The Spectacle Blog

More of California’s Future via Spain

By on 10.18.10 | 2:46PM

Given a previous, sadly typical effort below this post to spout smears as a way of distracting from the substance of what Dr. Gabriel Calzada has exposed about the 'green jobs' scam, note a story in today's E&E News . It reads in pertinent part (the part I omit notes Germany is hiking its rates again to pay for their solar panel scheme):

RENEWABLES: Spain, Germany juggle solar subsidy obligations (10/18/2010)

Spain plans to sell €1 billion of bonds backed by revenue from consumer electricity bills at the end of the month, sources say, in a move toward selling an eventual €17.6 billion in government-guaranteed debt. (The euro is currently worth $1.40.)

The money raised will be used to pay back utilities including Iberdrola SA and Enel SpA's Endesa unit for using the utilities' funds to subsidize power prices for consumers. Under Spanish law, the government needs to pay companies back their tariff deficits.

Iberdrola is owed €3.7 billion, and Enel's Endesa is owed €7.7 billion. The government owes other utilities €3 billion. The total debt from delayed electricity payments could reach €14.6 billion by the end of the year, according to government reports.

The plan still needs to be approved by the country's security regulator. Spain hasn't sold such bonds since the collapse of Lehman Brothers Holdings Inc. in 2008 triggered a global credit crunch and made investors scarce (Duarte/Sills, Bloomberg, Oct. 15).

This is what Calzada has argued since 2006. He has explained since about 2008 that the market was not purchasing the "rate deficit" of Spanish utilities -- that is the difference between what the consumer is charged for electricity, and what it costs to produce. That cost is kicked down the road to subsequent generations, a construct of the state to keep the consumer from seeing the true cost of the scheme which of course can lead to things like opposition to the scheme.

Calzada noted that this could provoke the collapse of the whole system, writing in his study that it is one of the unseen costs of the green energy program. The total deficit is now nearly €20 billion ($28 billion) and, as the article says, it is guaranteed by the government through electricity price increases. Meaning the government has guaranteed that its scheme would be paid off, by the ratepayer.

I am reminded of William Graham Sumner's "The Forgotten Man":

The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C's interests, are entirely overlooked. I call C the Forgotten Man.

In Spain, C is the future generations to whom the debt for this indulgence is kicked, and is as Sumner describes. Even if one wishes to ignore them and insist that C is today's ratepayer, C has a voice in that C can vote, but that voice is muted by hiding from C what's really going on by the state only increasing the cost of electricity a fraction of what is incurred, while using other taxpayer funds to bombard C with the claim that this is good for C.

Imagine what this €20 billion will mean in terms of higher household prices in the coming years. The National Commission of Energy (a State agency) said in 2009 that it would require an increase of 31% in prices to pay that off. Today that 31% is probably too low to allow the repayment of the deficit. So, it's a costly scam, and they're trying to make that cost up in volume.

The whole scheme should remind anyone who studies it of the subprime mortgage bubble and crisis, with the securitization of a debt that was supposed to be AAA until it was obvious that its actual value was nearly nothing. So one might also note the spectacular stock decline of the leading renewable companies there: GAMESA is now €4 and was at about €20 just two years ago.

Which brings us full circle to California, which of course has created its own grand troubles with public debt. And they are going Spain's route, adding a 'green economy' program that creates a huge debt for the type of indulgence that's catnip for politicians who will not be in office when the (bigger) bill comes due. They pat themselves on the back for creating what is a looming disaster for the middle class and the larger society.

But the Left is right. It's far better to smear the speaker than address the substance. When that's all they have.

Send to Kindle

Like this Article

Print this Article

Print Article