The Big Bank and Automotive bailouts of 2008 were transformative events in American politics. Protecting the wealthy and well-connected from the consequences of their own poor decisions, while leaving regular folks struggling to make ends meet, the bailouts unleashed an unexpected amount of populist energy and were a major contributing factor to the nomination and election of Barack Obama, the beginning of the Tea Party, and the rise of Donald Trump.
Well, fifteen years after that seismic event, is America ready for another major bailout? Specifically, a "green energy" bailout? Because, warns the Wall Street Journal's Allysia Finley, this is starting to look like a real possibility. It's already begun to happen in Europe. Here's Finley:
Last week Munich-based Siemens Energy, one of the world’s top wind manufacturers, said the German government is prepared to extend as much as €16 billion (or $16.9 billion) in state guarantees to rescue it. In June Siemens blamed a “substantial increase in failure rates of wind turbine components” for its mounting losses—about $4.8 billion this year—and warned that its financial problems could drag on for years as it repairs and replaces faulty equipment. The company has a backlog of orders from wind developers chasing government subsidies, but banks won’t extend credit because of its financial troubles. Siemens wants Berlin to issue loan guarantees on the faulty premise that its failure could endanger the country’s economy and national security. Wind is the new too-big-to-fail enterprise.
Finley reports that "developers in Europe and the U.S. are scotching wind projects as rising costs and interest rates are making them unprofitable," an alarming situation for environmental activists along with their allies in government. More,
American companies are also pleading for government help. Large offshore wind developers in September importuned New York’s Public Service Commission to increase contractual payments by an average of 48 percent to cover their costs. Regulators rejected their requests. Now developers are mulling whether to cancel the projects if they can’t coax more corporate welfare out of the Biden administration. Denmark’s Orsted, the world’s top offshore wind developer, and U.S. governors in the Northeast are lobbying the White House to boost subsidies in the Inflation Reduction Act to cover 50 percent of wind project costs.
Let's give it another try!
Of course, these demands are in addition to the nearly 1 trillion dollars that have already been ear-marked for keeping the Green movement's pet projects afloat via the atrociously named Inflation Reduction Act -- a "climate change" bill in disguise, as even Democrats now admit. Not to mention the billions already spent. But that itself is being used as an argument in favor of a bailout. As Finley puts it, "government has invested too much politically and financially in renewables and electric vehicles to let the companies go bust." This is the phenomenon known as the sunk cost fallacy.
It's worth remembering that Left's defense of renewable energy subsidies has always been that they were required to "level the playing field." The government would need to support renewable energy for a few years, until it could establish equal footing with traditional energy sources, at which point it would become self-sustaining and take off. The less frequently articulated part of that plot is government using its coercive regulatory powers to restrain the ability of the resource sector to really compete against renewables, ensuring that it is always fighting with one hand tied behind its back. But one thing this report makes plain is that renewables are losing even their own unfair fight.
A further injection of cash would probably obscure the economic and practical deficiencies of wind and solar for a little while longer, but they won't go away. Meanwhile, at a time of economic uncertainty, a bailout would have the effect of raising both taxes and -- in the longer term -- energy prices, and at a time comparable in many ways to 2008. It would risk kicking the political hornets nest once again, with unpredictable consequences.
Only a foolish, short-sighted White House would even consider this plan. So expect them to do it.