Tuesday, March 31, 2009

How many roads must the US economy walk down?

Various news outlets are reporting on a couple of major stories in wind power today. Australia's AGL Energy has signed a deal with Suzlon Energy (an Indian firm) to buy about a quarter of a billion dollars with of wind turbines, while Germany's Wetfeet Offshore Windenergy GmBH is buying over nine hundred million dollars worth of new turbines from the French Areva SA. This raises some questions that I'll but to the reader:
Why aren't these high-value engineering and manufacturing contracts being awarded to US firms? Does domestic energy policy impact the US's ability to respond successfully to contracts of this nature? What's required of entreprenneurs, big business, utilities, and governments to make the US more competitive in the global energy industry? How many times are we going to retread this path (energy crises, missed opportunities to exploit a new energy market, or both)?

Image source: Department of Environment, Government of Maharashtra, India


Sue said...

Good questions, erd. I suppose that the answer begins with finding out what, if any, companies actually produce wind generators and turbines in the U.S. Certainly a "US" firm (General Electric) does produce wind generators/turbines, but do they do so in the U.S.? I'm certain that the issues of subsidies and/or tax breaks figure heavily into where production of wind energy equipment develops -- both subsidies directly to that industry and subsidies to utilities, communities and individuals to encourage the use of wind power -- or alternatively simply the removal of subsidies that encourage the use of fossil fuels.

For the sake of argument, even if one takes a conservative point of view that says that government should take a "hands off" approach to industry, then the very least one could do is remove all tax advantages and subsidies(which are enormous) of fossil fuel energy.

Yet I have heard conservatives argue that things like "oil depletion allowances" are not subsides or government assistance, but natural and necessary. Yet we do not provide depletion allowances for any other non-renewable resources such as metals (gold, silver, aluminum, etc.), or non-metalic nonrenewables like stone. There area also no depletion allowances for coal (lots of other kinds of subsidies for coal). So why should oil enjoy that advantage?
The easiest first step then would be to remove all tax advantages and subsidies to fossil fuels. The logical, to me, second step is to provide tax incentives for the energy sources that are sustainable and which do not contribute to global warming.

Pat Jenkins said...

erd a community north of ours was adament in making sure they kept wind turbines out of their area. maybe many companies realize the vast majority of americans do not want the sight of these things anywhere near them, and then react by not buying in to the "market".

E. R. Dunhill said...

I'd love to see governments grant the market more freedom to address this problem.

E. R. Dunhill said...

Americans' tendancy to support things in theory but not in practice may explain the fragile nature of the emerging domestic market, but it doesn't address why US firms aren't meeting foreign demand. (Most Americans actually support the idea of wind energy; it's just that some high-profile projects have been stymied by local dissent, and more generally, there's the BANANA problem.) But, while the two contracts I described in this post are big (together, they're about $1.2 billion), they're not alone.
Given that there are numerous small and midsize wind projects in the US, and there are large-scale wind projects abroad, why aren't US firms responding to a greater degree?

Pat Jenkins said...

well could it be because they see a fruitless future in it erd? i imagine if money or profit was to be made, there would be no shortage of investors!

E. R. Dunhill said...

Are you honestly saying that you think a business that currently supports 900 million dollar contracts is a bad business to be in? No business lasts forever. Smart businesses make money while the opportunity is available.