NEW YORK (
) -- Big oil and dirty coal don't have to work too hard to generate negative headlines, but in 2011, renewable energy gave fossil fuels a run for its money in attracting the wrong kind of attention, thanks to failed solar company
and that whole mess.
One thing you can be sure of on either side of the energy divide, though, is that whether it's fracking, coal power plant stacking or a solar mount racking, the arguments will be full of holes and the rhetoric downright tiring.
So in the spirit of trying to start the new year by purging the old, here are six examples of doublespeak and dead ends of logic that the energy sector needs to say goodbye to in 2012.
1. We create jobs.
And when I say "we," I mean those hydraulic fracturing shale play companies and the "man camps" in the North Dakota Bakken, and the solar industry that is sending installers onto a rooftop near you to run your washing machine and dryer.
Yet if all you've got to make your case is the same old "jobs" rhetoric, I say make a better case. Whether it's the right or the left, the pre-eminence of jobs is overdone. Sure, unemployment remains stubbornly high, but the "jobs" argument alone is a poor one as far as energy policy.
If fracking is going to pollute our groundwater supply, then jobs don't enter into the equation.
If a solar manufacturer is going to create 1,000 jobs for about two years before shedding all of them in a heartbeat, then that's a bad idea, too.
Jobs are a byproduct of good ideas, and not vice versa. Sure, there's no such thing as a bad job -- heck, those people building Iran's nuclear missiles are probably happy about that project -- but just because there's no such thing as a bad job doesn't mean a job is the be-all and end-all of energy policy. Everyone interested in energy policy being built to last needs to go beyond this short-sighted bit of Peoria politics.
2. They're the enemy.
In a recent
New York Times
op-ed, Paul Krugman made the case for solar energy and the coming of grid parity and even trotted out the most overused solar headline of all:
Here Comes the Sun
. The problem with Krugman's piece wasn't the fact that he piled on the already nauseating solar energy pun headline game that the rest of the press has been at for years, but that the ingredients in pro-solar argument were as bilious as the alleged fracking fluid content. More than half the article about why solar is going to be so great was about why fracking is so bad. The Krugman piece should have been called
Here Comes One More Anti-Fracking Diatribe
Enough with enemies, I say. It's time for the energy sector combatants to put their "best foot forward" and in the same way that the crutch of jobs should be jettisoned, the case to be made, whether it's fracking or solar, should be on its own merits and not on the evils or shortcoming of the enemy.
Consider this: President Obama's "Competitiveness Council" head,
CEO Jeff Immelt needs the fracking industry to continue to thrive so GE sells its natural gas turbines, and GE needs the solar industry to continue to evolve to make good on GE's investment in its first solar manufacturing plant in Colorado,
where the ribbon was just cut in 2011.
Whether it's jobs or the polysilicon panel or the wellbore in Montana,
the GE example of being agnostic on energy generation type shows that the more reductive the argument, the closer it edges into idiocy. Oh, and by the way, did we mention that GE's major acquisition push in 2011, $10 billion or so, was oil and gas services?
So quit trying to fight a 100-year war for the future of energy supply within the four-year first term of one American president. Haste makes waste, and supporters of renewable energy are supposed to be all about conservation.
And as for the subject of China being the enemy and responsible for all of our alternative energy hiccups, that tortured subject can't possibly be covered in a paragraph, though it's one more example of what an industry does when it pursues short-term strategies that allow it to make a lot of money, and then suddenly the boom goes bust: blame someone else. China deserves some of the blame, because there's plenty of blame to go around (that means you, too, SolarWorld CEO Frank Asbeck).
As for you frackers...
3. It's time to up your game.
I recently attended a natural gas conference in New York at which the CEO of
, Aubrey McClendon, the man behind more land drilling acres in the U.S. than anyone other than
, tried to disarm the Manhattan gathering by saying, "Don't worry, I promise you we will not frack under the island of Manhattan." And so we've reached the era of fracking humor! It's not funny, but even less funny than McClendon's quip was his actual attempt to downplay the fracking controversy.
Chesapeake was one of the first companies to list on its Web site the
ingredients used in its fracking fluid, and as the company explained, it's just your garden variety cocktail of Drano and other assorted household cleaners. At the New York conference, after noting that the frack fluid could be found under your sink alongside the glass cleaner, McClendon tried to put an end to the fracking debate by adding: "The difference between medicine and poison is the dosage."
Call me crazy, but if that's the best fire power that the frackers have in putting out the fracking fire, they don't stand a chance against
-- coming to a theater near you soon -- Hollywood actor and part-time anti-fracking hero Mark Ruffalo, or the Sierra Club. You can sense the game those frackers are really playing when it comes to this issue in the
approach taken by Exxon Mobil in defense of its XTO Energy acquisition. It just keeps saying over and over again, amid all the criticism over low natural gas pricing and fracking, that in the long run it will be proven right. I don't doubt Exxon, but for the time being, the frackers aren't doing themselves any favors with an argument that tells the American public that it's OK to drink Drano, in the right dosage. They are losing this argument, at least so far, and saying that they are creating jobs (see above) isn't enough.
And on a related point...
