Filed under: Capitalism, Economy, Energy, Environment, Junk Science, National Security | Tags: Crony Capitalism, Green Loan Program, Subsidizing Friends and Supporters
One of the biggest scandals in American politics is about to erupt. It is a story of the inside game in Washington in which the political class enriches itself at the expense of ordinary taxpayers. Peter Schweizer’s new book details how 80 percent of the Department of Energy’s “Green Loan” program went to companies run or primarily owned by Obama’s financial backers. Out of $20 billion of government loans, $16 billion went to Obama bundlers, friends, and supporters. In other times, they used an old-fashioned word:
graft: The unscrupulous use of one’s position to derive profit or advantage.
Is this an inevitable result of government intervening in the private market, picking winners and losers? These are companies that rely on government support for their existence. In most cases, if the government support is withdrawn they cease to exist. Doug Ross quoted the relevant excerpt from Schweizer’s book:
When President-elect Obama came to Washington in late 2008, he was outspoken about the need for an economic stimulus to revive a struggling economy… After he was sworn in as president, he proclaimed that taxpayer money would assuredly not be doled out to political friends…
…But an examination of grants and guaranteed loans offered by just one stimulus program run by the Department of Energy, for alternative-energy projects, is stunning. The so-called 1705 Loan Guarantee Program and the 1603 Grant Program channeled billions of dollars to all sorts of energy companies…
…In the 1705 government-backed-loan program [alone], for example, $16.4 billion of the $20.5 billion in loans granted as of Sept. 15 went to companies either run by or primarily owned by Obama financial backers—individuals who were bundlers, members of Obama’s National Finance Committee, or large donors to the Democratic Party. The grant and guaranteed-loan recipients were early backers of Obama before he ran for president, people who continued to give to his campaigns and exclusively to the Democratic Party in the years leading up to 2008. Their political largesse is probably the best investment they ever made in alternative energy. It brought them returns many times over.
…The Government Accountability Office has been highly critical of the way guaranteed loans and grants were doled out by the Department of Energy, complaining that the process appears “arbitrary” and lacks transparency. In March 2011, for example, the GAO examined the first 18 loans that were approved and found that none were properly documented. It also noted that officials “did not always record the results of analysis” of these applications. A loan program for electric cars, for example, “lacks performance measures.” No notes were kept during the review process, so it is difficult to determine how loan decisions were made. The GAO further declared that the Department of Energy “had treated applicants inconsistently in the application review process, favoring some applicants and disadvantaging others.” The Department of Energy’s inspector general, Gregory Friedman, … has testified that contracts have been steered to “friends and family.”
Solyndra has become the poster child, particularly after the top executives took the Fifth Amendment to avoid testifying, and congressional investigations are ongoing, but there are many others. The latest is an electric transmission project that received stimulus-law financing under a program operated by the Western Area Power Administration.
NRG Energy is building a compound of nearly a million solar panels halfway between Los Angeles and San Francisco. Taxpayers and ratepayers are subsidising the project by almost as much as the entire $1.6 billion cost of the endeavor. This involves loan guarantees, cash grants, contracts that require power customers to pay higher rates, state laws that require utilities to buy increasingly large amounts of solar energy. Beneficiaries include firms like Goldman Sachs, Morgan Stanley, General Electric, Exelon, NRG and Google. The Dept. of Energy loan guaranteed a $1.2 billion construction loan, with a low loan rate of 3.5%. When construction is done, they get a $430 million check from Treasury. NRG doesn’t have to pay property taxes, saving it $14 million a year. And ordinary rate payers get to pay about 50 percent more than the expected cost of electricity.
The expected rate of return for equity investors is 25 percent.
States have passed legislation that requires utilities to buy a significant share of their power from renewable sources such as solar or wind. Kevin Smith, CEO of Solar Reserve, a Nevada solar project, said “It is like building a hotel, where you know in advance you are ging to have 100 percent room occupancy for 25 years.”
This is essentially what has happened in England, where a combination of EU regulations and governmental ignorance and fear of global warming has led them to a position where the high cost of energy is resulting in what they call “energy poverty” where people cannot afford the basic energy they need to stay warm — in a period when the globe has been cooling for over ten years.
Solar panels, they say, are ‘expected’ to last for 20 or 25 years, except they are quite fragile and subject to all sorts of damage. Then there are the backup power plants required for the times that the sun isn’t shining — like night, and cloudy weather. They don’t have any way of storing electricity yet, but they are thinking of large banks of used electric car batteries — used because the batteries are so costly.
The whole thing goes far beyond the Department of Energy’s foolish green loans. The federal government has paid out nearly $40 billion to subsidize corn-based ethanol. That is judged a success because it has displaced more than half a million barrels a day of petroleum. But ethanol has driven up food prices, contains less energy than gasoline, destroys small engines, is more polluting than gasoline, and if we were using our own energy resources properly would be unnecessary. And that’s just the ethanol.
Wind farms are proving to be neither cost/effective nor practical. There is the lightbulb ban, done so that GE, Sylvania and Phillips can make more money by having their bulbs made in China. There’s Beacon Power who made flywheels for electricity storage — bankrupt, Ener1, who made lithium-ion batteries, delisted by Nasdaq, and many more. There are the green job training programs, and I haven’t even touched upon the costly regulations emanating from the EPA. We may never know the total cost of all this nonsense, nor grasp the immediate costs to our country, our own pocketbooks and our own welfare and freedom.