December 1, 2011

A Broader Focus on Renewable Energy

Print More

Another day of thanks now lives on within our memories, and so the holiday season shall unwrap. Last week was Black Friday, and malls were bustling with shoppers who could finally execute their keen strategies and capture tremendous bargains, which satisfied their deal-craving appetites until the sales of post-New Year’s bristle. Some shopping aficionados have strategized better than others, deploying plans similar to military combat units by coordinating teams across multiple venues. The outside commentators could perhaps identify similarities between us Main Street consumers who seek holiday bargains and those politically influential few who otherwise serve as the targets of Occupy Wall Street protesters. Every consumer and investment banker similarly enjoys uncovering a “good bargain.”Although numerous scholars have labeled the United States as a nation of consumers, perhaps the United States is really a nation of value optimizers. Present historians describe the pilgrims of the first Thanksgiving as pioneers for optimizing their resources. Perhaps future historians will recognize this generation as pioneers for optimizing our land, technological and financial resources in order to cultivate energy security.Although the American public undoubtedly consists of intelligent consumers who execute patience and strategy in procuring gratifying deals, our federal officials may lack — at least according to New York Times writers Eric Lipton and Clifford Krauss — the caution of their constituents when funneling tax expenditures to energy infrastructure projects. Lipton and Krauss’s article, “A Gold Rush of Subsidies in Clean Energy Search,” which suggests that the multinational financial firms control the operations of the government, has likely fueled Occupy Wall Street protesters’ attacks on our nation’s political integrity. Evidently Goldman Sachs and Morgan Stanley have uncovered near-riskless profits as a result of American Recovery and Reinvestment Act initiatives, which support the development of renewable energy technology.   In this era of general political distrust and with specific allegations suggesting that the Obama Administration has demonstrated bias in its selection of green energy loan recipients, constituents have questioned the decisions of their leaders. However, the voting public must not lose sight of the fact that the renewables market is in its infancy. In spite of Lipton and Krauss’s insinuations that Wall Street is celebrating near-term economic windfalls from its energy infrastructure investments, future financing for renewable energy projects should yield more risk and lower returns as the renewables market becomes more saturated. Companies such as NRG Energy, which Lipton and Krauss profiled, are likely enjoying what economists would identify as a first-mover advantage, thus explaining their substantial capital inflows from Wall Street. Earlier web-based companies garnered larger profit margins than later entrants into the developing Internet market, and renewable energy suppliers who capitalize early on the recently adopted federal support programs should inevitably enjoy more pronounced profit margins than later market entrants.  Our federal leadership likely envisioned that earlier companies within the developing renewable energy marketplace would relish relatively riskless profits. The profiteering wind energy pioneers have likely obtained optimal geographical spaces, which may include inexpensive lands that receive high solar radiation incidences and retain close proximity to end users. However, federal leaders probably did not aim to advantage the financial statements of these first-movers when they promoted the ARRA initiatives. Instead, they had likely targeted later market entrants who would not only lack riskless profit forecasts and Wall Street backing but also could improve our energy infrastructure. Later market entrants may generate little or no profits without the ARRA incentives, but without their energy supplies our energy security may remain imperiled.To the improbable but possible extent that future market entrants will ceaselessly derive economic windfalls as a result of the existing federal support regime, the value optimizing public may solicit backstop recourse from their state and local leadership. For example, state and local action governs such areas as energy infrastructure siting and intrastate retail energy pricing.  Because state and local leaders determine how to optimally incorporate renewable energy projects into their communities, their decisions may generate national implications.  Local authorities site new energy facilities, and their constituents can always voice concerns at administrative hearings. The electorate can select the kinds of energy projects that best fit their communities’ needs, and then through their local authorities supporters may decide how to attract such projects and where to site them.  Moreover, state policymakers enacted renewable energy portfolio standards, which mandated electric utilities to provide specified amounts of electricity from renewable energy sources and collectively served as one impetus behind the promotion of federal support programs. Some commentators have suggested that these RPS mandates may escalate electricity prices like the ethanol blending mandates, which may have distorted gasoline prices. In any event, the public must refrain from discounting the broader political effect of the well-meaning RPS mandates, which motivated some federal policymakers to promote the ARRA initiatives.  With much joy and happiness the holiday season also delivers harsher temperatures and higher heating bills. In any event, the American people entrust their political leaders with the onerous tasks of deploying our land, technological and financial resources in hopes of eventually stabilizing energy markets. Federal policies have attempted to establish a floor from which renewable energy markets may develop, and the actions of state and local government leaders may creatively harmonize local community needs with the developing energy infrastructure. By narrowly focusing the lens on the flow of funds from Wall Street to the campaigns of our federal leaders, one may overlook opportunities to participate at the state and local levels of government, where the voice of the people can strongly emanate.

Adam Garnica is pursuing joint Cornell graduate degrees in Law and Biological and Environmental Engineering. He may be reached at [email protected]. Adam dedicates this article to his parents in California whom he credits for his balanced views. Barely Legal appears alternate Fridays this semester.

Original Author: Adam Garnica