At a time when a heat wave expands across the United States and the federal government is debating whether to raise the debt ceiling, the U.S. Department of Energy’s Loan Programs Office (LPO) is offering to guarantee financing for three solar panel projects in California for $4.5 billion to First Solar Inc. After taking a closer look, these LPO projects do little to fund efficient energy production or create permanent jobs.
The LPO specifically targets projects that promote clean energy and includes “job creation; reducing dependency on foreign oil; improving our environmental legacy; and enhancing American competitiveness in the global economy of the 21st century.” Moreover, support by the LPO is for borrowers in case they default on their financial obligations while the project is constructed. Therefore, it is clear that these loans are to expand energy production that the government chooses and not by market forces.
The EIA notes that in 2010 only 1% of energy consumption was from solar power. Although this is the case, 15 out of the 23 generation projects by the LPO have been for solar power plants. The cost of these 15 projects has been $16 billion and is 40% of the total cost of all projects that they have guaranteed financing. On the other hand, nuclear power makes up 9% of all energy consumption and has only received $10.33 billion of support.
The benefits of these guarantees are exaggerated. Job creation from these three solar panel projects is estimated to be 1,400 new jobs, which is $3.2 million per job! An additional issue is that many of these jobs are temporary.
A previous guarantee for a solar panel project was for Bright Source Energy in the amount of $1.6 billion that produced 1,000 temporary construction jobs and only 86 permanent jobs. The cost of these permanent jobs was $18.6 million per job created.
This is a huge cost for an energy source that is already subsidized and supported heavily by the federal government, where the average amount provided by the federal government per megawatt hour in 2007 was $24.34 for solar. In contrast, nuclear was only supported by $1.59 per megawatt hour.
The lack of benefits and the substantial costs of these solar panel projects not only distort the energy market, but are a waste of tax dollars. The sources of energy we consume most (i.e. petroleum, natural gas, coal, and nuclear) are not on the government’s to-do-list, but they are on the list to phase out and create a less efficient economy in the process. When it comes to increasing energy efficiency and creating jobs, these LPO guaranteed loans are not the answer.
Vance GinnResearch Fellow, Armstrong Center for Energy and the Environment