The Real Cost of Obama's Renewable Fetish

Since the Solyndra bankruptcy, the Obama administration has been taking a lot of heat over its handling of the energy sector. Just days ago, Rick Santorum said Obama is pushing a "radical environmentalist" agenda and that the president's environmental beliefs are a "theology" -- whatever that means. Romney has attacked renewable energy as "time and money wasted."

It's easy to paint a broad stroke of the energy picture when oil prices are rising and bankruptcies such as Solyndra and Beacon Power are in the headlines. But political candidates and newscasters rarely take the time to show the complete picture. The fact of the matter is, the cost of Obama's renewable energy investments has been relatively small when compared to the national budget. And it pales in comparison to the money the Chinese government gives to renewable energy companies -- the same companies who now, incidentally, dominate manufacturing in the fastest-growing part of energy: solar.

Real dollars and cents
The Department of Energy's loan guarantee portfolio, which includes Solyndra and Beacon Power, was recently reviewed by an independent consultant to determine credit characteristics and risk of loss. The findings might surprise you.

The program has provided $23.8 billion in loan guarantees. Only $8.3 billion of that has been drawn, and the subsidy cost provided by the government to the program amounted to $2.7 billion to $2.9 billion. The low overall cost is because most of the money was provided to extremely low-risk utility renewable projects.

The federal government's 1603 Treasury Program, a cash grant program for renewable energy developers, helped 22,000 renewable projects at a total cost of $1.75 billion. The program was allowed to expire at the end of 2011, although President Obama wanted to revive it in his latest budget.

What have these subsidies gotten us?

Growing renewable energy sector
Judging exactly what we've gotten from government subsidies is nearly impossible. But there is evidence that the industries that were supported are at least making a strong contribution to the economy.

  • Energy Secretary Steven Chu said that the loan program is supporting $40 billion in private investment and 60,000 direct jobs.
  • First Solar's (Nasdaq: FSLR  ) $646 million loan guarantee for the $1.36 billion Antelope Valley Solar Ranch One will power 75,000 homes at peak production. The company also has partial loan guarantees of $1.46 billion to build two Desert Sunlight projects totaling 550 MW.
  • The $1.237 billion loan guarantee for the 250 MW California Solar Ranch, now owned by NRG Energy (NYSE: NRG  ) , will be used to install SunPower's (Nasdaq: SPWR  ) high-efficiency panels and is projected to power 59,000 houses annually.
  • The solar industry now employs over 100,000 people nationwide.
  • The U.S. was a $1.9 billion net exporter of solar products, driven by capital equipment from GT Advanced Technologies (Nasdaq: GTAT  ) and others. Ironically, this will likely be a short-term phenomenon because we're shipping manufacturing capabilities to China.

It isn't just U.S. companies that are creating jobs here in the U.S. First Solar and SunPower still dominate the solar landscape here, but Suntech Power (NYSE: STP  ) now runs a manufacturing facility in Arizona to supply the growing U.S. market. Then there are companies like SolarCity who are installing modules on rooftops around the country and creating a majority of the jobs in the solar industry.

What it all means
Whether or not it's the federal government's role to guarantee loans for specific companies or subsidize an industry is up for debate, and it's not what I'm trying to point out in this article. I just want to put a scale on the debate.

At a cost of around $5 billion over the last three years, there are probably more important things to be debating, especially considering how fast the industry is growing and creating jobs. Plus, renewable energy costs are falling so fast that renewable subsidies will dry up in coming years as grid parity is reached across the country -- something that most subsidies never do.

Sometimes it's important to keep political rhetoric and government spending in perspective. President Obama may have a soft spot for renewable energy, but the support that's been given to these projects is pretty small in the grand scheme of things.

Fool contributor Travis Hoium owns shares of SunPower and First Solar and manages an account that owns shares of SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of First Solar. Motley Fool newsletter services have recommended buying shares of First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (11)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 27, 2012, at 4:26 PM, michnow wrote:

    you keep pushing the obama agenda. That is one on the reasons I dropped your service.

  • Report this Comment On February 27, 2012, at 4:35 PM, vecede wrote:

    Exactly where is Travis "pushing the obama agenda" in this article? Putting things in perspective using facts is hardly pushing an agenda.

  • Report this Comment On February 27, 2012, at 5:23 PM, DoctorLewis4 wrote:

    Don't confuse Obama haters with the facts!

