Congress might unrenew crony capitalism

April 6, 2012

By Chriss Street

Life is getting more difficult for crony capitalists. President Obama and a bipartisan group of senators was unable convince their pals in Congress to extend ludicrously large subsidies for supposed renewable energy projects under the deceptive label, “The American Energy and Job Promotion Act.”  The senators included Mark Udall, D-Colo Michael Bennet, D-Colo.; Chuck Grassley, R-Iowa; Scott Brown, R-Mass.; and Dean Heller, R-Nev.

The short delay was too much for the largest potential beneficiary of the legislation, as the Blythe Solar Power Project in the Southern California desert filed for bankruptcy.  But it seems that the American taxpayer may have dodged a big bullet since Blythe Power had been approved since April 2011 for a $2.1 billion loan guarantee from the U.S. Department of Energy.  Creditors gasped when bankruptcy papers disclosed that Blythe’s parent company, Solar Millennium, estimated they only have $10 million in assets, and already had between $50 million and $100 million in liabilities.
California is no stranger to renewable energy boondoggles.  Zond Energy was founded in 1980  as America’s first wind-energy company.  Powered by tax credits, Zond promoters raise lots of money from tax shelter-investors and placed hundreds of non-functioning windmills on pristine mountains in Northern California.  When the company filed for bankruptcy in January 1997, Ken Lay as CEO of the infamous Enron Corporation acquired Zond.

Enron then lobbied the state of Texas to enact a broad electricity restructuring bill with a “renewable portfolio standard” that mandated private electric utilities buy a minimum 2,000 megawatts of qualifying renewable energy by 2009; and 10,000 megawatts by 2025.  Enron also lobbied Congress to successfully amend Title XXII of the Energy Policy Act of 1992 to direct the federal government to authorize tax incentives for renewable energy technologies.

Lay’s wheeling and dealing eventually drove Enron’s leveraged empire into bankruptcy four years later.  His scams cost investors $10 billion. and more than 20,000 employees lost their jobs and retirement benefits in the largest bankruptcy in American history.  Lay died prior facing a possible life sentence for his crimes. But Enron’s crony tax credits, mandates and regulations did not die with him.  In May 2002, General Electric acquired Enron Wind Systems and renamed it GE Wind Energy.

Imagine cronyism

GE’s corporate motto is “Imagination.” But it was lobbying muscle that drove wind power.  GE’s $23 million lobbying in 2005 was rewarded with congressional passage of the Energy Policy Act of 2005, that provided more tax incentives and loan new guarantees for renewable energy.

As GE lobbying rose to $26 million in 2009, Congress amended Section 406, the Energy Policy Act of 2005, to authorize added loan guarantees any “innovative technology that avoids greenhouse gases.”

In 2010, GE lobbying soared to $39 million, as the American Recovery and Reinvestment Act of 2009 spiked Congressional funding to $27.2 billion for renewable energy.

Wind power and other renewables have had so much in the way of accelerated depreciation tax breaks, production tax credits, and renewable energy credits that GE has been able to recoup its capital investments within a few years.  The concept of actually selling power has been far down the list of priorities for renewables.  Under law, if renewable sources of energy are available, utilities are required to pay approximately twice the going rate for any wind power that is transmitted to their power grid.

The extension of the crony renewable energy subsidies was originally buried deep in the legislation authorizing the Keystone XL pipeline. But the Senate rejected the measure on a largely party-line vote.  With the GE lobbying machine and bipartisan support, the American Energy and Job Promotion Act appeared headed for easy passage.  But California scandals and high costs may have made green crony capitalism un-renewable.

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Thank you also for the success of Chriss Street’s latest book: “The Third Way.”

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