“We are going to be a global leader in solar generation,” said Solar Energy Industries Association President Rhone Resch in early 2014. “Ivanpah’s opening is the dawn of a new era in power generation in the United States.” Eleven years later, that era is over. In a statement released by Pacific Gas & Electric, the company announced that it would terminate contracts with the Ivanpah power plant. The AP notes that “if approved by regulators, the deal would lead to closing two of the plant’s three units starting in 2026. The contracts were expected to run through 2039.” This is a measure to save customers money as power generation from the plant is not cost-efficient. While this may seem to some as the normal operations of a business acting in the market — after all, businesses fail, market conditions change, and losses occur — this is far from the case. Ivanpah’s very existence is not the result of market forces but rather government subsidy.
In 2011, Ivanpah was granted a $1.6 billion loan guarantee by the Department of Energy (DOE) under the Obama administration. Additionally, Ivanpah’s owners were not required to pay the standard credit subsidy cost and were granted numerous loan extensions by the DOE. To this day, these loans have not been fully repaid. The story of government entanglement in the funding of Ivanpah does not end there. In 2014, Ivanpah applied for and received a $539 million federal grant from the Treasury Department.
Despite this massive financial lift from the taxpayers, Ivanpah did not even meet its expected energy output goals. Benjamin Zycher, a senior fellow at the American Enterprise Institute, notes that “when fully operational, it was supposed to generate about 1 million megawatt-hours of power annually; for 2015–2023, actual annual output has averaged 702,322 MWh.” Despite opening in 2014, it was only in 2017 that the plant met its contracted performance levels. Needless to say, Ivanpah’s subsidies generated less than promised.
One of the main stated benefits of transferring taxpayer money to Ivanpah was the environmental benefit of reducing emissions. However, closer scrutiny of Ivanpah’s ecological impact makes this desired goal of emissions reduction a moot point since it kills nearly 6,000 birds each year. Additionally, Ivanpah required the relocation of endangered desert tortoises. Ivanpah’s environmental record must include these costs, not just emissions reductions.
Ivanpah was once touted as a great step towards “promoting energy independence and strengthening our national security.” Instead, it has shown exactly why solar cannot be trusted to do any of these things. Solar generally performs at about 25% of its capacity since it is weather-dependent, and as Duran Duran wrote, “The Sun Doesn’t Shine Forever.” If energy independence and national security are the primary concerns, making a grid dependent on an unreliable and costly form of energy would benefit our adversaries. With solar, neither energy independence nor national security is gained.
What can Ivanpah’s story tell us today? For one, be skeptical of promised benefits from government subsidies and intervention. Despite receiving billions in subsidies, Ivanpah has always underperformed its projected energy output. Additionally, politicians’ claims about job creation are often dubious. Ivanpah did create some 1,000 temporary construction jobs and some 60 permanent jobs on site. Of course, if you divide the total jobs created by the subsidies taxpayers provided for the project, Ivanpah jobs cost taxpayers over $36 million per permanent job created. More importantly, the purpose of the state is not to create jobs through redistribution but to create an institutional framework from which productive jobs can be created.
Another important point to note is that most subsidy deals fail to reach a small fraction of jobs created compared to the promised ones. In Michigan, for example, one study found that for every eleven jobs promised in subsidy deals, only one was made. The jobs politicians promise rarely materialize. Additionally, when the government sets out to “create jobs,” that does not mean those people are doing something that people find socially beneficial or that those jobs are worth the cost.
Billions of taxpayer dollars went into Ivanpah’s funding. This, however, is just the tip of the iceberg. Whether it be the U.S. Agency for International Development, the Inflation Reduction Act (IRA), the Department of Energy, or the Environmental Protection Agency, there are countless examples of the government using environmental protection as a justification to subsidize green gambles and special interest groups. As the debate around government spending and transfers heats up in Washington, repealing laws like the IRA and slashing funding for green patronage networks are simple yet effective ways to save taxpayers money and cut corruption.
