The Global Warming Bubble
When the federal government bailed out General Motors, you may remember that we were told the government would transform GM by moving it away from manufacturing big, gas-guzzling trucks and SUVs (you know, the vehicles that were actually making a profit) and instead make sure that GM rode the real wave of the future: electric cars.
Well, here's where the wave of the future has taken us: GM just shut down the assembly line of its electric car, the Chevy Volt, for five weeks because demand for the Volt is making the Edsel look like a roaring success. Observers are divided over whether the Volt has flopped because of its limited all-electric range, its high price tag (despite massive government subsidies), or the fact that its battery might have a tendency to catch on fire.
The Volt is just the latest commercial failure for "green" technology. We are in the middle of what you might call a global warming bubble. It is a failure of the global warming theory itself and of the credibility of its advocates, but also a failure of the various "green energy" schemes proposed as a substitute for fossil fuels.
Take the sleek Tesla electric roadster, brought to you with about half a billion dollars in government-backed loans, which turns into an immovable "brick" if you run down its battery too far, say, by taking a long drive and parking it for a while.
The failure of the solar panel maker Solyndra has been followed by the bankruptcies of a variety of other government-subsidized green energy firms, such as Beacon Energy, which makes an energy storage device needed to smooth out the energy production of erratic "renewable" sources, and battery maker Ener1.
But maybe we're just not subsidizing green power enough, because surely you've heard--probably from Tom Friedman--that China is beating us to the future with its support for green energy. But China's solar energy firms are also heading into a slump and laying off workers. Part of the reason for the solar slump in China is that they were counting on generous subsidies for their product from the West, particularly Europe. In effect, the Chinese were manufacturing solar panels in order to cash in on subsidies from Western taxpayers. But now the subsidies are drying up.
That leads us to the most interesting of these stories. Germany is phasing out its solar subsidies, but the economically revealing part is why they are eliminating the subsidies. As Bjorn Lomborg explains:
"Subsidizing green technology is affordable only if it is done in tiny, tokenistic amounts. Using the government's generous subsidies, Germans installed 7.5 gigawatts of photovoltaic capacity last year, more than double what the government had deemed 'acceptable.' It is estimated that this increase alone will lead to a $260 hike in the average consumer's annual power bill."
At the end of last year, I wrote (in my own newsletter) about the marginal economics of the welfare state. Many welfare-state policies seem to work so long as they are implemented on a small scale but fail when they are expanded to cover a larger portion of the population. The Medicare program, for example, takes advantage of the fact that it can dictate lower prices for medical services, because it only needs to pay the marginal costs (the relatively low cost of treating one additional patient in an existing hospital), while non-Medicare patients are billed at higher rates to cover big capital expenditures (the cost of building the hospital in the first place). But if the government starts paying for all health care, it suddenly has to pay a lot more to fund those capital expenditures.
Something similar applies to green technology. It can be sustained only as a token or showpiece designed to distract attention from all of the coal, natural gas, and nuclear power stations that actually keep the lights on. The Chevy Volt, for example, is openly billed by GM as a "loss leader": they're losing money on it for the sake of all of the good "green" PR they hope to get. But the moment you try to use these technologies to generate a noticeable portion of a nation's electricity, the costs rise to ruinous levels.
Thus, as Lomborg explains:
"Solar power is at least four times more costly than energy produced by fossil fuels. It also has the distinct disadvantage of not working at night, when much electricity is consumed.
"In the words of the German Association of Physicists, 'solar energy cannot replace any additional power plants.' On short, overcast winter days, Germany's 1.1 million solar-power systems can generate no electricity at all. The country is then forced to import considerable amounts of electricity from nuclear power plants in France and the Czech Republic."
The same applies to wind energy, too, for the same reason. Just as the sun doesn't shine consistently every day, so the wind does not blow consistently. The natural fluctuation of wind power means that every megawatt of wind power requires an equal amount of conventional, fossil-fuel-powered generation to prevent power dips on the electric grid. Which is to say that solar panels and windmills are really just ornaments. They are monuments to greener-than-thou environmental vanity.
That these forms of renewable energy are capable of generating only minimal amounts of power is no accident. Ten years ago, I published an article by Jack Wakeland which examined the growth of "renewable energy" and concluded that every time an "alternative" power source grew large enough to produce energy on a truly industrial scale, environmentalists turned against it, as they have done with hydro-electric dams, geothermal plants, and even wind farms. So the fact that green energy is capable of generating only a small fraction of the power needed to fuel an industrial civilization is no accident. In effect, the inability to generate industrial-scale power is what makes green energy green.
But what that means is that green energy is doomed as an economic proposition. It has all of the hallmarks of an economic bubble. As with the Internet, housing, and higher-education bubbles, green energy is fiercely believed in, not just as an investment but as a superior lifestyle and a positive social good. And as with housing and education, it is propped up by government tax breaks, loan guarantees, and massive subsidies, all of which support a growing edifice of economically unproductive activity. But this artificial stimulation eventually expands the industry beyond the point where it can be sustained, either economically or politically, and the bubble bursts.
It looks like the global warming bubble is hitting that point.