FOR IMMEDIATE RELEASE
Thursday, February 11, 2010
CONTACT: Paul Tencher, Campaign Manager
401-965-3761
paul@debforvermont.com
Markowitz says “Working Families’ Tax” Wrong Idea
Taking $40-$80 out of Vermont families’ paychecks shouldn’t be on the table, neither should increasees for small businesses; cites need for fresh ideas and pursuit of aggressive economic recovery plan
MONTPELIER—Secretary of State Deb Markowitz said now is the time for creative ideas to resolve Vermont’s Unemployment Fund deficit, but taxing workers is the wrong idea at the wrong time. “Increasing taxes on working Vermonters will hurt families that are already struggling. We should instead take advantage of emergency aid available through federal programs to help us ride out economic storm.” Markowitz said the state should also step up its investigations of abuses in the system.
“A long term vision for economic recovery must be the highest priority for Vermont.” Markowitz said. “Montpelier underfunded our unemployment insurance program by increasing benefits without increasing contributions paid by employers to support the fund. Now, when we need it the most because unemployment is at nearly seven percent, the fund is out of money. President Obama has made a wise decision to boost the no-interest loans to states adversely affected by the downturn. We should use this opportunity to reset our economy, get people the help they need and start creating jobs by supporting existing businesses in Vermont that are ready to grow. The last thing we should do is take more money out of a family’s budget or spike unemployment taxes on small businesses.”
A new Senate proposal would tax the paychecks of nearly 330,000 wage earners in Vermont. The tax increase would affect the average wage earner in Vermont by about $40-$80 per year.
Vermont has already begun to seek assistance of no interest loans from the federal government to bail out the state’s unemployment fund. Markowitz said using the no interest bridge funding will give us time to grow our economy.
“Once Vermonters are back to work, and our businesses are on solid footing, it will be easier to make the necessary adjustments to the fund to make it sound. First-time filings for benefits have decreased again today and our economy will improve if we get aggressive about supporting existing businesses,” Markowitz said. “No interest bridge funding can help us ride out these down times without increasing the burden on businesses and families.”
Markowitz also said greater efforts should be made to stop fraud and abuse in the system. Even if the savings are minimal, Markowitz said that abuses to the system need to be accounted for, so that we can preserve the benefits for workers who are entitled to receive them.
The last thing we need is subsidized renewables, i.e., solar, wind, etc., that produce expensive power, which make Vermont LESS efficient when it is in dire need of becoming MORE efficient to raise household incomes and worker productivity.
The legislators and vendors are in a green world of their own. Creating relatively low-skilled jobs at enormous government (taxpayer) expenditure. Most of them should be voted out of office.
ECONOMIC EVALUATION OF A 150 KW PV SOLAR SYSTEM; WINNERS AND LOSERS by Willem Post
http://www.coalitionforenergysolutions.org/
INTRODUCTION
The purpose of this study is to determine the economics of a 150 kW PV solar system and the winners and losers.
There are various organizations that promote energy from renewables, such as wind and PV solar. They tend to see their renewables through rose-colored glasses, boost the positives, downplay the negatives. Some information presented by these organizations to the public and to public officials may not be clear or complete.
When the Vermont Legislature passed Act 45 that established feed-in-tariffs, FITs, for renewables, the law required the Vermont Public Service Board, VT-PSB, and the Vermont Department of Public Service, VT-DPS, to perform studies of the economics of renewables. The two entities performed a lot of research to obtain the best data for their studies. The spreadsheets of these studies, using the Project Cash Flow method, are available on their websites.
A side benefit of their work is that many more people have a much better insight regarding the economics of renewables, because the numbers on the spreadsheets provided a clearer and more complete picture of project cash flows than existed before. i.e., their work resulted in a much-needed reality check of the rose-colored glasses paradigm presented by proponents. As a result, the Governor and other leading officials have questioned the wisdom of proceeding with subsidizing inefficient renewable power which ultimately will make Vermont less attractive to business RELATIVE to other states.
One of the government spreadsheets is for a 150 kW PV solar system; ( Solar_Generation_Mode_150_kW_PA-2.xls )
The spreadsheet was finalized at the end of 2009. It likely has the latest input data. I took the data from the spreadsheet and imported it into my own spreadsheet which has a format familiar to financial analysts and CPAs. After some reverse engineering, the end results of the calculations in my spreadsheet are identical to the government spreadsheet. Both spreadsheets are attached.
STUDY SUMMARY
The 150 kW PV solar system installed cost is estimated at $910,630, or $6,070/kW; this is not vendor cost, but owner cost. It is expected to produce 150 kW x 8,760 hrs/yr x CF 0.13 = 171,000 kWh/yr; the VT-PSB uses CF 0.13 to account for panel aging and system outages.
