Friday, October 7, 2011

Wasted Money

The so-called 'Solargate' scandal in the US with the loss of 500 million dollars in government grants to a bankrupt company has obscured the fact that energy is going to cost more as the return on investment continues to shrink. There is, to coin a phrase, no alternative to alternatives. Alfred Collins on zero hedge figures bank bail out money could have been better spent.

This Bloomberg article about German utilities giving away power got me thinking what our world would look like if the trillions in bailout money had instead been spent to build alternative energy infrastructure.

From Bloomberg:

“The 15 mile-per-hour winds that buffeted northern Germany on July 24 caused the nation’s 21,600 windmills to generate so much power that utilities such as EON AG and RWE AG (RWE) had to pay consumers to take it off the grid.”

“You’re looking at a future where on a sunny day in Germany , you’ll have negative prices,” Bloomberg New Energy Finance chief solar analyst Jenny Chase said about power rates in wholesale trading. “And a lot of the other markets are heading the same way.” source link

I will use only simple round numbers and calculations to make my point.

Let’s say the bailout money (remember, we have not finished bailing yet) is about $20T, and alternative energy infrastructure costs $10 per watt (it has been getting cheaper recently). That represents potentially 2TW (TerraWatts) peak of electrical energy generation capacity.

Building an infrastructure this large would provide employment for millions of people for several decades. Again, using very rough numbers, this would provide employment for perhaps as many as 20 million people for twenty years.

Don’t get me wrong; I am not saying I support the government imposing taxes on us to pay for this.
I am just expressing the cost of the bailout in terms of jobs and the amount of energy infrastructure this amount of spending (preferably by private sector enterprise) would provide. Consider this as the lost opportunity cost of the bailout.

Which would you rather have done with the bailout money: 1) propped up zombie banks for three years, or 2) provide 2 TerraWatts peak electrical generation capacity and employment for 20 million people for 20 years?

This is the lost opportunity cost of the bailouts.

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