By Ross Kaminsky on 4.18.12 @ 6:09AM
"Renewable" energy subsidies have become an unaffordable feel-good luxury.
First Solar Corporation was indeed first at something: It was the first solar company to lose more than $15 billion of market value. FSLR's stock plummeted from $140 per share a year ago, and $170 a few weeks before that, to under $21 per share early this week before rebounding modestly on Tuesday. In fact, $15 billion substantially understates the peak-to-trough drop in the company's value, as the stock traded above $250 per share for most of 2008, briefly peaking over $300. As of Tuesday, the company's value was just under $2 billion; at its all-time high stock price, that number was over $25 billion.
In a press release on Tuesday morning, the company announced that a massive decline in its business, especially its European business, will cause it to record about $300 million in restructuring charges while firing 2,000 employees, about 30 percent of its total work force. This is due primarily to Germany's recently cutting its solar subsidies, following a similar move in Spain.
According to the company's Chairman, Mike Ahearn: "After a thorough analysis, it is clear the European market has deteriorated to the extent that our operations there are no longer economically sustainable, and maintaining those operations is not in the best long-term interest of our stakeholders."
Further: "The solar market has fundamentally changed, and we are quickly adapting our market approach and operations to maintain and build upon our competitive advantage," said Ahearn. "After a period of robust growth, First Solar is scaled to operate at higher volumes than currently exist following the reduction of subsidies in key legacy markets. As a result, it is essential that we reduce production and decrease expenses to reflect the smaller volume of high-probability demand we forecast."
As usual, one has to wonder about certain stock analysts, with one firm reiterating a buy (how much has that cost the firm's clients so far?) and Goldman Sachs cutting from buy to hold (in a business where "better late than never" is not a wise approach). Amusingly, the Goldman analyst's cut preceded the stock's biggest percentage gain in months, as "short covering" and a sigh of relief that the company is at least recognizing that its business is a shadow of its former self brought buyers into the game. (Fully one third of the company's "float," the number of shares issued and available to trade, has been sold short, representing bets on the stock price falling.)
As worldwide government balance sheets have worsened in recent years, "renewable" energy subsidies became an unaffordable feel-good luxury. Particularly in the U.S., with our massive natural gas supplies, it is unlikely that solar power could ever be a competitive electricity source in terms of cost per kilowatt-hour without even larger subsidies than we have already seen -- and which are not likely to be tolerated by voters in this time of Solyndra and trillion dollar deficits.
There are physical limits to improvements in solar technology so that Moore's Law, which has described improvements in computer technology (or more specifically transistor density) over recent decades, does not apply despite the use of silicon in both. Gains in solar efficiency, both in how well panels work and how much it costs to make them, are limited by laws of physics, at least with all current solar technology. In other words, most of the gains in the price of solar electricity generation have already been achieved, and the industry still cannot compete without subsidies.
Most Americans probably know that "renewable" energy sources receive handouts of taxpayer money. These are true subsidies, not the common tax deductions used by oil companies, along with many other companies, which the left terms "subsidies." But do we understand the scale of these numbers and how fast they have been growing?
According to the Institute for Energy Research, subsidies for renewable energy (related to electricity generation) jumped 186 percent during the three year period from FY 2007 to FY 2010. Wind was the dollar leader in terms of picking taxpayers' pockets, going from $476 million in 2007 to $5 billion in 2010, making it the largest energy subsidy recipient. (Nuclear power came in second, at half the level of wind, and coal came in third, at less than one quarter the level of wind.) Solar, in fourth place in absolute dollar subsidies, made a very large percentage jump as well, going from $179 million to $1.1 billion over that same time frame.
The above data only include federal subsidies, however. Solar power receives state and local subsidies, including from utilities which pass those costs along to ratepayers, far more than other sources of power. In fact, there is a whole database of "State Incentives for Renewable and Efficiency," where you can find your particular state's waste of money on the solar swindle.
