1.  The President denied the Keystone XL pipeline to transport oil from Canada to be refined and used in the U.S.

The Obama Administration decided on January 18 that constructing the Keystone XL pipeline was not in the national interest of the United States. The proposed pipeline had the capacity to carry 700,000 barrels of oil to American refineries, as well as deliver 20,000 jobs to a depressed economy. Only in Washington D.C. would this project not be considered an economic miracle and a key part in securing our energy future.

2. The President’s policies have restricted access to domestic energy resources

Despite numerous discoveries of abundant natural resources, only 2 percent of offshore areas are currently leased for oil and natural gas production. That means 98 percent of energy-rich offshore federal lands remain restricted for exploration and development. Furthermore, despite the claims of the Obama administration and his surrogates that U.S. oil and gas production has gone up during his tenure, the reality is that oil and natural gas production on federal lands—for which he could justifiably claim some credit—has decreased by over 40 percent since 2000. Only on state and privately held lands is production increasing, and it is increasing on account of technologies like hydraulic fracturing that the Obama administration wants to restrict.

3. President Obama acknowledges that electricity prices will have to increase under his proposed policies and regulations

Referencing his proposed cap-and-trade energy tax, President Obama had a rare moment of political clarity when he said, “…if someone wants to build a coal plant, they can – it’s just that it will bankrupt them, because they are going to be charged a huge sum…” Unfortunately the President’s crusade against affordable energy didn’t end there.  IER recently noted that new EPA rules and regulations for power plants would shut down roughly 10 percent of our coal electricity production.   The 28 gigawatts of generating capacity that would go dark are the equivalent of shutting down every power plant in the state of Indiana or North Carolina, and, in the administration’s own words, would “necessarily” make our energy prices skyrocket.

The most troubling aspect of the energy debate is that President Obama and his administration are actively pursuing policies that make energy more expensive for consumers and businesses, while sending billions to failed businesses like Solyndra. Taxpayer funded renewable energy is a fantasy, but the pain at the pump is very real.

Bad News and Good News

The Monday after Beacon Power filed, The Hill carried the story:

A Massachusetts company that received a $43 million Energy Department loan guarantee last year filed for bankruptcy Sunday, a step certain to fuel criticism of federal green energy financing in the wake of the solar company Solyndra’s collapse.

Beacon Power Corp., which develops energy storage systems, filed for bankruptcy protection in the U.S. Bankruptcy Court in Delaware.

Beacon Power had received a federal loan guarantee to help build an energy storage plant in Stephentown, N.Y., that began operating in January. The Treasury Department’s Federal Financing Bank provided the loan.

Critics of the DOE loan program were quick to pounce:

“This latest failure is a sharp reminder that DOE has fallen well short of delivering the stimulus jobs that were promised, and now taxpayers find themselves millions of more dollars in the hole,” said Rep. Cliff Stearns (R-Fla.), the GOP’s point man on the Solyndra investigation and a senior member of the Energy and Commerce Committee, in a statement to The Hill and other outlets.

Naturally, the DOE rushed to do damage control, and reassure taxpayers that the government was looking out for them:

Energy Department spokesman Damien LaVera said there are “many protections for the taxpayer” in the agreement with Beacon Power.

“The Department’s loan guarantee is for the project Stephentown Regulation Services, LLC, not the parent company, and the loan was set up in a way that ensures the Department is not directly exposed to the liabilities of the parent company,” he said in an email Monday.

…

“It is important to note that this plant itself, which is operational and generating revenue, is a valuable collateral asset. In addition, under the terms of our loan guarantee agreement, Stephentown Regulation Services, LLC currently has cash reserves and proceeds from the plant that it was required to hold as collateral on the loan,” LaVera said. [Bold added.]

LaVera is right, it would be reassuring to taxpayers if the loan to the Stephentown project were completely separate from the bankrupt parent company, and if those cash reserves were still airtight collateral on the loan.

Unfortunately, those taxpayer protections evaporated a mere two days later at the bankruptcy hearing, as the WSJ reports:

A Massachusetts company that received a $39 million loan from the Department of Energy before declaring bankruptcy won interim approval Wednesday from a Delaware judge to use cash collateral for the loan to help pay operating expenses during its reorganization.

Judge Kevin Carey overruled an objection by the DOE in granting permission to Beacon Power Corp. to use some $3 million in cash collateral to keep its business going.

…

In response to Beacon’s request to use the cash collateral, the DOE asked for a breakdown of expenses related to the Stephentown facility. [Beacon attorney William] Baldiga said providing a breakdown is virtually impossible because the company is highly integrated.

“There are virtually no expenses that are paid at the Stephentown level,” said Baldiga. [Bold added.]

Oops. Taxpayers should at least be glad that their cash collateral was safe and sound for a full 48 hours after the DOE issued its statement.

Why Is Uncle Sam Investing in Flywheels?

Besides the comedy, the episode raises the more fundamental question: Why is the federal government providing loan guarantees to a company working on flywheels, anyway? Beacon’s website gives part of the story:

The world’s first 20 MW flywheel energy storage plant, designed, built and operated by Beacon Power in Stephentown, New York, reached full capacity on June 21, 2011. The plant operates continuously, storing and returning energy to the grid to provide approximately 10% of the state’s overall frequency regulation needs.

