Everyone who cares to inform themselves (in other words everyone but progressive statists) knows that green economy, far from being an economic boom as the left trumpets, has been a bust where and whenever it has been tried - primarily in Europe, but not surprisingly, in the U.S. also. Afterall, the very reason that there are any ongoing, purely politically driven, green policy initiatives at all is none other than tax payers subsidizing these initiatives, none of which has been able to prove themselves economically viable. The following is just another cautionary tale in the long list of failures from Spain to the U.S.
At the heart of the U.S. "green energy" agenda is the expansion of windmill farms, at taxpayer expense, all across the United States. Everyone from well-known billionaires such as T. Boone Pickens to newcomers such as Tom Carnahan of the famous Carnahan family in Missouri and founder of Wind Capital Group, a Missouri-based wind farm development company, have clamored for taxpayer dollars to heavily subsidize this unprofitable industry.
Typically, a new business venture requires a certain period of time to transition in to profitability. Again typically, this period is financed by the founders' own equity or some type of debt, but not taxpayer subsidies.
Windmillers like Tom Carnahan have eliminated the owner's equity problem in Missouri, and in some other states, by compelling their unwilling utility customers to buy the electricity produced when the wind blows. With ingenious forethought and lots of propaganda about how burning carbon and producing carbon dioxide as a byproduct threatens humanity's future on earth, they tricked the voters of Missouri in a deceptive ballot initiative in 2008. The result was a statutory mandate requiring all state-based electrical utilities to buy a certain percentage of windmill electricity by a date certain. Thus, they created a monopoly for themselves by requiring a state's resident utilities to purchase their wind power forever.
This solves so many problems for the windmill entrepreneur that you just will not believe it. And without their absolutely reliable and creditworthy utility customers, the "equity" requirement for a windmill farm would have been huge. For example, to build 100 windmills reaching 400 feet into the sky requires on average $3.0 million for each windmill. Completing the example project would therefore have a total cost of $300 million.
All windmills have to be up and running at about the same time to provide your unwilling utility customer at least a critical mass of electricity when the wind blows. Therefore, the total investment has to be made in a compressed period of time.
But there is no real customer base for wind-generated electricity because the supply is as random as when the wind blows. Electric utilities prosper because they always provide the power you need when you need it. You could just say that no big wind farm would ever be built if it was not required by government regulation and paid for by utilities who are required to buy it by government regulation.
Without compelling utilities to buy "windpower," the equity requirement for a wind farm is almost infinite, because you would lose money forever. They would never be built. On the other hand, if your revenue stream is established by a state statute requiring relevant utilities to purchase 20% of their electricity from wind farms, the equity requirement is substantially reduced.
In addition to forcing utility customers in Missouri to buy their product, Windmillers, including Tom Carnahan, received a substantial taxpayer investment in their wind farm projects through the failed Stimulus Bill of 2009. Make that more than 200 wind farm projects!
Between "getting their confidence" to proceed just after the Stimulus Bill was signed into law in February 2009 and generating power in May of 2010, a whole lot of things had to happen very quickly. To have committed to all the long lead-time items like design, planning, and ordering a hundred windmills to specification would have been extremely dangerous without all the necessary financing in place. It would have been a great advantage if Wind Capital Group knew that their money was one of the two hundred payments in the Stimulus Bill long before it was signed. Did they? Remember, the American people and their representatives had no time to ever read the Stimulus Bill. The Obama administration ostensibly had to rush it through to save our economy.
And on 10/26/2009, Wind Capital Group announced in a press release that "[a] group of international leaders in project finance lending is providing $240 million in debt facilities to support the construction and operation of the project."
Here are more reasons the Obama administration needed to create a frantic haste in passing this bill:
Critics of the Lost Creek funding have seized on the design of the payment. Rather than giving the credits after the companies file tax returns, the stimulus legislation provides for upfront payments equivalent to 30 percent of the cost of the project. ...
The upfront payments to Lost Creek, a $300 million plus project ... aren't awarded competitively but on the basis of meeting various criteria. For instance, companies were required to submit accredited designs and start building by the end of the year (2010) Energy Department official described the process as automatic; the Treasury Department is required to issue payments to those who qualify within 60 days of Application.
For those of you who have been involved in "market-based" business starts, can you imagine anyone, much less the federal government, rushing to give you a financing payment of any amount, much less $107,000,000? This is the amount of money the Carnahans' Lost Creek project received from the taxpayers under the Stimulus Bill. After it, their capital structure would be $300 million minus $107 million, resulting in a net debt of $193 million in debt and $107 million in equity.
This was really a gift. Or was it instead a giant political payoff from a corrupt government to one of its favorite clans of Democratic politicians?
If you live in Missouri, remember that every time you turn on your lights, you are being forced to guarantee the success in perpetuity of the Carnahans' Lost Creek Wind Farm. This is what green jobs are all about! Yes, profit may be damned when payoffs, a $107-million gift, and state-required revenue streams from the taxpayers are available.
Hat Tip: Fred Sauer