A new report by a center-right think tank takes aim at the pros and cons of federal subsidies versus market forces when it comes to the recent U.S. energy boom, while suggesting the Trump administration’s latest push to prop up coal and nuclear plants is the wrong direction to go.
“When you don’t have competition, and you have a lot of government intervention, you might get the policy outcome that is desired, but you’re not necessarily going to get the most cost effective policy,” said Philip Rosetti, energy director at the American Action Forum, in an interview with the Washington Examiner, providing an exclusive preview of the findings of his forthcoming new report.
The report, “America’s Energy Revolution 101: Lessons Learned,” looks at the policies that led to the dramatic rise in both fossil energy resources from the shale boom and the cost reductions in solar and wind technologies.
Even though the report does not evaluate President Trump’s latest venture to save uneconomic coal and nuclear plants for national security reasons, Rosetti does concede that his findings are applicable.
Although the particulars of Trump’s proposal with regard to coal and nuclear are not yet known, it is hard to say exactly how the market will be affected, said Rosetti.
“But in general, if you have a government policy, which is forcing a different ordering of capital than what the market finds most efficient, then that is going to raise cost, it’s going to carry inefficiencies, and most likely those are going to get passed on to consumers,” he explained.
“The ‘Energy Revolution’ marked rapidly falling energy prices in oil, natural gas, wind, and solar power, which has resulted in Americans spending $431 billion less on energy annually,” according to the new report’s findings. But not all policies that led to the energy boom are created equal, and the task of policymakers going forward will be to promote those that actually work best for consumers, according to Rosetti.
“Numerous policies contributed to the Energy Revolution, but they were not equally effective,” according to the report’s summary. “Policies aimed at early-stage innovation were enormously beneficial for both the economy and the environment, but policies aimed at expanding government-preferred energy deployments sacrificed economic benefits for environmental ones.”
The report says early-stage research and development, which helped along the advancements in drilling that led to the shale energy boom, as well as programs like the Energy Department’s Sunshot solar program, should be the focus over more direct subsidies like tax credits for wind and solar, according to Rosetti.
“The lesson to be gleaned is that market conditions are enormously important to the effectiveness of energy policies, early-stage investments are better than later-stage ones, and attempts to force outcomes through policy can be an expensive endeavor,” according to the report’s summary.