4. Baseload is BS and intermittent energy is here to stay.
Does that seem backwards to you as far as understanding the way energy generation works? Good, it was supposed to. Anyone who follows energy closely has heard this one before: solar and wind are intermittent sources of energy and can never replace baseload generation -- coal, natural gas or nuclear, for example.
In 2011, this argument got its play after the Japanese Fukishima nuclear disaster. Some delirious solar sector fans thought they had just locked up the energy race, right before the baseload argument army marched back in with the fact that coal and natural gas would be the real nuclear disaster "winners."
Yes, there is a difference between baseload generation and renewable energy sources such as solar and wind, which only work when the sun shines or when the wind blows -- and could require new energy storage technologies to work more like baseload. Yet the environmental movement probably has a point when it says baseload is bull, or at least in part a convenient game of strategic misdirection foisted on a gullible public by the dirty coal and nuclear lobbies. Must it be either/or? Apparently in energy, it must be, but it shouldn't be. The environmental lobby goes too far, as do dirty coal and nuclear.
And let's go back to GE for a moment, which is building natural gas plants to work on a hybrid basis with intermittent sources of energy. Look at
Coal King Warren Buffett of
investing in solar in 2011 and through his MidAmerican Energy utility, being a prime driver of Iowa's ability to reach 25% of energy generation from renewable energy.
The truth is somewhere in between both reductive arguments, and in the portfolio of Warren Buffett spread across dirty coal and
economics of renewable energy that work for a big-time investor, and for the grid as well. So move on folks and figure out how to get all of these
diverse energy sources to work within a comprehensive energy policy.
Speaking of comprehensive energy policy -- and other signs of our sad excuse for energy discourse in this country -- did you hear...
5. Renewable-energy firms are lobbying the government!!!$%#@&?
That's right, it wasn't just White House "pet project" Solyndra that was up to
no good in lobbying politicians, but according to a
report on Dec. 28,
spent more on lobbying in California than
. Let's leave to the side the reducto absurdum comparison between BP and First Solar lobbying in California -- which is the energy lobbying equivalent of comparing just about anything in the world to the size of Rhode Island -- and deal with the real issue here: Renewable-energy companies would have to have their heads buried in the sand if they weren't stealing every trick out of fossil fuels' lobbying playbook to get themselves entrenched in the political status quo. That's how it works, folks.
Of course, it all started with Solyndra when, lo and behold, it occurred to the press that the "do-gooding" renewable energy firms might also be part of greasy-hand political deals.
This process is how an industry grows and gets in "too deep" to be easily removed. If nothing more, it helps to move the glacier of energy policy just a little just by having a foot in the door. That's not a bad thing; that's a form of checks and balances within our own borderline-corrupt system. You want to make a case against solar or any renewable energy form, don't make it over lobbying.
Here's some advice to you renewable energy companies afraid of Solyndra's long tail:
If a sizable renewable energy company isn't lobbying the government, it should fire somebody, or hire a head of government affairs, soon.
While we are on the subjects of those do-gooding renewable energy firms, let's leave off with the do-gooding and end this diatribe with a focus on market fundamentals.
Earlier this year, in an expansive
piece, a writer wondering whether the capital markets and investment banks created any good highlighted renewable energy as one of the exceptions to the post-financial crisis rule that the Wall Street fat cats were just in it for the money.
Which brings us to our basic premise...
6. Social good is not a market reality.
Here's some news for you (sit down first, please): They're just in it for the money when it comes to renewable energy, too! That's capitalism folks.
If the solar crash of 2011, the LED energy efficient lighting crash of 2011, and the electric car battery maker crash of 2011 -- to name a few examples of all the great renewable energy capital markets ideas that went south in a hurry this past year -- show us anything, it's that rhetoric about long-term secular adoption trends and the more hazy "social good" argument don't have any place in an IPO filing, and often will crush your investment portfolio when held for the long-term.
These companies have made a lot of money for investment bankers, a lot of money for executives through stock options, and a lot of money for the hedge funds and other shorters smart enough to see through the rhetoric and markets' disconnect and play these stocks as nothing more than convenient fast money vehicles, and ride these stocks like First Solar and
all the way down in 2011.
The returns paint
a grim picture of all the good social good does for investors who buy into the social good argument in industries still in their infancy and without a clear road to sustainable profits:
As solar analyst Paul Leming of Ticonderoga Securities, who has been in it from the beginning, recently said, "The volatility in this space has been amazing -- and I'd never bet against
the bulls telling people that Shangri-La is now right around the corner. The thought that goes through my mind is that many of these stocks have declined 90% from their peak -- FSLR $310 to $32;
$140 to ... whoops $6 (95%);
MEMC Electronic Materials
$95 to $4 (another 95%'er). There has been a one-way trade for three or four years in this group. Within that long-term secular trade, there have been too many short-term trades to count. That is going to continue."
I hope not, but I don't doubt it, and the point is, social good alone does not make for a viable business, even if it makes for a darn good trading strategy. For investors, if you've been burned, try to remember that feeling good about green energy can still make you feel very nauseous when monitoring your portfolio.
Though forget about stock market investors. The larger queasiness is knowing that all of these tired arguments about the energy wars will be dusted off once again in 2012, and there's nothing anything anyone can do about it, except ignore them.
-- Written by Eric Rosenbaum in New York.
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