Saturday, September 29, 2007

Solar Energy for a few!

The link

Last Wednesday former President Clinton and Florida Gov. Charlie Crist, announced plans for a solar power plant aimed at reducing Florida’s carbon emissions. This solar plant is expected to reduce the carbon emissions by 2 million tons over five years and is a part of a 2.4 billion dollar clean energy program. The first thing that caught my eye was the question of, who is going to front the bill for this? Well, if it’s a state run program then the citizens of Florida are going to pay. The citizens are also paying right into the pockets of the utility company owned by the FPL Group. The FPL Group has a three step plan for this carbon emission reduction escapade. First they are planning to spend 500 million dollars to develop 4.3 million Smart Meters so there customers can track their electricity usage each day online to help control their energy usage. To me this sounds absolutely ridiculous. Every month customers get a bill and are charged according to how much they use, how would knowing daily what your usage is differ from knowing monthly? If people were really interested in how much they used they could walk outside to the meter on the side of the house and take a look. But, these are my value judgments and I guess convenience isn’t worth 500 million dollars to me.
The second part of the plan is to start with a 10 megawatt solar plant and then increase it to 300 megawatts in Florida and another 200 megawatts somewhere else. To let everyone know solar energy is more expensive to produce per kilowatt than other energy producing sources already in place and requires of course, sunlight. ''As we all know, Florida is one of the sunniest places in America, but this is the sort of thing, if they can prove it works, it can be done in sunny places all over the world,'' Clinton said. ``If you mix it in to your overall power mix, the extra cost is not particularly great.'' On a side note, Clinton said “if they can prove it works”. What? They don’t know if it’s going to work? Looks like a huge gamble to me. Back to the issue, yes it will cost more and there are going to be in the end 500 megawatts available. This leads into the third phase of FPL Group’s master plan. Next year FPL is planning on selling Renewable-energy credits nationwide. Renewable-energy credits are credits that prove that energy bought was offset by renewable energy sources. People can now chose to buy electricity at a higher price and get the satisfaction of knowing that it was offset by renewable electricity and they are saving the world from impending doom at the same time! What a fantastic idea, until one comes back to reality. Why would anyone buy more expensive electricity? I had a hard time understanding this from the article so I looked up Renewable-energy credits and found out that in other states they have mandated some companies to have purchased so many of these Renewable-energy credits or they are fined. This is the transferable pollution credits in action just as a different flavor.
My main point of this whole thing is; I see a government subsidized monopoly rising to power. Here is my logic. First, the utility company is owned by the company FPL Group which is already a kind of monopoly second of which is being subsidized by part of the 2.4 billion dollar clean energy program. In perfect competition a company wouldn’t willingly spend $500 million to create convenient ways to help people reduce their consumption of the company’s product. A company in perfect competition that is going to sell a completely homogeneous product like electricity is not going to employ higher priced capital such as a solar plant. To put it plainly, I think this company is using its somewhat existing monopoly power as the utility company and a little natural monopoly (the sunny state of Florida) to gain more profit. They are having the tax payers pay for their solar power plant. Then the company is going to sell electricity at a higher price and get away with it because it is a government mandated product that other companies have to purchase. I think that there is a clear market failure being created by the government and it’s going to hurt the tax payers and the companies that are required to by the credits, but it will reduce carbon emissions and that’s what the legislation is trying to do.
Robbe Uhrhammer

1 comment:

Larry Eubanks said...

"I think that there is a clear market failure being created by the government. . ."

Looks to me like a clear inefficiency is being created by the government. So, let's call this a government failure, not a market failure.