Recent installations with higher per kW costs:
The Green Mountain Coffee Roasters 100 kW PV system, Waterbury, VT, owner cost $790,000, in operation Fall 2009.
The George R. Roberts Co./The Step Guys 110 kW PV system, Alfred, ME, owner cost $900,000, in operation January 2010.
Commercial PV system owners selling to the grid at FIT prices are allowed a return on investment of 12.16%
To achieve this rate, PV solar power needs to be sold to the grid at $0.335/kWh, higher than the mandated FIT = $0.30/kWh.
The system was financed with a $325,560 bank loan at 7.5%/yr for 18 years and owner equity of $585,050
The system was depreciated over 16 years.
Vermont corporate tax rate is 8.5%, federal corporate tax rate is 0.35, combined corporate tax rate is 40.53%.
THE WINNERS: OWNERS AND VENDORS
The spreadsheets show the Owner of the 150 kW PV system will be able to use the interest and depreciation deductions to shelter $625,956 of his taxable business income and avoid $625,956 x 0.4053 = $253,700 (the 6-yr sum of 6c and 6e in my spreadsheet) in federal and Vermont corporate taxes during the first 6 years. Absent such taxable business income, the IRR would be about 5% which is almost entirely due to the tax credits. The Owner will be provided by the Vermont and federal governments investment tax credits, ITCs, of $168,670 and $259,490, respectively, a total of $428,160, at the beginning of the project.
A lottery winner with a 2,200 kW PV system, the maximum under Act 45, will have a tax-sheltered income of 2,200/150 x $625,956 = $9,108,688, and avoid $3,681,751 in taxes during the first 6 years; he may need some “partners” to help out sheltering all that taxable income. The ITCs will be 2,200/150 x $428,160 = $6,279,680. Did 70% of the legislators voting for Act 45 not understand the tax shelter implications and gross inequity of Act 45 which greatly benefit a few people at the expense of everyone else? Will some of these legislators and friends become “partners” in PV solar systems? Is that the Vermont way?
To take advantage of the lucrative tax breaks, a PV solar system developer must have substantial taxable business income from sources other than the PV solar system. Developers who do not have enough taxable business income merely find some other organization (often a large bank or Wall Street financial institution with large amounts of taxable business income they wish to shelter from income taxes) that will be their “partner” and part owner for the period of time (years) that is necessary to capture the tax benefits. Then the full ownership “flips” back to the developer. The developers and “tax partners” are the big winners and ordinary taxpayers who bear the burden escaped by the PV solar system developers/”partners” are the big losers.
Pres. Andrew Jackson: When government subsidizes, the well-connected benefit the most. http://www.wind-watch.org/documents/wp-content/uploads/Schleede-High-Cost-Low-Value-Electricity-from-Wind.pdf
The Vendors will be major beneficiaries of the government subsidies for renewables. A few hundred jobs will be created by sizing and installing the renewable systems, most of which are put together with parts that are imported into Vermont. It is an inefficient use of scarce government resources to subsidize producers of expensive power and a very expensive way to create a few, hundred relatively low-skilled jobs.
Germany has found similar results. Its PV solar promotion has become a subsidization regime that, on a per-worker basis, has reached a level that far exceeds average wages, with per worker subsidies as high as $240,000. Remember, these are relatively low-skilled jobs.
Vendors claim they want to make Vermont a major exporter of renewable systems. This claim may not be realistic and achievable. It would require billions of dollars to build a suitable technological/educational infrastructure, attract and train many hundreds of suitable people, and many years of development work by highly educated, technical professionals; hardly the Vermont heritage. Vermont would need a much better business climate RELATIVE to other states to attract the resources to achieve it.
THE LOSERS: GOVERNMENTS, TAXPAYERS AND RATEPAYERS
The spreadsheets show the Vermont and federal governments, both with huge budget deficits for years to come, will collect ZERO in corporate income taxes for 25 years.
The Vermont and federal governments will provide ITCs of $168,670 and $259,490, respectively, a total of $428,160, at the beginning of the project.
Even with the government ITCs, the spreadsheets show power needs to be sold to the grid at $0.335/kWh for 25 years to provide an internal rate of return, IRR, of 12.16%; the ACT 45 PV solar FIT = $0.30/kWh.
Vermont’s ratepayers, i.e., households, commercial, institutional entities, etc., already suffering from the Great Recession, will pay (0.30-0.06)$/kWh x 171,000 kWh/yr = $41,040/yr more for their electricity over 25 years.
If all 12,500 kW PV solar power of Act 45 is implemented, the extra cost to ratepayers will be 12,500/150 x $41,040/yr = $3,420,000/yr.
If all 37,500 kW renewable power from wind, methane, hydro, etc., of ACT 45 is implemented, the extra cost will be millions more per year.
