Is Colorado's "new energy economy" still viable in light of recent setbacks in the industry? No
It's been a rough stretch for Colorado's "new energy economy." Over the last few months, the Centennial State's green energy industry, which the new energy economy was supposed to kick start, has been beset by a series of setbacks. Loveland-based Abound Solar went bankrupt; Vestas Wind Systems laid off almost 200 workers at its Windsor blade plant; and General Electric pulled the plug on a planned solar manufacturing plant in Aurora.
The troubles of renewable energy companies are not unique to Colorado; they extend nationwide. U.S. taxpayers ponied up $60 billion for green energy "investments" as part of the American Recovery and Reinvestment Act of 2009, better known as the stimulus bill. The results are only coming in only now, and they are not good. The list of "stimulosers" — of which Solyndra is only the most famous example — is long and growing. It includes Beacon Power, Evergreen Solar, Amonix, A123 Systems, Nevada Geothermal Power, and many others.
These green industries are in trouble for a simple reason. They are running out of subsidies. The 2009 stimulus has been spent and the wind production tax credit is set to expire in December. Without a steady influx of taxpayer help, renewable energy sources like wind and solar power cannot compete, due to their high capital costs and intermittent supply.
How dependent on government are these industries? The American Wind Energy Association estimates that almost half of the entire wind power workforce — almost 37,000 people — would lose their jobs if Congress were to allow a single tax subsidy to expire. Such sudden and severe contractions are symptomatic of industries whose business plan is predicated on political favoritism. When the political winds change and the subsidies on which these companies depend are cut, the bottom falls out from under them.
On the demand side, green energy entails higher rates for consumers. In 2011, for example, a New Energy Economy policy known as the Solar*Rewards program accounted for almost 4 percent of sales, despite generating a scant half a percent of Xcel Energy's system-wide power. That's a bad deal for Coloradans. Unfortunately, the burden on Xcel ratepayers will only increase with the expiration of federal subsidies, which have effectively discounted Colorado's policies.
Somewhat paradoxically, the new energy economy's biggest expense likely will pertain to fossil fuels. The 2010 Clean Air Clean Jobs Act mandated that Xcel Energy generate from natural gas almost 1,000 megawatts of base load supply that it now gets from coal. At current prices, natural gas is historically cheap, but it is still more than twice as expensive as coal, according to Xcel Energy's regulatory filings.
And let's not forget that the price of natural gas reached historical highs only four summers ago. In fact, the high cost and volatility of the natural gas market relative to coal was the primary reason that the Colorado utilities have relied on the latter to meet the preponderance of the state's energy needs. A spike in the price of gas after the current supply contracts expire would cost Xcel Energy ratepayers dearly.
The worst aspect of the new energy economy program is its regressive nature. Utility bills represent a larger portion of poor households' budgets, so the new energy economy's costs are shouldered disproportionately by those who can least afford them.
Before the new energy economy program came along, Colorado utilities' decisions on how to provide power to consumers were guided by considerations on how to do so most efficiently at the least cost. Now, many of those decisions are based on political considerations, such as the need to prop up renewable energy, imposed by politicians. As a result, Colorado ratepayers can expect to pay for unsustainable subsidies, endure lower power supply reliability, and suffer unexpected consequences — all in the name of green ideology.