The President announced $2 billion dollars will be given to fund solar projects in Colorado, Arizona and Indiana yesterday in a radio address.  The funding will pay for several large solar plants that will add permanent power capacity to the respective states.

One report indicated that the $2 billion would be funded as part of the scheduled $863 billion stimulus fund already appropriate by congress.  Another report indicated that the funds would be provided as loans.  There is a huge difference between the two, and the fact that the various reports are not clear on this point is very curious.

As a sidebar, I guess this is the new style of legislation.  The government passes a law first and decides what it means later.

$400 million is provided as a loan (or loan guarantee) to assist Abound Solar to add 2 major manufacturing facilities and new product lines for the company.  One facility in Indiana will be built from an existing automotive plant that will be re-tooled for solar manufacturing.  The company is expected to add several hundred new production jobs.

Abengoa Solar of Spain, which has operations in the United States will be receiving $1.45 billion, although it is not clear if the money is a loan or a grant.  And while Abengoa has operations in the US and has an excellent reputation as a contractor of large energy projects, it seems very peculiar to be giving money to a foreign entity.

This leads to a couple of really important questions about American energy policy.

From the standpoint of cost effectiveness, if you take the $1.45 billion for Abengoa and divide it by the 1500 projected jobs, the cash cost of each job is over $966,000,  per position.   It would be the same as paying $96,000 to each employee for 10 years.  This has to be the most ineffective use of public funds imaginable.

The other public policy question which has come up before is, why are US taxpayer funds being given to foreign companies?  Major green energy projects in every sector are being built by foreign companies with US government funding.   There needs to be a “Buy American” clause in all this pork barrel spending.  If these are loans, or loan guarantees, how does the government get paid back?

The corollary question for US Energy policy is why should the Federal Government be making loans or guarantees to private companies?

Fiskar Automotive, for example, has secured $500 million in loan guarantees from the DOE for it’s electric car program.  But Tesla Motors raised $2.1 billion in the private financial markets.  Does this constitute a scenario where the Federal Government is creating unfair competitive conditions by providing financial support to companies of their choosing?  And not providing similar funding to other companies.

This is also true on the larger scale.  As the Federal government continues to direct where the majority of US research and development funds will be spent, the process itself disconnects the efforts of the research community from the potential economic benefit that the research should be targeting.

The goal of all research is to produce a benefit.  And the benefit must be weighed in the context of economic utility.  When the development of technology is subjected to bureaucratic decision making, it is dissociated from the decision making process of economic benefit.

This will result in massive waste as limited resources are put into projects with poor return in value.  We appear to have entered a period of time where the process of free market decisions are being circumvented, and everything is to be decided by government.

Because, after all, these folks are professionals at spending your money and they know better than you, or the market, what is most important.