A closer look at Obama’s “$90 billion for green jobs”

October 4, 2012

At last night's presidential debate, Mitt Romney criticized the Obama administration for putting "$90 billion into green jobs," saying the money could have been spent instead on things like teachers. Romney also claimed that half the companies funded by these energy programs have "gone out of business" — an untrue statement that was quickly rebutted by fact-checkers. (The real figure so far is less than 1 percent.)

(Reed Saxon/Associated Press)

But it's worth stepping back from Romney's specific remarks and looking at President Obama's clean-energy track record more broadly. What sorts of green jobs programs has the Obama administration spent $90 billion on? Where does it all go? How much of the funds have been wasted? And what are we actually getting in return for all this cash?

1) The stimulus provided some $90 billion in financing for a wide array of clean energy programs. Here’s the breakdown: There's $29 billion for improving energy efficiency, including home retrofits; $21 billion in incentives for renewable generation, such as solar and wind; $10 billion for modernizing the electric grid; $6 billion to promote advanced vehicles and a domestic battery industry; $18 billion for high-speed rail and other trains; $3 billion for research into carbon capture for coal plants; $3 billion for job training; and $3 billion for clean manufacturing tax credits.

A few caveats. Not all of these programs are strictly Obama programs. Some of them were signed into law by President Bush, but didn't get funding until the stimulus was enacted. An example is ARPA-E, which conducts research into long-shot energy technologies and was first created in 2007. What's more, some programs involve loans or loan guarantees, which means the money will be repaid so long as the companies survive.

2) The vast majority of these projects are still up and running, though there have been a few notable failures. It is not even close to true that "half" of the energy companies funded by the stimulus have "gone out of business," as Romney said. Many of the programs, such as the tax credits and grants for wind and solar production, only pay out when the turbines and solar panels churn out electricity.

Romney's campaign later clarified that he was solely referring to the Energy Department's 1705 loan program, which provides about $16.1 billion to clean-energy companies. Yet of the 33 companies that have received loan guarantees, just three are in bankruptcy—including Solyndra, which could cost the government up to $535 million. (The other two firms are Abound Solar and Beacon Power, which is still operating and has largely repaid its federal loan.) Additional companies could eventually fail, but for now, the default rate is just 2.6 percent for one program in the stimulus.

It's worth noting that Congress created the 1705 loan program with the expectation that some companies would fail. The government was supposed to take risks. And, as energy analyst Gregory Kats has testified (pdf), the loan program's final cost will likely end up well below the $2.47 billion Congress set aside to cover losses.

3) The stimulus appears to have boosted U.S. wind and solar generation. Here's Mike Grunwald with a top-line summary: "Before President Obama took office, the U.S. had 25 gigawatts of wind power, and the government’s 'base case' energy forecast expected 40 GW by 2030. Well, it’s not quite 2030 yet, but we’ve already got 50 GW of wind. We’ve also got about 5 GW of solar, which isn’t much but is over six times as much as we had before Obama."

Costs are dropping, too. The price of photovoltaic systems has fallen in half, from $7.20 per watt in 2007 to $3.47 per watt in 2011, although solar is still more expensive than conventional electricity. And the cost of new wind turbines fell 27 percent from 2008 to 2011. It's difficult, however, to sort out how much of the decline was due to the stimulus and how much due to China's massive foray into wind and solar manufacturing.

Let's also put these advances in perspective: Solar and wind still generate a small fraction of U.S. electricity—just 3 percent in 2011. And it's not clear that either industry can maintain its rapid growth without further subsidies. For instance, a key tax credit for wind generation is set to sunset at the end of this year, which would slow down turbine construction dramatically, especially since wind has to compete against cheap natural gas.

4) Other green programs in the stimulus have a murkier track record, though it could take years to see results. The Obama administration spent $2.4 billion to create a new battery industry in the United States, yet many of those factories are now running idle, thanks to weak demand for electric cars. A modern "smart grid" could one day enable the country to juggle intermittent power from solar and wind, but the technologies have been slow to gain a foothold. Likewise, the federal government is chipping in $3.2 billion for high-speed passenger rail between San Francisco and Los Angeles—but it's uncertain if the line will ever get finished.

Advocates of the energy programs argue that it will take time for some investments to pan out. Electric cars, for instance, could eventually catch on. And ARPA-E is bankrolling research into novel ideas like laser drilling for geothermal energy and advanced lithium-ion batteries. Will these inventions transform the energy industry? It may take years to find out.

Other stimulus efforts are showing signs of progress after early missteps. Back in 2009, the $5 billion home weatherization program looked like an outright disaster; in Delaware, state officials were grappling with contractors doing "shoddy, unnecessarily expensive work." Since then, however, the Energy Department has managed to weatherize one million homes, saving consumers an estimated average of $400 per year on energy bills.

5) Clean energy has received the vast bulk of government since 2009, but it hasn't always been this way. Ever since the first tariffs to protect Pennsylvania coal in the late 1700s, the U.S. government has always nurtured new energy sources. And, over the decades, fossil fuels and nuclear power have received the bulk of that support, as a report last year from the venture-capital firm DBL investors showed.

The report’s authors, Nancy Pfund and Ben Healey, looked at subsidies given to different forms of energy in their first 15 years of existence. Back in the 1950s, nuclear power received support worth $3.3 billion per year in today’s dollars — or a full 1 percent of the federal budget — for its first 15 years. Oil and gas got an average of $1.8 billion, or 0.5 percent of the budget in its early days. And solar and wind? Their support averaged less than $0.4 billion from 1994 and 2009:

Technologies like solar, wind and geothermal have now received an infusion of about $21 billion from the stimulus — which, if spread out over 15 years, means that renewables are still getting less support in absolute terms than oil, gas, and nuclear did in their first two decades. What's more, the authors noted, support for renewable energy tends to be temporary and erratic, whereas government support for fossil fuels and nuclear has been steadier over time. (Oil and gas companies continue to receive a number of tax breaks worth about $2.8 billion per year, such as the percentage depletion allowance.)

A raw subsidy count, however, can be misleading. Government support for energy can manifest itself in all sorts of ways. Take the drilling technique known as "fracking," which has led to a recent surge in U.S. oil and gas production from shale rock. That was developed by private industry with vital aid from the federal government, which contributed research, key pilot projects, and mapping assistance. Fracking took 25 years to develop and fine-tune, a product of a number of programs and collaborations—a reminder that energy technology rarely develops in a straightforward, predictable fashion.

Further reading:

— The stimulus isn't all that Obama has done on energy. He has also ratcheted up fuel-economy standards for automobiles to 54 miles per gallon by 2025 and enacted a number of EPA regulations on carbon and mercury that will likely hamper coal plants.

— Here's a look at Romney's plan for North American oil independence by 2020. Also note that Romney supports ARPA-E, the $400 million program for long-shot energy research.

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Suzy Khimm · October 4, 2012