2012-04-21 / Editorials & Letters

Burning our green energy

‘Green’ or renewable energy has been a buzz word for several years. Ohio, like many states, approved an alternative energy mandate in 2008 that requires that least 25 percent of all electricity sold here by 2025 come from alternative energy with at least half of that from renewable sources such as solar, wind, hydropower, geothermal or biomass. There are significant penalties for electric generators who fail to meet the mandate.

‘Green energy’ proponents claim a wide array of benefits including providing energy security, promoting environmental sustainability, stimulating economic growth and creating high-paying jobs. It really sounds great. Who wouldn’t want to get ‘free’ energy from the sun and wind?

There is a hitch, well actually quite a few hitches. First, turning sunshine and wind into usable energy isn’t free – it’s very expensive. Second, the sun doesn’t shine all the time nor does the wind blow all the time. At best and Ohio is far from the best, sunlight shines on solar panels less than half the time. The U. S. Department of Energy’s Photovoltaic Solar Resource map places central Ohio at 4.0 kWh per square meter of panel per day. That’s just slightly more than some areas in Alaska. Wind energy potential in central Ohio is even worse.

Solarbuzz, a solar industry research firm, calculates solar electricity prices monthly. The March 2012 price, which includes installation costs and a 20-year life, is 42.73¢ per kWh for a commercial system in a cloudy climate like Ohio. Electricity purchased from AEP costs less than 10¢ per kWh. Round it up to 10¢ and solar electricity still costs FOUR times as much as our 24/7 power (most the time) from AEP.

So why is ‘green energy’ still touted as the next best thing? Why are Lakewood Schools on the verge of signing a long-term contract to purchase solar electricity?

The answers are politics, government control, SUBSIDIES and wishful thinking. It sounds good – we can forget about the troublesome Middle East, sunlight and wind are ‘free,’ and nothing is being burned. It feels good to be for ‘green energy’ just as it did when our politicians thought everybody should own their own home.

We saw how that worked out and many of us are still reeling from the housing market crash. Single-minded pursuit of ‘green energy’ will distort the energy market just as sub-prime loans hammered the housing market and financial institutions. More ‘green energy’ means much higher energy costs. When something costs more, we use less of it. Energy use is directly related to the growth of our economy. More energy means more growth. That growth will fund governmental benefits, retirements and jobs for our children and grandchildren. We’ve been getting a taste of slow or no growth for over three years now. Not many of us can say we or our families are better off today than we were four to five years ago.

Just as the world seems to be waking up to the financial realities of ‘green energy,’ solar power is surfacing in Licking County. Tipping Point, a Dublin based energy services firm, is touting no investment solar power at a discount to AEP rates. Southwest Licking School District recently signed a Power Purchase Agreement with Tipping Point andLakewoodcouldapproveasimilaragreementata7a.m.meetingonFriday,April 27. Tipping Point is also talking with the Village of Hebron.

Germany, the leader worldwide in solar subsidies, is scaling way back and is phasing out subsidies over the next five years. Since the spectacular failure of highly touted Solyndra last fall with its $535 million dollar DOE loan, there has been a steady stream of bankruptcies, layoffs, credit downgrades and dropped projects.

What’s the problem? Solar and wind power production is an artificial market propped up only by government regulations, grants, loans and tax credits. It is very expensive to overcome the inherent inefficiencies of solar and wind. It’s 10¢ versus 40¢.

The proposed Lakewood contract still isn’t available, but Tipping Point often mentions a guaranteed 15 percent discount from the AEP rate. A 15 percent discount without incurring any capital or maintenance costs sounds OK. It sounds better once the typical 20-25 year contract expires and the customer gets the equipment. Then it is totally ‘free’ power except that’s when the panel warranties run out if your panel manufacturer - often Chinese - is even still in business. Customers can get to that ‘free’ power scenario earlier by buying out their contract at 10, 15 or 20 years. Lakewood is considering a buyout. That might give them some warranty years if, and it’s a big if, the panel manufacturer is still in business. Even so, it will be very old technology.

So what’s our complaint with this deal? It is totally based on subsidies paid directly or indirectly by all of us. As Lakewood’s energy consultant told Hebron council members Monday night, “If there wasn’t federal legislation that makes this attractive, it wouldn’t be attractive.” It actually goes beyond federal regulations to Ohio’s renewable energy mandate. To meet that mandate, AEP provides two subsidies - purchasing renewable energy credits (RECs) from solar and wind power producers and providing financial incentives to those selling their RECs to AEP for 15 years. AEP’s REC Purchase Agreement states it “shall immediately terminate... if the Public Utilities Commission of Ohio disallows cost recovery for any REC(s) the Company purchased...” Cost recovery means that AEP will add those costs to the price of electricity that everyone else is purchasing. Those premium costs can add up – 2011 subsidies in Germany increased the average consumer’s power bill $260 a year. We’re not there now, but that’s the road we are heading down.

At the federal level, there is a no-cap 30 percent investment tax credit/cash grant, guaranteed debt, accelerated write-offs and preferential treatment for the tax credits. Most of the investment in solar equipment comes from tax motivated investors. Investments are made for the preferential tax treatment – high income investors can legally shelter income from taxes. There is something for both conservatives and liberals to attack here. Conservatives typically oppose subsidizing markets while liberals generally believe the well-to-done don’t pay enough taxes. Solar power subsidies anger both sides.

So Lakewood’s 15 percent discount (about $35,000 based on last year’s costs) will increase everybody else’s electric bills and add to our rapidly increasing $15.7 Trillion national debt. That 30¢ premium per kWh has to be paid by someone.

We applaud Lakewood for seeking to control costs. District residents are responsible for Lakewood’s energy costs which should be transparent and based on market economics. Installing acres of solar panels to generate electricity at a 400 percent premium to market prices does NOT make sense. Shouldn’t Lakewood take advantage of these programs and spread its electric costs over all AEP customers and taxpayers nationwide? NO, we’ve got to stop the crazy spending and subsidies, and that means here AND everywhere!

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