Shop Notes

A basic lesson in mathematics

Posted: April 15, 2010 | Tags: stimulus

Administration officials were on Capitol Hill yesterday to celebrate stimulus funding for green energy. However, previous Investigative Reporting Workshop articles found that as much as 80 percent of the money from a direct cash grant program that rewards developers of renewable energy facilities went to foreign companies – and they in turn were buying mostly foreign-made turbines.

But Matt Rogers, the top stimulus advisor for the Department of Energy, told members of Congress that the program has been a huge success. How huge? Cash grants totalling $3.1 billion under the program so far, he said. And, he said, the program, known as Section 1603 grants, hasn't just been successful at giving away money, it's been a successful job creation program.

“Tax programs are not actually required to report into, but the 1,603 recipients reported that these projects created 12,000 jobs last year, and if continued as expected would create 60,000 jobs across the life of the program,” he said.

As Rogers acknowledges, these are self-reported numbers by the very companies who are reaping billions of dollars in taxpayer money. If taken at face value, 12,000 jobs is a good thing – but going beyond face value: Rogers testified that 10,000 of those jobs created last year were in construction, and only 2,000 were in ongoing maintenance and operations. A job is a job in this economy, and wind construction jobs pay as well as any other construction job, but, on average, they only last nine to 12 months.

Assuming that all of the work done on wind farms that received cash grants under the stimulus was done last year (and not previously), many of those jobs don’t exist anymore. Knowing that much of the work happened well before the grant program started handing out money in September, and even before the stimulus bill was passed last February, it’s safe to say most of those jobs don’t exist anymore.

Was it really that stimulating?

The wind energy industry denies the fact that much of the work was done well before the money started flowing – at issue because when the cash arrives in a recipients account it comes with no strings obligating future investment in the U.S. – and Rogers tried to downplay that fact by pointing to a review of the grant program (pdf) done by the DOE’s Berkeley National Laboratory. The report, which did find the program had some stimulative effect (and didn’t seem to be suffering too much fraud involving applicants claiming facilities worked when they did not), estimates that without this particular grant program about 2,000 megawatts of wind energy would not have been installed.

But, the same report finds, about 3,700 megawatts of wind energy were installed that would have been installed anyway.

In response to the Investigative Reporting Workshop's articles, the report also looks into domestic job creation and found that the grant program "has supported about 62% of the maximum number of (short-term) job-years that it could have possibly hoped to support." Putting aside the report's assumption that 60 percent of turbines installed under the project are domestically made (even industry lobbyists only claim "nearly 50 percent" of turbine component value is made in this country), 62 percent still works out to a grade of "D"

Even more money headed to green energy

But one of the most interesting details slipped into Rogers’ testimony was not his spinning of how well the $3.1 billion grant program has worked so far, but how much bigger it’s going to get. When the program was announced Sept. 1,  Rogers and a Treasury official told reporters it was a $3 billion program - with the potential to expand if it was successful.

According to Rogers, the program is now expected to dole out, "an estimated $16 billion in renewable energy generation payments-in-lieu of tax credits."

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