Energy Secretary Rick Perry hit a raw nerve in Washington recently when he announced his department will undertake a study of the possible impact that federal regulations have had on U.S. electric grid reliability. Essentially, the Department of Energy will look at "critical issues central to protecting the long-term reliability of the electric grid." The review will consider whether "regulatory burdens" and "mandates and tax and subsidy policies" for renewable energy are forcing coal units into retirement.
This is sensible policy. After all, the toll that recent regulations have taken on affordable power production is well documented. In 2012 the Mercury and Air Toxics Standards rule alone forced almost 20 percent of the U.S. coal fleet into retirement, and saddled the power industry with almost $10 billion in annual costs — and all for a mere $6 million in public benefit. The U.S. Energy Information Administration has estimated that the more recent Clean Power Plan would cut coal production by 240 million tons annually. And Duke University's Nicholas School reported that government regulations threatened the viability of more than half of U.S. coal plants; low natural gas prices threatened the viability of less than 10 percent.
Evidently, though, an examination of these impacts on electricity production crossed a red line by possibly raising awkward questions about the massive subsidization of renewable energy. In an April 28 letter to Secretary Perry, the nation's wind and solar trade groups expressed alarm. With their taxpayer-funded subsidies potentially under attack, they all but questioned what business Secretary Perry's energy department has in studying energy.
Their letter suggested that the strong, recent growth of wind and solar — turbocharged as it has been by growing federal largesse — hasn't hurt coal. Neither, they imply, have Obama-era regulations. Instead, they blame coal's woes on cheaper alternatives like natural gas. Even some in Congress weighed in against the secretary, accusing him of a "thinly disguised attempt" to harm renewables in favor of "less economic electric generation technologies" like coal.
This is nonsense. For much of the past eight years, the Environmental Protection Agency has enjoyed unprecedented authority over the U.S. power grid — and has given renewable fuels a free ride. But now that the EPA is going "back to basics" under Administrator Scott Pruitt, energy supply issues are suddenly being handed back to the Energy Department. Thus the palpitations aplenty among fledgling renewable projects.
Since 2007, federal portfolio requirements, "net metering," and annual subsidies have sheltered the renewable energy sector from market competition. And what amounted to roughly $1 billion in assistance 10 years ago has swelled to more than $11.6 billion today. Without these subsidies, wind and solar would have to compete in the same Game of Thrones-style energy market as "less economic" sources of electricity.
Apparently, it's okay for coal to struggle against cheap natural gas. But renewable fuels would rather not, thank you very much.
The problem isn't the undeniably impressive growth of wind and solar power. It's how this growth has come about and the resulting impact on competing fuels. When a friendly government lowers your operating costs through tax breaks, raises your competitors' costs with regulations, and mandates a market for your product — all while shielding your customers from paying for the grid they use — it's disingenuous to announce this growth as real, much less revolutionary. That's because it's easy to get pricing power if you have enough political power. Hefty subsidies for renewables, like steroids for Olympic medalists, tarnish the achievement.
Subsidies are never free, especially not for the half of all Americans who now describe themselves as "lower class." Even measured by the jobs required to generate electricity, renewable fuels are costly. Wind creates 2,200 jobs per MWHr, and solar 98 jobs — while coal creates 7,800.
Still, some senators critical of Perry's report view green subsidies as necessary sacrifices that taxpayers must make to help wind and solar companies win the race for power market domination — and help affluent consumers indulge their green vanity in the bargain. But U.S. taxpayers left paying more for energy — and a smaller supply of it — may soon disagree.
Luke Popovich is vice president for external relations at the National Association of Mining (NMA).
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