Michael Eckhart, President of the American Council of Renewable Energy (ACORE), visited with Bill Loveless on Platts Energy Week on December 19, 2010. He was invited to lay out his industry’s proposal to change electric power grid rules to favor power plants that are a hybrid of unreliable, weather dependent energy sources like wind and solar along with “dispatchable” natural gas fired power.
Aside: I put dispatchable in quotes because Ekhart talked about combined cycle gas turbine power plants as being his preferred partner in this endeavor; from an engineering point of view, those plants are not much easier to vary up and down than large supercritical coal fired steam plants or very large light water reactors. The kind of gas plants that are most often used to balance highly variable power sources are fairly small, simple cycle, relatively inefficient gas burners. The Electric Power Research Institute is working on ways to change that technology limitation, but they have a long way to go before plants that are optimized for high efficiency can be used as load balancers for unreliable power sources.End Aside.
When you watch this interview, pay close attention to Eckhart’s description of the competition between various sources of electrical power and to the partners (natural gas industry, banks, etc.) that benefit from his vision. Then take a hard look at the gift from taxpayers that helps to make it all possible – the section 1603 cash grant program that provides developers of politically correct “renewable” energy systems a direct payment of 30% of their project cost as a grant from the federal treasury.
Aside: Regular readers of Atomic Insights might recall Michael Eckhart as the man who rudely grabbed the microphone at a conference in August 2010 to declare that nuclear energy, even if it is based on converting what is now considered to be waste into useful fuel, could never be called “renewable”. End Aside.
In the last minute rush to pass a stimulating tax bill before the holiday break, the renewable energy and natural gas coalition was able to convince lame duck legislators to include a one year extension of the amazingly generous 30%-of-project-cost cash gift that helps to build wealth (Eckhart’s word) for renewable energy entrepreneurs who are backed by venture capital. In just the past two years, that program has cost taxpayers $5.5 billion, enough to pay 100,000 people $55,000 for a year.
In addition to that more visible expenditure of funds, the recently signed bill allows renewable projects to expense the entire capital cost of their project as a tax write off. Amazingly enough, the amount of that write off includes half of the amount of the cash grant.
Suppose a project costs $1 billion. The developer gets a check from taxpayers for $300 million. Taxpayers also pay for any credit subsidy cost associated with a guaranteed government loan. The developer can then take a deduction of $850 million in the first year of operation. At current corporate tax rates, that deduction is worth another $330 million.
No wonder renewable project developers do not really care that their projects do not generate much electricity that can be sold for a profit. No wonder there are some temporary jobs associated with the renewable energy industry that will disappear as soon as the payments disappear – as they inevitably will. No wonder there is a reluctance on the part of nuclear project developers to pay credit subsidy costs that approach one billion dollars for a single reactor project that does not qualify for any of the renewable energy gifts and that will not be able to benefit from the expensing provision because they still have several years worth of licensing activities to complete before they can begin purchasing equipment.
Since the tax and grant favored renewable energy systems will only operate for about 20-40% of the time and that operation cannot be scheduled to coincide with peaks in demand, no wonder the natural gas industry was more than happy to help apply the necessary political pressure.
I hope you can understand why I am so livid and staying up late at night again. I think that people like Eckhart are the real problem in America today – rich and politically powerful people who are becoming even more wealthy by flimflamming the American taxpayers.