NICHOLS & DRIESSEN: Delaware’s very own Solyndra?

OPINION:

Delaware’s political establishment thinks First State electricity consumers should subsidize the manufacture of supersized fuel cells under the auspices of California-based Bloom Energy to replace natural gas and coal-fired power plants in generating electricity. The politicos want to build a factory in Newark, where rail service is available to ship Bloom’s 10-ton, 100-kilowatt “eco-friendly” Energy Servers to presumed eager buyers across America.

Bloom claims its “revolutionary new design” and “breakthroughs in materials science” make its new solid-oxide-fuel-cell (SOFC) technology “clean, reliable and affordable.” Gov. Jack Markell, a Democrat; Department of Natural Resources Secretary Colin P. O’Mara; Department of Economic Development Secretary Alan Levin; and assorted legislators insist their plan will create jobs and put Delaware at the forefront of the Green Revolution.

If that were the case, and if Bloom had a viable business plan, investors would be clamoring to get in on the action. There would be no need to stick Delaware ratepayers with a bloomin’ tariff (“green premium”) that will add a whopping $600 million to household and business electricity bills over the next 20 years - above what they would pay for electricity generated by combined-cycle natural-gas plants. There would be no need for the Economic Development Department to contribute another $16 million in startup costs.

Those higher electricity costs translate into higher prices for goods and services. They pull money out of productive sectors of the economy and transfer it to politically connected operators and campaign contributors. In the process, they destroy traditional jobs - as they did in Spain and Scotland, where overpriced “green” energy killed 2.2 to 3.7 jobs for every “green job” created.

Bloom also expects to receive a substantial grant from the U.S. Department of Energy if it can get swift approval of the Delaware tariff. That federal grant will come from borrowed money in the midst of an economic and budgetary crisis and in the wake of scandalous green-energy bankruptcies.

This crony capitalism means Bloom Energy gets risk-free cash, enabling it to proceed with an initial public offering (IPO) of its stock. As a privately held company, it gets to keep its finances a secret. Meanwhile, U.S. and Delaware taxpayers will take another big risk, and families and businesses will pay well above market rates for electricity.

This sweetheart deal is shocking in its audacity. But then, as Green Tech Media reports, “Bloom plays the subsidy game like a pro, receiving more than $218 million in subsidies in 2010 from California’s [Self Generation Incentive Program].” It gets worse.

This time around, Bloom persuaded the Delaware legislature to enact a special provision. If any future legislature ever modifies the Bloom tariff, the company will receive a lump-sum payment of the entire 20-year tariff, which Delmarva Power meantime will tack onto all ratepayers’ utility bills. Without this guarantee, Bloom would have a hard time peddling its IPO.

It’s equally amazing that Bloom can even qualify for renewable-energy subsidies. For that it can thank the Delaware legislature, which adopted Mr. Markell’s and Mr. O’Mara’s expanded definition of renewable energy to include Bloom’s natural-gas-fueled SOFC Energy Servers.

This was pulled off by enabling only Bloom fuel cells to qualify under the Renewable Portfolio Standard, originally intended for wind and solar facilities, by claiming Bloom’s equipment “could” run on biofuels, such as methane from cows or landfills.

As for being clean and green, Bloom’s Energy Savers require substantial amounts of rare-earth elements such as yttrium and cerium. Prices are soaring - by 500 percent to 2,000 percent over the past 12 months, according to a recent General Electric report. The United States imports 100 percent of all the rare earths it uses in countless energy, military, electronic and other applications, with 97 percent coming from China.

Now the Chinese have restricted rare-earth exports and sell mostly finished products, often using our technology. Worse, the rare earths are mined, processed and turned into those products under health and environmental conditions that severely impact farmland, wildlife habitats, miners and factory workers.

With the shale-gas revolution driving natural-gas prices down, there should be no need for fuel cells to replace gas-burning generators. China and India are building new coal-fired power plants every week and emitting far more carbon dioxide than all our job-killing regulations and climate-change initiatives can ever offset, so even die-hards like Al Gore cannot justify Bloom’s systems on global-warming grounds.

Then there is Solyndra. One would think that scandalous debacle - $535 million in taxpayer cash blown in two years, and Solyndra executives now pleading the Fifth Amendment right against self-incrimination - would ensure at least a modicum of sanity, honesty, transparency, accountability and reluctance to use more taxpayer dollars to benefit special interests. Apparently not, at least in Delaware and the Energy Department.

On Sept. 27 through 29, the Delaware Public Service Commission will conduct public comment sessions on Bloom Energy’s application for special treatment and subsidies. Every American who cares about our economy and unemployment and every citizen who is disgusted with our wasteful, crony-capitalist, bureaucrats-picking-losers system, can send comments and then let their elected officials know enough is enough.

That may help inoculate America against the risk of the California and Delaware “green disease” becoming an uncontrollable national contagion.

John Nichols is a financial consultant and citizen activist in Delaware. Paul Driessen is senior policy adviser for the Committee for a Constructive Tomorrow.