FOR years, liberals have claimed old-fashioned energy — the oil and gas that Oklahoma has produced for decades — would inevitably give way to “clean” energy sources like solar and wind power. Investors' actions suggest otherwise.
Research by Bloomberg New Energy Finance finds that third-quarter global investment in so-called clean energy has fallen 20 percent since last year. This year's investments in renewable energy and related technologies will likely be lower than the 2012 total, which was down 11 percent from 2011. By quarter, new investment in clean energy has fallen 41 percent from a high of $78 billion in the second quarter of 2011 to $45.9 billion in this year's third quarter.
What's especially telling is that venture capital firms are increasingly moving to the sidelines. Those firms aren't risk-averse when it comes to developing new technologies. Investors' withdrawal from clean energy suggests they don't see a future there. Global venture capital and private equity investment has plummeted 82 percent from $4.1 billion in the third quarter of 2008 to $724 million in this year's third quarter.
Michael Liebreich, chief executive of Bloomberg New Energy Finance, attributes declining investor interest in part to “policy uncertainty in Europe” and “the lure of cheap gas in the U.S.”
Basically, consumers have access to an abundant and affordable supply of energy that allows cheaper electricity generation. That's good news for anyone who enjoys indoor lighting, but good news is often considered bad in the realm of climate change alarmism.
As a result of hydraulic fracturing, U.S. domestic oil and gas production has soared. As natural gas supply has increased, prices have declined. This ultimately benefits citizens' take-home pay but creates a problem for “clean” energy proponents. Large-scale alternative energy production is only attractive or feasible if the price of traditional energy increases exponentially, or if taxpayers underwrite alternative energy production. European countries have opted for the latter, but the consumer impact has been harsh.
Earlier this month, the top executives of companies providing half of Europe's electricity production called for an end to subsidies for wind and solar power, noting they increase consumer costs and are harming system reliability. In Europe, clean energy production is subsidized through guaranteed prices. In France, wholesale prices have hovered around the equivalent of 40 U.S. dollars per megawatt hour, but electricity generated by windmills sells for a minimum amount of roughly $112. Consumers make up the difference.
Thanks to these inflated prices, investors funded many wind and solar projects after the 2008 recession caused European electricity demand to stall or decline. This created overcapacity and reduced system reliability as gas-fired plants were idled in response. Blackouts are now increasingly likely.
That may please global warming alarmists, but not consumers with limited incomes. In Germany, about 25 percent of power comes from wind or solar — but consumer prices have doubled since 2000. And, as GDF Suez CEO Gerard Mestrallet recently told The Wall Street Journal, “carbon emissions keep increasing.”
In the United States, consumers continue to prefer affordable over expensive, but theoretically cleaner, power. Yet the Obama administration's hostility to fracking and preference for “green” energy is well known. Europe illustrates the folly of overdependence on wind and solar. If the administration boosts those industries by impeding domestic oil and gas production, the result won't be a cleaner environment, just a higher cost of living and lower quality of life.