MESSAGE TO LEGISLATORS
The Clean Energy Development Fund, CEDF, normally gets about $7 million/yr from Entergy which owns Vermont Yankee. Because of the Great Recession, federal stimulus funds were received by Vermont, but Vermont’s government, to pay for Act 45, assigned about $21,000,000 to the CEDF. As a result, the CEDF 2010 Fiscal Year budget will be about $28 million. It plans to spend most of it on renewables which produce expensive power. Legislators should stop this unwise spending. However, the spending is doled out throughout Vermont and legislators are eager to point it out to voters. A conundrum. http://publicservice.vermont.gov/energy/ee_files/cedf/Annual%20Plan%20FY%202010.pdf
Why encourage inefficient producers? Efficiency Vermont claims it can produce savings at $0.03/kWh through efficiency measures. It would be wiser to augment those efforts, instead of producing power at $0.30-$0.45/kWh from renewables, as shown by the VT-PSB and VT-DPS spreadsheets. There are millions of opportunities for improving efficiency in Vermont. These efficiency measures reduce CO2 and usually have short payback periods (savings in peoples’ pockets), unlike renewables. They would create thousands of jobs in various sectors of Vermont’s economy, instead of the hundreds of jobs claimed by proponents of renewables.
Sen. Sanders obtained $500,000 of federal funds (taxpayer money) for PV solar systems at 10 Vermont schools. This is good PR for Sanders and vendors of PV solar, but it creates the false impression in communities and among parents, teachers and children, that PV solar is the way to go, when, in fact, it is the most expensive way to go, as shown by the VT-PSB and VT-DPS spreadsheets.
Sen. Sanders proposed PV solar systems on 10 million roofs. If the systems average were 5 kW, it would cost $325 billion at $6,500/kW to produce 68.62 TWh/yr of expensive VARIABLE, INTERMITTENT, mostly summer power for 30 years. The same $325 billion invested in nuclear plants would produce 315.62 TWh/yr of relatively inexpensive, STEADY, 24/7/365 power for 60 years. http://sanders.senate.gov/newsroom/news/?id=429c59fa-56c7-47a9-808d-67de390a9822
http://sanders.senate.gov/newsroom/news/?id=7b209b1c-a3bb-4811-92ca-7ed0137de06e
THE GERMAN WIND AND SOLAR EXPERIENCE
Germany’s experience with renewable energy promotion is often cited as a model to be replicated elsewhere, being based on a combination of far-reaching energy and environmental laws that stretch back nearly two decades. German renewable energy policy, and in particular the FIT scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country’s energy portfolio. By the end of 2008 this had led to Germany having the second-largest installed wind capacity in the world, behind the United States, and largest installed PV solar capacity in the world, ahead of Spain. This explains the claims by proponents that Germany’s FITs are a great success.
However, installed capacity is not the same as production. By the end of 2008 the estimated share of wind power in Germany’s electricity production was 6.3%, followed by biomass-based power (3.6%) and hydro power (3.1%). The amount of electricity produced through PV solar was a negligible 0.6% despite being the most subsidized renewable energy, with a net cost of about $12.4 billion for 2008.
Over the 20-year FIT period, the PV solar power subsidies may total $73.2 billion for systems installed between 2000 and 2010. Over the 20-year FIT period, the wind power subsidies may total US $28.1 billion for wind turbines installed between 2000 and 2010. Vermont, a poor state, would be wise not to replicate Germany’s experience.
Recently, Germany announced it will reduce its FITs for renewables at a faster pace than under current law and it will continue operating its nuclear plants. Sweden decided to continue operating its nuclear plants and the UK will not be far behind. President Obama announced an expansion of loan guarantees for nuclear plants from $18 billion to $54 billion in his 2010 State of the Union message. Rational people have realized CO2 targets cannot be achieved without nuclear power and are doing something about it.
http://www.rwi-essen.de/pls/portal30/docs/FOLDER/PUBLIKATIONEN/GUTACHTEN/P_RENEWABLE+ENERGY+REPORT+RWI+FORMAT.PDF
http://www.dw-world.de/dw/article/0,,4110890,00.html
http://www.spiegel.de/international/world/0,1518,605957,00.html
THE FRENCH NUCLEAR EXPERIENCE
France gets about 80% of its power from CO2-free nuclear, the rest mostly from CO2-free hydro.
France exports some power to the UK, Germany, Spain and Italy.
France has designed its nuclear plants to be load following.
France uses its hydro plants to smooth any variable, intermittent power on its grids.
France has reprocessed its used nuclear fuel and reused it in its reactors for 30 years. The remainder is stored in one building.
France has one of the lowest electricity rates in Europe and these rates are nearly independent of fossil fuel prices.