  • Report this Comment On February 27, 2012, at 5:26 PM, MichaelDSimms wrote:

    So where in the U.S. constitution does it appear that government shall pick the successful companies and technologies of the the United States business and corporations? Guess it falls under the amendment of manufacturing will pay 3% less than energy companies as proposed by Obama in his new corporate tax scheme. Or maybe it falls somewhere under "I can do anything I want" amendment.

  • Report this Comment On February 27, 2012, at 5:32 PM, Munsonmanor wrote:

    The problem with Obama is HOW he did all this, not that he did it at all. Instead of putting the carrot of $$$ in front of all of these solar companies and REWARDING any of them that put together worthwhile ideas, why did he pick winners and losers and spread all of this money out? Especially, knowing that some of these companies were likely to fail. Other things not mentioned, some places don't get enough sunlight to make it practical to switch. There would have to be backup batteries for night time. Maybe there's a Donald Trump or Bill Gates of the Solar industry that's coming up with a brilliant idea that will make it cheaper to convert. Great! Don't try and FORCE everyone's energy bills to go up by cutting off drilling and trying to shut down coal factories when our country CANNOT replace that energy at this moment in time!

  • Report this Comment On February 28, 2012, at 1:12 AM, MIleHighProfits wrote:

    Travis,

    I’ll tell you what the rate-payers in Colorado have gotten; a monthly add-on charge of 1.92% for studies to support Renewable Energy Standard Adjustment. Of course, Xcel Energy includes this fee in the sub-total costs of the bill because, god forbid, they forget that the Franchise Fee and Sales Tax are based off of the sub-total too.

    As a taxpayer and the added “perceived” benefit this green-fraud has cost us let’s take a look at ‘dollars and cents’ as you suggest. In the context of real costs, please do us all a favor and cite the correct amounts of obligated dollars for the appropriate loan programs. Your statement, in the context of DOE Loans, “The program has provided $23.8 billion in loan guarantees” is incorrect. Don’t worry though, you’re only off by about a factor of 2x. To support Title XVII of the Energy Policy Act of 2005, the DOE has two funding streams – 1703 and 1705. The 1703 portion was the original authorization to obligate money and the 1705 was the shot-in-the-arm from Recovery Act. Together, the 1703 and 1705 Loan Programs obligated a total of $38.6B, not the $23.8B you incorrectly referenced. Also, while Title XVII projects require a credit facility for repayment once the project is operating, it’s the DOE (i.e. the taxpayer) that holds the bag for all the risk until the project is complete. And considering that the Federal Financing Bank is listed as an eligible lender, it’s hard to imagine how the taxpayer ever got a fair shake in this boondoggle. So, at best, your reference to the 1603 Treasury Loan Program is misleading at best. While it is bona fide funding stream, you try to pass it off as if that is all that the Federal government has obligated itself too – FALSE!

    And what have we got with First Solar…………hmmm, well they built a plant in Malaysia and Vietnam. The one in Vietnam was closed before it was ever commissioned. And, Michael Ahearn has contributed a ton of money to Obama – so if you’re into Hope and Occupy that’s a good thing. Oh yeah, we’ve got a bunch of Solar eye-sores littered all over the left coast that can’t even generate enough electricity to power self-contained sun tracking servo’s.

    Just wait until somebody living next to a First Solar installation can’t figure out how is dog ingested cadmium and died after a little seismic activity and rainfall near Topaz. Don’t believe me, read the Environmental Impact Statement for yourself and do a little research on the EU’s RoHS. And then take a look at the EIR for Topaz and let me know how safe you’d feel with First Solar’s estimated module breakage of slightly less than 100,000 of their modules over the operating cycle of the project.

    You want to keep advocating for these solar nut jobs – fine, but don’t do it under the guise of a legitimate investing website.

    You keep the cadmium, I’ll keep the petroleum!

    N. Swift – Denver, CO

  • Report this Comment On February 28, 2012, at 6:25 PM, DJDynamicNC wrote:

    "Instead of putting the carrot of $$$ in front of all of these solar companies and REWARDING any of them that put together worthwhile ideas,"

    Actually, as detailed in the NY Times a couple of days ago, that's exactly what his administration has been doing.

    The loan guarantee program, on the other hand, was passed in 2005 - when he-who-shall-not-be-named was President.

  • Report this Comment On March 07, 2012, at 11:47 PM, mtracy9 wrote:

    A better question to be asking is one that Obama asks frequently -- why are we subsidizing the oil industry, especially when this industry is making record profits? The answer, of course, is that the oil lobby has the Congress bought off, especially Republicans.

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