As the last post explained I’ll be going through America’s Energy future and why it will probably be roughly the same as it is right now. Today I will tackling the question of “Why won’t the massive subsidies going toward alternative energy solutions change the energy landscape?”
The first and easiest answer is that the subsidies aren’t being used. Only roughly 200 billion of the 800 billion of the original stimulus package is being used. Why only that much is being used is a rant for another time…perhaps one I’ve done already…no, that rant was about the fact that no one was using the package, not why. Either way though, that 200 billion isn’t all for alternative energy solutions, only a fraction of that is being used for those purposes. Now besides the stimulus money you also have a small small pile of money going toward research of this nature at the behest of the Energy Policy Act of 2005, but again it ain’t being used that much. Now this segues very well into the next point.
The people doing the research aren’t the people making, distributing, or selling the electricity. For the most part the people researching are universities and national labs, and not the the power companies, with the exception of PSEG and a few other companies in California and similarly crazy states (PSEG and similar companies are being forced to go the alternative route because the laws in California are forcing them that way, I’ll get to why that’s a bad thing later). So all the stimulus money for this stuff is going to universities and not the companies producing power. This creates a problem in that in the event that a breakthrough is made, its not made at a power company, it’s made at a university, so that the breakthrough has to be sold to the power company after it is made.
So what would be the problem convincing a power company to take up a breakthrough that would probably make them billions of dollars? Because the advances cost money to implement. And money is not something power companies have. “What!?!” you say. I get charged by that damn electric company every month and it’s a ton of money. Yes, indeed you do, but the electricity actually costs most of that to produce. In a regulated environment the company’s are only allowed to make so much profit (12% in most places) from selling the electricity. That means that 88% of the money you send the utility each month is being used to pay for what it takes to make the electricity. Which means that every year an electric company only has roughly 12% of it’s total incoming money, minus taxes of course, to use to pay for new things like energy breakthroughs. Which is also why they don’t do any research themselves, because they can’t afford to because it doesn’t count as costs to run the grid.
So basically the people making the breakthroughs have to try and sell the breakthrough to the people who don’t have much money to spend. It really is that simple. Now if the stimulus was setup to allow power companies to do research and charge it to the rate payer then we’d have solved that problem, BUT you’d all be paying more for your electricity, which you won’t do, because as far as you’re concerned electricity is already too damn expensive, which is why it became regulated in the first place, because in most places you don’t have a choice on where to buy electricity from, which makes the utility companies monopolies. And what do monopolies do? They overcharge customers because they can.
Now I will say that the breakthrough people (researchers and the like) do know of this problem and because of that are now looking for other markets. Namely you, the consumer. Much of the alternative energy research going on today is not targeted at being the savior of the grid. It’s targeted at begin the savior of the individual’s dependence on the grid. And there are a ton of reasons that it is not working so far, but we’ll get to that in part 2.
For now remember these things. 1) Few people are actually doing research in the field of alternative energy solutions. 2) The people doing the research aren’t the people making electricity. 3) Any breakthrough made has to be sold to an electric company. 4) The electric companies don’t have the money to pay for breakthroughs. Hence, alternative energy solutions will not be made a major portion of the American electrical grid in the near future by the electric companies.