France needs to make less future investments RELATIVE to its competitors to upgrade/replace/expand its mostly CO2-free power systems; an enviable competitive position to be in which has not gone unnoticed in Germany, the UK and Sweden, all of which are RETHINKING nuclear power, because they have realized they cannot achieve the required lower CO2 emissions with renewables.
http://en.wikipedia.org/wiki/Nuclear_power_in_France
http://www.ocrwm.doe.gov/factsheets/doeymp0411.shtml
http://www.fissilematerials.org/ipfm/site_down/rr04.pdf
http://www.world-nuclear.org/info/inf40.html
http://www.nytimes.com/cwire/2009/05/18/18climatewire-is-the-solution-to-the-us-nuclear-waste-prob-12208.html
A LESS COSTLY, MORE EFFICIENT WAY FORWARD FOR VERMONT
Vermont has one of the LOWEST per capita emissions of CO2 in the the US, largely because of CO2-free power from Hydro-Quebec and Vermont Yankee that provide about 65% of Vermont’s power. Transportation, and commercial and residential buildings produce about 71% of Vermont’s CO2 emissions. Given Vermont’s CO2 condition, one would think improving the efficiency of vehicles and buildings would be at the top of the legislative agenda, instead of dabbling in renewables. But legislators dislike the mundaneness of improving efficiency. They, aided by renewables proponents, like the feel good, magic aura of expensive renewable power.
Legislators came up with renewable power schemes that:
- keep a lot of state employees and highly-paid outside consultants busy with studies, administrating, etc. ; a built-in constituency for renewable power.
- are capital intensive, when capital is scarce,
- require large subsidies and investments per job created.
- produce expensive power per lb of CO2 avoided, when large quantities of much less costly, CO2-free power that requires NO capital investments from Hydro-Quebec and Vermont Yankee are readily available to Vermont,
- waste taxpayer money, when Vermont’s aggregate household income and tax revenues are dropping and will be stagnant for some years.
Subsidies usually SHIFT jobs from one sector to another; there is little NET job gain. Job gains usually come from becoming more efficient and improving productivity and BROADLY DISTRIBUTING the benefits of those efficiencies. Source: Economics 101.
A much more efficient use of scarce federal and state funds would be to cancel/reduce/place-on-hold the existing incentives for expensive renewable power, and instead provide major incentives to:
- reduce the energy use of buildings (greater R-values, less air infiltration, greater use of efficient light bulbs, greater efficiency ratings. for heating and cooling systems, stricter and ENFORCED statewide building energy codes, increased training to build efficient buildings).
- build more compact communities to reduce the time and energy to travel from residences to workplace buildings.
- construct gas-fired combined cycle gas-turbine, CCGT, power plants that have electrical efficiencies up to 60% and produce about 0.25 lb of CO2/kWh. Some of the CCGT plants could serve for district heating with a thermal/electrical efficiency up to 85%, as is done in Germany, Sweden, Denmark, the Netherlands, etc. Note: coal-fired power plants are about 30% efficient, produce about 2.0 lb CO2/kWh, plus many pollutants that weaken/sicken/kill fauna (includes us) and flora.
Examples of annual building energy use for heating, cooling and electricity:
Vermont State Government buildings average 107,000 Btu/sq ft/yr. http://www.publicassets.org/PAI-IB0806.pdf
The XEROX Headquarters, Stamford, CT, built in 1978, with passive solar, but no active solar sytem, averages 28,400 Btu/sq ft/yr.
France and Germany are building high-rise office buildings with passive and active solar that use less than 10,000 Btu/sq ft/yr.
It is important to get all households involved with reducing CO2, not just the top 5% of households which benefit the most from the existing incentives.
Pres. Andrew Jackson: When government subsidizes, the well-connected benefit the most.
Major incentives for the bottom 90% of households are needed to:
- increase the efficiency of their house envelopes, appliances, lighting, heating and cooling systems,
- replace their old, polluting, inefficient wood and coal stoves and oil furnaces with new, clean-burning, efficient ones,
- exchange their 5 or more year-old gas guzzlers (20 mpg or less) with new high mileage (30 mpg or more) vehicles; the higher the mileage, the greater the incentive. http://www.fueleconomy.gov/feg/FEG2010.pdf
We should develop power from non-CO2 renewables and non-CO2 alternatives, such as solar, wind, geothermal, nuclear, etc., but significant reductions of CO2 emissions from them wiil be years or even decades away. However, efficiency improvements we can do NOW. They would reduce CO2 emissions NOW. They would create many more jobs than renewables, especially for the depressed building and automotive sectors. No studies, research, demonstration and pilot plants, etc., will be required. Regarding global warming, time is of the essence.
The no-interest bridge loan from fed to state government sounds like a good way to get our economy going again. This allows our businesses and workers to gain their footing during this down-turn. Deb Markowitz sounds like the type of Governor we need at this time.
Deb Markowitz sounds like she always does, promoting Deb Markowitz. there is nothing here but vagueness and no ideas. NO Markowitz, NO Markowitz. She knows not how to govern at all.