administration was right. But it was wrong about the details.
The part it got right is that there is an energy boom. It's coming from oil and natural gas. And it's spurring the capital investments and technological advances that were predicted to be part of the green energy revolution. Economists and energy experts are bullish on both the present and future of oil and natural gas extraction and forecasting great advances for the fuel refiners. Analysts at IHS Insight predict that over the next two decades, the energy industry is expected to make more than $5 trillion in new capital investments and create more than 3.5 million jobs.
Meanwhile, the green energy “revolution” has not exactly been robust, not here nor in Europe.
In 2000, Germany passed a 20-year green energy initiative, an effort led by German Chancellor Angela Merkel, that required energy companies to purchase and supply renewable energy at much higher rates. After the Fukushima nuclear disaster in Japan in 2011, Merkel took it a step further by immediately shutting down eight nuclear reactors and putting Germany on a path to eliminate all nuclear energy.
So how's Germany doing? Not so well according to a 2012 report from German energy expert Dr. Guenther Keil. He says that it is nearly impossible to generate enough energy from renewable sources like wind, especially during high energy demand seasons, without covering all of Germany with wind turbines and without the country incurring costs to the tune of one trillion Euros over the next 15 years. Even with massive government subsidization, renewable energy cannot compensate for the reduction in tradition energy.
Here in the U.S., renewable energy efforts are being abandoned because of exorbitant costs and renewable energy’s inability to provide for consumers’ energy needs. The state of Maine has been promoting an offshore wind farm, but just recently the builder, a Norwegian company called Statoil, reneged on its planned $120 million investment in the project. Even with private investment, Maine energy consumers would have been stuck with a $200 million bill to actually use the wind-created energy.
The Administration’s push to support green energy and its attempts to pick winners and losers in the energy sector, have cost American taxpayers billions and ultimately have failed. The Heritage Foundation reports that 36 of the green energy companies offered federal support have gone bankrupt, are laying-off workers, or are heading for bankruptcy. Aside fromSolyndra’s bankruptcy and its $545 million of squandered taxpayer dollars, these failed investments have gone largely unreported. The reality is Solyndra is just the tip of the iceberg and there are 35 additional renewable energy companies that received taxpayer money, to the tune of over $15 billion, who have promised innovation and development but failed to deliver.
I support a balanced national energy plan, but green energy, which can’t compete in the marketplace without government intervention, is not the answer to America's energy needs. The gains are too small and incremental given their costs, and there is no indication that there will be a major breakthrough. In the last 10 years, green energy has grown modestly, from generating 8.9 percent of our electric power in 2002 to generating roughly 13 percent of our electric power currently, under a half percent gain per year.
Meanwhile, new discoveries of oil and gas fields combined with major advances in extraction technology have given North America an energy boom that is powering a manufacturing renaissance in the United States. Recent access to shale oil and natural gas deposits are the result of the underreported development of new safe and environmentally sound technologies. There has been nothing technologically comparable in the green energy industry.
According to analysts at IHS Global, the boom in natural gas products has driven expansion in petrochemical manufacturing, which uses gas as a fuel and feedstock. Mark Wegenka, managing director for chemical consulting at IHS says that petrochemical companies plan more than $100 billion in capital investments for facilities by 2025.
So we are getting the best of both worlds: an energy boom that is dominated by the production of clean natural gas AND a manufacturing boom that is spurring investment and jobs.
The Obama Administration needs to accept reality and work more closely with producers and manufacturers in the fossil fuel industries. Oil and natural gas are here for the long-term, and will fuel America’s comeback whether it’s in the President’s plan or not.