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Clean Batteries and Dirty Coal: Your Tax Dollars at Work

How would you like to invest in a start-up that makes advance renewable energy storage systems? Before investing, you should know that this particular company has:

  • Never made a profit.
  • Piled up losses of $44 million since going public in 2007.
  • Replaced its CEO because he was paid both as an employee and independent contractor.
  • Seen its stock tumble from $6 to 70 cents a share since going public in 2007

Actually, you've already invested. The company is called ZBB Energy, and it's seeking to commercialize zinc-bromide technology developed in Australia back in the 1980s. This week, President Obama visited its U.S. headquarters in Menomonee Falls, Wisconsin. According to the White House:

ZBB Energy Corporation is using $1.3 million in Recovery Act State Energy Program loans to fund a $4.5 million factory renovation to triple their capacity to manufacture flow batteries and power systems. As a result, the company has already retained a dozen workers and will hire about 80 new workers over time.

"Companies like this," the president said, "are showing us how manufacturing can come back right here in the United States of America, right back here to Wisconsin."

Well, maybe -- but the company will have to find some customers and generate some profits for its comeback to be meaningful. The $1.3 million may sound like pocket change, and it is, but ZBB also has secured a $14.68 million Recovery Act 48c Advanced Energy Manufacturing Tax Credit to build a new factory. It's one of 183 projects in 43 states to get $2.3 billion in Recovery Act tax credits for clean energy manufacturing projects. The Wall Street Journal editorialized about ZBB today under the headline Uncle Sam, Venture Capitalist.

Meanwhile, another energy-related business in Wisconsin is enjoying an Obama administration subsidy -- and this time, the controversy is being generated by the left. Bucyrus, which is based in South Milwaukee, manufactures mining equipment. Unlike ZBB, it doesn't need government help to survive; the company's equipment helped excavate the Panama Canal and it generated $2.6 billion in revenue and $312 million in net income last year.

The controversery has arisen because the Export-Import Bank of the United States is moving forward with a $600-million loan guarantee to support the sale and export of Bucyrus mining equipment to a company called Sasan Power Ltd., for a 3,960 megawatt (meaning very big) coal-fired power plant in Madhya Pradesh, India. You read that right -- while it's becoming increasing difficult, thank goodness, to build new, polluting coal plants in the U.S., your government is supporting the construction of a coal plant in India. It agreed to go forward when the project's backer, Reliance Power, agreed to develop a 250 megawatt renewable energy facility as well. The Ex-Im Bank, as it's known, is also considering backing a 4,800 megawatt coal-fired plant in South Africa.

The rationale for the government loan guarantee is, of course, jobs. In a news release, Bucyrus CEO Tim Sullivan praised Wisconsin's governor, senators and congresspeople for helping to persuade the Ex-Im bank -- which initially turned down the loan for environmental reasons -- to reverse itself. "The nearly 1,000 U.S. jobs supported by the project include over 300 family-supporting jobs in the Milwaukee region and approximately 650 additional U.S. jobs in Bucyrus' supply chain," the company said.

But jobs at what price? Friends of the Earth, the Sierra Club and a group called Pacific Environment all oppose the loan because of the new plant will be one of the largest sources of global warming pollutants on earth. Doug Norlen of Pacific Environment said:

The Ex-Im Bank's ongoing fossil fuel binge indicates a clear unwillingness of the agency to adhere to Congressional climate change directives and systemic bias towards financing fossil fuel projects.

Writing at Huffington Post, Michelle Chan of Friends of the Earth says:

What's particularly worrying is the precedent that this investment will create. The Sasan deal was the first major test of Exim's new carbon policy (which resulted from a 2002 lawsuit that Friends of the Earth filed in response to the agency's failure to consider the greenhouse gas implications of its financing activities). Although the policy is not nearly as robust as Friends of the Earth would have hoped, it does empower the Exim Board to reject applications at an early stage because of their carbon emissions. The fact that congressional and White House pressure caused Exim to reverse course on a decision made under this new policy does not bode well for the other four big coal deals in the Exim pipeline, including the 4,800 megawatt Kusile coal power project in South Africa, which would emit 30.5 million tons of carbon dioxide annually.

Needless to say, ZBB Energy will have to make a whole lot of clean energy storage devices to offset the emissions of big coal plants in India and South Africa, which, to be fair, will probably deliver electricity to lots of people who need it.

What's most worrisome here is the big picture: The Obama administration, which already owns big chunks of GM, Chrysler and Wall Street, is during a time of record budget deficits intervening in ever-more specific ways in the economy. This is industrial policy at its worst, picking winners and losers, usually in the name of jobs, whether green or in the case of Bucyrus, coal-black. Funny thing, but these loans and grants also have a way of flowing towards politically-connected projects in swing states.

This isn't to say that the government should keep its hands off the energy business. That's a pipe dream, pun intended. But if the administration invested lots more in basic energy research and higher education, enacted a stiff revenue-neutral carbon tax and used the proceeds to reduce payroll taxes, its chances of creating sustainable jobs would be a lot greater. There'd be fewer ribbon-cuttings, for sure, but more prosperity and less waste.

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