Thursday, September 01, 2011

U.S. Energy Is A Mess, And Not Just From Irene

Stop wondering whether infrastructure spending is going to jump-start a U.S. economic recovery, despite any official job-growth plans driven by the broken window fallacy.  Utilities in areas back east that were most heavily affected by Hurricane Irene are mobilizing every spare resource they have to restore knocked-out energy grids.  That means it will be months before the status quo as of August can be restored.  Any capital outlays these utilities have planned will be diverted into emergency maintenance and repair.  Rates will rise for neighborhoods in unaffected areas with functioning grids to subsidize these expenses, squeezing businesses' cash flow as they pay more for the same amount of energy used. 

Federal spending on new enterprises in renewable energy won't help in the short run either.  Remember what I mentioned yesterday about solar companies going down the tubes even after getting big bucks from Uncle Sam?  That doesn't prevent the industry from dangling a carrot in front of politicians, promising . . . what exactly?  Campaign contributions after the next round of government loan guarantees?  It's funny how that article mentions First Solar (FSLR) and LDK Solar (LDK) as big potential winners.  Their stock prices have been totally hammered this year.  LDK, a Chinese company, is suffering as much from overcapacity in solar panel production as American companies like LDK.

China isn't putting all of its eggs in the solar basket.  It continues to develop its nuclear energy sector to generate the baseload power that solar can't produce.  Let's see the U.S. government's proposed infrastructure bank allow for investment in nuclear energy.  It couldn't possibly turn out any worse than Uncle Sam's failed loan guarantees for bankrupt solar producers. 

Full disclosure:  No positions in FSLR or LDK at this time.