Awful Month for “Green” Stimulus

by William Yeatman on August 30, 2011

in Blog, Features

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Remember how the stimulus was pitched? In order to defibrillate job creation, the American Recovery and Reinvestment Act (ARRA) was supposed to inject almost $1 trillion of taxpayer money into the economy, in a manner that was “timely, targeted, and temporary.”

About a tenth of ARRA funds were given to creating so-called “green jobs,” and a spate of recent news stories suggest that these “clean energy” stimulus dollars have been a massive failure. Instead of “timely, targeted, and temporary,” these environmentalist earmarks are better described as “late, loose, and lasting.” Consider:

  • Last year, Seattle was awarded $20 million in stimulus funds to weatherize buildings. Seattle Mayor Mike McGinn promised that the money would improve energy efficiency in 200 buildings (in practice, this means calking and insulating), thereby creating 2,000 “green jobs.” This proved to be a gross overestimate. Two weeks ago, the Seattle Post-Intelligencer called the program a “bust.” The newspaper reported that a scant 14 jobs have been created, most of which were administration.
  • According to a recent New York Times article on the failure of President Barack Obama’s green jobs agenda, California has spent half of $186 million in stimulus money it received for weatherization programs. The money created a paltry 538 full time jobs, at a cost of almost $173,000 per job. What a crummy deal!
  • Then there’s Evergreen Solar, a solar-power components manufacturer. In April 2009, the White House issued a press-release stating that stimulus money* resulted in Evergreen Solar seeking to fill 90-100 jobs at a plant in Devens, Massachusetts. A year later, Evergreen Solar packed up its bags and moved operations to China. This month, it declared Chapter 11 bankruptcy.
  • In late July, the House Oversight and Investigations Subcommittee (of the Energy and Commerce Committee) took the extraordinary step of subpoenaing documents from the Office of Management and Budget pertaining to its involvement in a stimulus-funded $535 million loan guarantee to Solyndra, a California-based manufacturer of solar power rooftop systems. The Subcommittee was piqued by the seeming shady political connections behind the loan, and the subsequent financial troubles experienced by the company—it had to shutter a plant a year after the loan was guaranteed.

All in all, this has been a horrid month of news for the “green jobs” element of the ARRA. Why is the  green stimulus failing? For starters, politics too easily corrupts the process. Members of Congress are less concerned about the economic viability of the industries into which they invest taxpayer money, and much more concerned with getting pork to their districts. This was recently demonstrated by Minnesota Senator Al Franken. Civil servants, no matter how disinterested, know that their political overlords are watching their decisions carefully, so as to ensure that taxpayers give-aways reach their constituents. Of course, political expediency is a poor substitute for sound financial analysis.

Another major problem with the green stimulus is its impetus: spending lots of money fast. For example, in 2008, the Department of Energy’s weatherization program had a $227 million budget; in 2009, as a result of the stimulus, its budget exploded to $5 billion. On top of being inundated with taxpayer dollars, the Office of Energy Efficiency and Renewable Energy, which administers the weatherization program, was given a mandate to rush stimulus money out the door. I remember in late 2009, speaking with a knowledgeable colleague, who relayed word from his contact in the Department of Energy that staffers there were overwhelmed with the task of trying to spend the billions of dollars as quickly as possible. They must have felt like Monty Brewster! It stands to reason that rushed spending makes for a poor investment.

*As is explained in this excellent reporting by NewsBusters, it’s wholly unclear which stimulus funds were received by Evergreen Solar. The best guess seems to be that the company was the beneficiary of stimulus subsidies awarded through a $55 million block grant for energy efficiency given to Massachusetts.

American Patriot August 30, 2011 at 1:54 pm

It is an orgy out there; and it is us taxpayers who are getting screwed!

AnneinNYC August 31, 2011 at 1:05 pm

President Obama invested $173M in ARRA Stimulus funds in US Solar Industry in 2009.

In 2010, US Solar Industry named “fastest growing US industry” – 93,000 jobs created. Due to the successful Obama ARRA Stimulus Treasury Grant Program and Loan Guarantee Program made it easier for developers and manufacturers to finance facilities, the solar sector grew faster than ever before and generated $1 billion net export growth, adding 55,000 more jobs in 2011.

Solar Energy Trade Assessment 2011, a GTM Research Study:

Solar Industry & Jobs:
“The Treasury Grant Program (TGP) is one of the primary incentives from which solar developers benefitted in 2009 and 2010. The TGP allows the owner of a commercial solar project to receive a 30 percent grant in lieu of taking the solar Investment Tax Credit (ITC). Applicants are eligible for the grant only if they start construction on projects by Dec. 31, 2010 and complete construction by Dec. 31, 2016. The Solar Energy Industries Association (SEIA) has encouraged the White House and Congress to extend the TGP start date through Dec. 31, 2012, either as it currently exists or through a direct payment mechanism.

Rhone Resch, president and CEO of SEIA, said the TGP has garnered bipartisan support and that the administration has stated it is a top priority.

“I think there is broad recognition that this program has resulted in hundreds of thousands of jobs,” Resch said. “It’s probably the highest return on a dollar by dollar basis to the taxpayer of any of the provisions created in the stimulus bill.”

If someone is telling you that US green jobs are a non-starter, they’re either fibbing or in for a shock!

Maurizio Morabito September 1, 2011 at 7:15 pm

Solyndra’s gone too. How many high-profile Chapter 11’s will be needed before calling it a day?

Seamus Dubh September 1, 2011 at 9:57 pm

“$173,000 per job.”
Now that’s a job I wouldn’t mind being hired for.

Scot September 6, 2011 at 8:49 pm

AnneinNYC: I read your post and the associated links you gave with some interest. Partly because it appeared that there were contradictory quotes in your post, I wanted to read the actual context and see if I misunderstood something.

The qoutes that concerned me were this:

In 2010, US Solar Industry named “fastest growing US industry” – 93,000 jobs created

Followed somewhat later by this:

“I think there is broad recognition that this program has resulted in hundreds of thousands of jobs,” Resch said.

Now you must admit that at first glance that seems like odd math, 93,000 is most certainly not “hundreds of thousands”.

In context I began to understand this better. THe links you provided are very optimistic about jobs growth though most of the focus in the various articles are Canadian jobs. Specfic information about US jobs included the following information,

In 2010, there were about 93,000 jobs in the Solar Industry which was a 100% increase from the previous year. This means that there were actually only about 46,500 jobs actually added.

In the large scheme of things that is not a very high number and certainly moves even further from the claim of “hundreds of thousands of jobs”.

The articles then go on to promote their very positive outlook by referencing some of the projects which this article, that we are both commenting on,verifies have failed or fallen prey to partisan political corruption.

While any growth in industry is certainly desirable in our current economic situation, it is still wise to be cautious that this evolving industry in particular is very expensive, for those who don’t have jobs to pay for it in the first place. And it certainly doesn’t bode well to get further stimulus money. Rather it should grow as it becomes economically feasible to do so.

I think it is admirable to try to maintain a positive view in the hopes of job creation. I also think investment in the solar industry is a positive way to grow as a nation. But I believe the article is urging caution because of economic viability.

I don’t believe it is either deceitful or naive to point out the failed episodes that are referenced here.

But thank you for trying to maintain a sense of hope maybe the solar industry can right itself.

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