Feed-In-Tariff Fail: Is the US Bailing Out Spain's Solar Industry?

Almost a year ago, I posted about the failure of Spain's solar power "feed-in-tariff" program.  Simply speaking, a feed-in-tariff is an above-market price paid to an energy producer, subsidized by utility ratepayers or taxpayers.

Any first-year economics student can tell you that paying above market will bring producers out of the woodwork, which will quickly bankrupt any such program.  Nonetheless, solar power advocates want to bring feed-in-tariff to Minnesota and the U.S.

Two years ago, the New York Times reported on the collapse of Spain's solar power industry, "Spain's Solar Market Crash Offers a Cautionary Tale About Feed-In Tariffs," quoting the CEO of Spain's Abengoa Solar,

"What's important for the regulation of solar is stability," said Santiago Seage, the CEO of Abengoa Solar SA, one of Spain's largest solar developers. "Unfortunately, up to now, we have had too many changes. ... [And] if the context changes, you can make mistakes in business decisions."

Regardless, Seage stills recommends feed-in-tariff to us in America.  The New York Times reports,

"Americans and others would be wrong to avoid the feed-in tariff based solely on Spain's experience, Abengoa's Seage said.  'The feed-in tariff is a mechanism that, typically, Americans don't like,' Seage said. 'They believe it doesn't optimize costs for the taxpayers. ... Nevertheless, I feel it has a huge advantage. It's a simple mechanism to get the market started.' "

Now PJ Media reports the possibility that the U.S. government (and its taxpayers) may be bailing Abengoa out of its "mistakes in business decisions."  The Department of Energy's loan guarantee program (think Solyndra) rushed to complete transactions before the program ended on September 30th.  One of the last guarantees approved was for an Abengoa ethanol project.   Earlier, the DOE underwrote Abengoa solar projects in Arizona.  Writes PJ Media,

"Over the last two years, DOE Secretary Steven Chu has awarded Spain-based Abengoa—a sprawling, multi-national industrial firm operating in 70 countries—loan guarantees worth a staggering $2.78 billion for solar and ethanol plants."

PJ Media concludes,

"According to Chris Horner, a senior attorney at the Competitive Enterprise Institute, Abengoa is not an exception, but the rule for the Obama administration’s artificially stimulated “green” industry.  He tells PJ Media, 'This is not unique to Abengoa. It defines the [green] industry, which exists in any meaningful way solely due to political creation, not performance or economics.' "

Your tax dollars at work.