Solar energy does not shine despite Spain investment

NY Times:

Two years ago, this gritty mining city hosted a brief 21st-century gold rush. Long famous for coal, Puertollano discovered another energy source it had overlooked: the relentless, scorching sun.

Armed with generous incentives from the Spanish government to jump-start a national solar energy industry, the city set out to replace its failing coal economy by attracting solar companies, with a campaign slogan: “The Sun Moves Us.”

Soon, Puertollano, home to the Museum of the Mining Industry, had two enormous solar power plants, factories making solar panels and silicon wafers, and clean energy research institutes. Half the solar power installed globally in 2008 was installed in Spain.

Farmers sold land for solar plants. Boutiques opened. And people from all over the world, seeing business opportunities, moved to the city, which had suffered from 20 percent unemployment and a population exodus.

But as low-quality, poorly designed solar plants sprang up on Spain’s plateaus, Spanish officials came to realize that they would have to subsidize many of them indefinitely, and that the industry they had created might never produce efficient green energy on its own.

In September the government abruptly changed course, cutting payments and capping solar construction. Puertollano’s brief boom turned bust. Factories and stores shut, thousands of workers lost jobs, foreign companies and banks abandoned contracts that had already been negotiated.

...

Puertollano’s wrenching fall points to the delicate policy calculations needed to stimulate nascent solar industries and create green jobs, and might serve as a cautionary tale for the United States, where a similar exercise is now under way.

For now, electricity generation from the sun’s rays needs to be subsidized because it requires the purchase of new equipment and investment in evolving technologies. But costs are rapidly dropping. And regulators are still learning how to structure stimulus payments so that they yield a stable green industry that supports itself, rather than just costly energy and an economic flash in the pan like Spain’s.

...

Were it not for price fixing, there would be a very limited market for solar energy despite the new efficiencies. The calculation is really pretty simple. How long does it take to recover the cost of installation compared to what you pay for traditional energy. Unfortunately, in most cases the payback is longer than the life of the equipment. Even with the subsidies the pay back does not offer a reasonable return on the investment for most people.

Spain's goofy socialist government rigged the market to try to get around these realities and wound up spending itself broke for some very inefficient energy. What they found was that throwing money at so called green jobs was a real loser.

Obama seems determined to repeat that mistake while his administration is at the same time strangling domestic energy production of oil and gas. This want mean we will use less oil and gas, it just means we will have to get from sources outside the US driving up our negative balance of trade. It also means we will likely pay a higher price for oil and gas while subsidizing inefficient solar and wind projects.

It would be wiser to let the market set the price for all these energy resources. The solar energy business that survived would be more efficient and more competitive with more traditional energy resources. Price fixing is illegal if the private sector did it. There is a reason for that which goes beyond illegitimate profits. The guy with the best product or service at the best price does not get the business and has less reason to become more efficient.