The reason the DOE is committed to spurring flywheel development is that solar and wind power are intermittent energy sources. In contrast to more conventional forms (such as fossil fuels, nuclear, and hydropower), solar and wind electrical generation do not provide a steady and reliable source of power. If such technologies are ever to serve more than a niche market, they will need to be supplemented with extensive storage capacity. As a 2008 Sandia National Laboratories report explained:

PV [Photovoltaic] systems are a small part of today’s electricity infrastructure and have little effect on the overall quality or reliability of grid power. Nevertheless, state and federal efforts are currently underway to greatly increase the penetration of PV systems on local and regional utility grids to achieve goals related to emissions reduction, energy independence, and improved infrastructure reliability. However, when PV penetration reaches sufficiently high levels (e.g., 5 to 20% of total generation), the intermittent nature of PV generation can begin to have noticeable, negative effects on the entire grid.

Figure 1 [listed in the report] illustrates the transient nature of PV generation as clouds pass over a typical residential system during the course of a day. Both the magnitude and the rate of the change in output are important: in mere seconds, the PV system can go from full output to zero (essentially), and back again. At high levels of PV penetration, this intermittency can wreak havoc on utility operations and on load-side equipment, due to fluctuations in grid voltage and power factor. Fluctuations at this scale simply cannot be allowed. [Page 10, bold added.]

The use of extensive storage (whether in batteries, flywheels, etc.) is thus necessary if the shares of solar and wind power are to significantly grow in the electrical mix. For this reason, the comparisons of generation costs among different technologies are often misleading, because solar and wind should carry the additional costs of storage technology.

These costs can be quite significant, depending on the storage technology. The Sandia report (page 22) shows that at least for residential and small commercial applications, storage costs (as of the 2008 report) ranged from $150/kWh for lead batteries, to $1,000/kWh for high-speed flywheels, and over $1,300/kWh for lithium ion batteries.

Conclusion

The bankruptcy of the second DOE-backed company in the renewable energy sector is yet another red flag that the government has no business running a bank (or hedge fund) with tax dollars. Government officials shouldn’t be picking specific winners and losers, even if one believes in the threat of climate change. The reason the private sector won’t fund these projects is that they are unprofitable, and that’s exactly why the government shouldn’t be backstopping them either.

Labor Day provides us with an opportunity to consider how much labor the use of energy saves us. After all, energy is defined as the capacity to do work. Work is labor, and the more tasks that inanimate energy can do via machines, the greater the reward for humans in productivity and leisure time.

For the vast majority of human history, our ability to do work was limited by our muscles or the muscles of animals. Only through the industrial revolution and the harnessing of massive amounts of energy are we able to enjoy the technologies and comforts of modern life.

In the past, to live a life of opulence, it took hundreds of people working to provide the kind of luxuries that we take for granted. For example, it took 498 people to prepare each meal for King Louis XIV at Versailles in 1700. Today, the typical supermarket has far more food choices than King Louis XIV imagined and he was King in the world’s richest city.[2] Today’s energy-powered transportation and communications options would also be were also unimaginable to the world’s richest people of the past and yet today even homeless people sometimes have cell phones.

To better appreciate how the use of energy saves human labor, some researched calculated how many humans it would take to generate the energy we consume on a daily basis. According to data from 2005, Jennifer Barker found that a fit person can average a sustained output of about one-tenth of a horsepower. This means that average American would have approximately 147 energy slaves working around the clock to generate the energy necessary for modern life.

Barker uses examples to illuminate our “unimaginable opulence”:

Now think about your energy slaves as you go about your day. Every time you leave a 75 Watt light bulb burning, one of these very strong energy slaves is pedaling away as hard as he can to keep it going for you. If that 25 mpg car has a 100 horsepower motor, it’s the equivalent of 1,000 strong people.

If you add up all the power we Americans use, on average, to light and heat our homes, transport us, etc. and convert it to the human energy equivalent, it’s an unimaginable opulence by the standards of all the humans who came before us. It is as if our well-being were measured by the number of energy slaves we have learned to command.

The transition from human power to animal power to machine power has made energy the master resource. “Energy will do anything that can be done in the world,” stated Johann Wolfgang von Goethe during the Industrial Revolution.[3] The labor-enhancing, labor-saving characteristic of energy-enabled machinery was described by Erich Zimmermann in the mid-twentieth century as follows:

The shift to machine power changed America from a rural agricultural nation to an industrial giant. It also made men’s lives easier and richer. In 1850, the average American worked seventy hours a week. Today he works forty-three. In 1850, our average American produced about 27 cents’ worth of goods in an hour. Today he produces about $1.40 worth in dollars of the same purchasing power.[4]

“By providing energy flows of high power density, fossil fuels and electricity made it possible to embark on a large-scale industrialization,” energy polymath Vaclav Smil more recently observed, “creating a predominantly urban civilization with unprecedented levels of economic growth reflected in better health, greater social opportunities, higher disposable incomes, expanded transportation and an overwhelming flow of information.”[5]

The benefits of modern energy contribute to days off to relax and celebrate and even permanent retirement from work. This Labor Day, we should take time to appreciate energy in its many manifestations.

Ironically, all of these public policy adventures have increased our dependence on foreign oil and increased the cost of energy.

Let’s try something new, Mr. President — let’s get the government out of the energy industry.