“It is error alone which needs the support of government,” Thomas Jefferson once observed. “Truth can stand by itself.”
I’ve always thought Jefferson’s observation could describe government playing favorites among consumer choices. A product that works effectively and efficiently at a good price doesn’t need government to support it. It can stand by itself. But when government uses incentives, disincentives, and regulations to “transition” people away from a product, people are left worse off, and the economy suffers.
If only President Joe Biden thought that way about energy. His signature legislative victory, the Inflation Reduction Act, gave a massive boost to federal incentives for renewable energy projects: $369 billion in incentives and tax credits over 10 years.
The Biden administration claims the act will “save American families up to $38 billion on electricity bills.” This is possible, according to the administration, because “clean energy sources like wind and solar are cheaper to operate once they’re built; unlike gas and coal plants, there are no fuel costs.”
Suppose that was actually true. Biden would have taxpayers pay $369 billion to save electricity customers $38 billion. Even if the stated benefits were real, they’d be only about one-tenth of the cost — a great deal for electricity customers but a raw deal for taxpayers.
The problem is electricity customers and taxpayers are the same people. So it’s just a raw deal, period, and it gets worse the more it’s studied. Last spring, for example, Goldman Sachs forecasted that the Inflation Reduction Act’s cost would reach $1.2 trillion. Wood MacKenzie projected that the cumulative cost of Inflation Reduction Act tax credits for utility-scale renewables and storage would fall somewhere between $2.5 trillion and $3 trillion.
Supposedly, taxpayers would underwrite so much of the costs of constructing solar and wind facilities (the “once they’re built” part) that the same people, now called ratepayers, wouldn’t have to cover as much of those costs in their electricity bills. It’s a special kind of shell game in which the patsy plays himself.
It is true that solar and wind don’t have “fuel costs.” Sun and wind are provided by nature for free — when and only when nature chooses to provide them at all. But the implication that fuel costs are the only costs that matter once a plant is built is flat-out wrong. There are still costs for operations, maintenance, property taxes, and transmission, as well as costs unique to intermittent renewables: load-balancing costs, costs imposed on reliable plants, and overbuilding and curtailment costs.
Renewables demand overbuilding to compensate for their unreliability. They are land-intensive and require more transmission infrastructure. They need reliable, dispatchable backup generation (usually natural gas). They might be supplemented with expensive battery arrays that can discharge their stored power for only one to maybe four hours. All these things add to electricity bills.
As Massachusetts Institute of Technology professor Richard Schmalensee explained in MIT’s Climate Portal, the intermittent nature of wind and solar means, “You get what you get when nature gives it to you. That’s just a more complicated system, and it’s not going to be cheaper.”
Meredith Angwin showed repeatedly throughout her landmark book, Shorting the Grid, that subsidized renewables have many anti-competitive advantages over traditional, reliable energy sources. As a result, these reliable forms, including oil and gas, are often pressured to be retired prematurely.
But reliable baseload and dispatchable sources simply cannot be replaced by systems waiting for whatever nature decides to give at any particular moment. Blackouts and warnings of blackouts promise to be an ever more frequent feature unless we return to putting reliability and affordability at the top.
Electricity is a basic household necessity, not a luxury item. Whether by outright rates or taxes, raising household costs for electricity leaves families with less money for their other needs. Providers of those goods go wanting. People are made relatively poorer than we should be.
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We know what works, and we are abundant in energy resources. Our greatest resource is free people with free minds. American history is replete with technological breakthroughs by garage geniuses and patient tinkerers seeking to solve the seemingly intractable problems of their time.
History is also littered with the failings of command economies directed by unimaginative autocrats and functionaries. Applying a command approach to energy only guarantees worse outcomes. Our “unsolvable” problems in energy need freedom and time, not impatience and coercion.
Jon Sanders is the director of the Center for Food, Power, and Life at the John Locke Foundation in Raleigh, North Carolina.
