“Clean Tech Boom” Goes !!KA-BOOM!!

See wired.com: Why the Clean Tech Boom Went Bust.

The article is good, I guess, but doesn’t go nearly far enough into the true causes of such boom/bust cycles with government-funded business ventures.

It skips or glosses over several key points, like:

(1) You cannot create market demand with investment or technology or even a product. To be successful, there must be existing but unsatisfied (“latent”) demand, and a price point that will push people off of existing technology. And today, if any such demand exists at all, it isn’t big enough, and/or the price point is too high. This is Economics 101.

(2) Government funding of risky ventures creates too many opportunities for graft and fiscal mismanagement because hey, it’s not their money! Especially when competing with government-subsidized products from countries where labor is cheap. Competition that would cause private investors to bail instead encourages government to throw good money after bad because, hey, it’s not their money!

(3) Remaking energy infrastructure is nearly impossible because of built-in inertia to keep things as they are, until prices force a change.

That’s the short version. What follows is my further thoughts on it. I’m no expert on energy, but I understand a little bit about markets and economics, and that’s really what this is about.

There is no mass market for expensive, unproven, subsidized technologies. People have lives to lead and jobs to get to, we don’t have time or money to dork around with experimental energy sources. We don’t want to change the world, we just want products that work, cheaply, without government help, and anything less is a mere plaything, a way to pass the time for the idle rich.

The guy who invented the motorized car didn’t get famous, it was Henry Ford who popularized it and became famous because he was in the right place at the right time, with the right kind of production genius to make the car affordable enough for the mass market, and BINGO, the mass market for cars was born. He’s the guy we remember, because he had the genius to meet the market needs at the price the market would pay. And he didn’t need no stinkin’ government help (spits on ground). Did Google have government help? Ebay? Amazon? Craigslist?

People already have cars that work, and we haven’t yet reached the price point where they cost too much to run — unless you have an Expedition or Suburban (in which case, God help you) — while electric and hybrid cars are relatively expensive compared to petroleum-fueled cars and sell in tiny numbers. And they would sell in even tinier numbers if not for government subsidies (that I don’t remember being asked to pay for, do you?), and also have other complicating factors. So, electric and hybrid cars would have to be cheaper than petroleum cars to be attractive to the mass market, but are instead more expensive. There is almost no market for them, except, again, as government-funded playthings. It would appear that for these to succeed in a true mass-market would require the next revolution in mass production. Is that likely to happen in today’s U.S.A.? You tell me. And the batteries use various metals and commodities that are also a finite resource, and which have rising prices in the commodity markets, do they not? Will they suddenly become cheaper, especially during inflationary times? And even if batteries do become cheaper, can they become cheap enough to make the car’s price competitive?

You can’t completely remake an energy infrastructure in just a few short years. Energy is the underlying engine that drives the entire American economy. It is just not possible to change it quickly, and by “quickly”, we mean less than 25-50 years. Think about it: gas stations, refineries, electricity generating power plants, internal combustion cars, all the businesses that both make components for these things or rely on the finished product in some way, we have A LOT of existing infrastructure that is totally dependent on our existing energy sources. And it works pretty well, and is reasonably priced, and so there is just not a lot of incentive for regular people or businesses — i.e., the non-Green-obsessed — to abandon it. It is just common sense to continue leveraging existing energy sources, unless there is some good reason to move off of them. Much cheaper, too — where is the logic in recreating a system, and incurring all that cost, and then ending up with a new system that is no cheaper to run day-to-day than than the old one? That’s Looney Tunes. And in the future, if and when the supply of an existing energy source starts to become constrained enough that it drives prices up, then two things will happen (at least): (1) the businesses that sell that energy will already have other energy sources to sell to us, because they aren’t stupid, and (2) it will drive up prices of that energy and (eventually) change our decisions about accepting other energy sources that may look more attractive in light of the new energy prices we face. In the meantime, we use what we have. There’s no good reason not to.

A lot of the Save The World types were too wrapped up in this, madly in love with themselves and their imagined brilliance. And so they went all in, only to find that a) “this shit is harder than I thought”, and b) “hey look, the government is happy to loan us taxpayer dollars no matter how shitty our business model is!” Would you be surprised to learn that many of these same Save The World types ran businesses that benefited from those loan programs? Shocking, I know. I hope they recovered their own investments, plus some change to feed the bulldog. And keep the Hummer gassed up.

But mainly, the key point here is that this entire Clean Energy episode is just one more example of hubris and crony capitalism, built on a web of wishing, hoping, exaggeration and graft. If the market isn’t already there, you ain’t selling much of anything, no matter how cool it is. Demand creates the market, not the other way around. Once again, government intervening in markets it doesn’t understand, and screwing them up.