What really demands examination, however, is the subsidy per amount of electricity produced, and by that measure solar is the undisputed champion. Consider the top four recipients of subsidy dollars: wind, nuclear, coal, and solar: Coal's subsidy equates to 64 cents per megawatt hour and nuclear comes in at just over $3. Wind subsidies cost a shocking $56 per megawatt hour. But even that is a tremendous bargain when compared to solar which -- and again this is only the federal subsidies -- costs taxpayers $775 per megawatt hour. (What wind lacks in apparent costs, it makes up for in slaughter of birds, showing the true hypocrisy of so-called "environmentalists.")
A 2010 study by the Commonwealth Foundation of electricity costs in Pennsylvania showed that in 2009, electricity generated by wind cost 150 percent of the average electricity cost in the state while solar-generated electricity cost an incredible 706 percent of the average. Furthermore, while natural gas and oil prices declined from the prior two years, solar and wind power costs jumped 65 percent and 92 percent, respectively.
Another IER analysis determined that states which require a certain percentage of their electricity production to come from renewable sources have electricity prices "nearly 40 percent higher than states that do not have similar mandates."
Natural gas is more difficult to export than oil or coal because it has to be compressed or liquefied before it is shipped. But at a 13-year low price of $2 per million BTUs, the cost is so low that more international trade in natural gas will become economical, putting even more pressure on solar and wind power and highlighting the absurdity of subsidies, even without travesties like Solyndra.
Highlighting this near-revolution in energy markets, Cheniere Energy announced on Tuesday that the Federal Energy Regulatory Commission (FERC) has approved its Sabine Pass liquid natural gas (LNG) terminal in Louisiana, making it the nation's first approved large exporter of natural gas. Two other companies, Sempra Energy and Energy Transfer Equity, also aim to build export facilities in Louisiana. Sempra announced on Tuesday that it will spend $6 billion on its liquefied natural gas (LNG) export terminal, which will be able to export 1.7 billion cubic feet of LNG per day beginning in late 2016.
Tuesday was a dark day for solar power, though a day that was obviously on the horizon. At least it would have been obvious to anyone willing to admit that solar (and wind) has only gotten as far as it has due to massive subsidies implemented by government members of the Cult of Global Warming, also known as the Algore Enrichment Society.
Unsurprisingly, some of the most committed, unquestioning (two of the several traits of cult members) followers of the Cult such as the Sierra Club -- a group with enough political clout, along with its co-religionists, to convince Barack Obama to block the Keystone XL pipeline -- are already opposing LNG exports. (According to energy author Robert Bryce, the amount of energy that the pipeline would transport in any given time frame would exceed the total energy produced by all solar panels and all wind turbines in America, combined. So much for an "all of the above" energy strategy.)
Like Energy Secretary Steven "I don't drive a car" Chu, these are people for whom adherence to the Cult trumps the ability of ordinary Americans to affordably cook their food, turn on their lights, or heat their homes. This comes from the top, of course, as Barack Obama has made no secret of his desire to make electricity prices "necessarily skyrocket." If that is your goal, requiring solar power to be an important part of the national energy mix is a great start.
Staying in the realm of economic know-nothings, House Resources Committee Ranking Member Edward Markey (D-MA), with unfortunate moral support from T. Boone Pickens, says that we should not export natural gas because it might increase prices here. They ignore that foreign substitution of natural gas to replace oil or coal for electricity generation will lower the prices of those other commodities, as well as lower the atmospheric carbon dioxide (aka "plant food") concentrations that seem to concern them so greatly. They also ignore that even if natural gas prices doubled from here, it would still be a cheap form of energy, especially compared to the cult objects of solar panels and "bird blender" wind turbines.
First Solar's troubles remind us of Herbert (father of AmSpec's own Ben) Stein's wisdom that "If something cannot go on forever, it will stop." When it comes to subsidizing renewable energy, we are now witnessing the realization -- including remarkably by European governments -- that the subsidy insanity cannot go on forever.
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To read another article by Ross Kaminsky, click here.
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