April 5 2013
Energy Companies Finding Green Energy Unprofitable
If BP’s business decisions are any indicator, the renewable industry isn't profitable and may need to go back to the drawing board.
BP announced this week it is selling its wind businesses in order to focus on oil and gas enterprises. According to the Houston Chronicle, this includes "over 1,500 turbines with generating capacity of 2,600 megawatts, as well as other projects in various stages of development...'When you're looking at spending $50 million in capital each year, and $50 million spent developing shale plays gives you $250 million in value, and $50 million spent developing a wind farm gives you $10 million in value, it's not hard to figure out," said Edward Hirs, an energy economist at the University of Houston."
The company’s decision comes 2 short years after the company sold its solar businesses.
Energy companies are increasingly finding it unprofitable to invest in green energy production, despite the fact that green energy receives over six times the federal subsidies of fossil fuels. Solyndra, A123, and Fiskar are a few among many companies that receive federal subsidies but fail anyway. That’s because federal subsidies don’t make business plans more competitive; instead they artificially sustain noncompetitive and unsustainable ventures, while raising the costs of energy and thus hindering economic growth and true clean energy innovation.
BP’s decision raises significant questions regarding the future of “green” energy. If they are not a profitable investment in the near future, how can researchers develop energy options that are?
In the end the government should withdraw from the “life support” business. Instead, it should free energy industries to compete and innovate. There is a domestic demand for clean energy, because consumers want cleaner air, rivers, and land. But we have yet to develop that solution.