By Paul Blair
Over the past 18 months, President Trump has taken great strides to fulfill a number of major campaign promises. One major promise was the commitment to help communities harmed by the decline of coal and nuclear energy. To that end, the president recently directed Energy Secretary Rick Perry to prevent retiring coal and nuclear plants from shutting down prematurely.
Shortly afterward, a leaked policy document from the National Security Council outlined a number of policy tools that the Department of Energy (DOE) could use to keep the plants afloat. In response, groups across the political spectrum and throughout the energy sector have criticized the administration for “putting its thumb on the scale” for coal and nuclear.
Many of these critiques overlook an important, big-picture policy question: How did we get here in the first place?
One major contributing factor is market forces. Inexpensive natural gas has benefited countless households by reducing energy prices. A DOE report released last year showed that the growing percentage of natural gas in the country’s total electricity generation, driven by an expansion of domestic drilling, is a primary driver of coal and nuclear plant retirements.
There’s another contributing factor, however, that is less obvious and getting lost in the national conversation: Decades of taxpayer subsidies and mandates for renewable energies have greatly distorted the energy market and made coal and nuclear energy artificially uncompetitive in terms of cost.
These are the same distortions in the marketplace that fiscally conservative organizations, including Americans for Tax Reform, have opposed for years.
New national energy policymaking doesn’t happen in a vacuum, so it’s important to examine the root causes of problems confronting this administration on the energy front, especially when it comes to the convoluted and complex local, state, and federal policies at play.
State governments across the country have enacted illogical solar net metering policies, green energy mandates known as renewable portfolio standards, special-treatment financing including Property-Assessed Clean Energy loans, and tax credits targeted to green energy production.
At the federal level, President Barack Obama enacted increasingly aggressive rules on energy efficiency standards and practiced administrative policies that favored “green” energy throughout executive agencies, in areas as unexpected as the Treasury Department or the Department of Defense. The Obama administration also worked with Congress to dramatically increase spending levels on programs for renewable energy such as the DOE Office of Energy Efficiency and Renewable Energy and throughout the Environmental Protection Agency.
The federal government has also extended billions in favorable tax treatment to green energies. The main program for the wind energy industry, the wind production tax credit (PTC), for example, has been repeatedly extended and expanded since the early 1990s. Most recently, in the 2015 omnibus appropriations package, the PTC and the solar Investment Tax Credit were extended for five years. History suggests these programs could stick around even longer.
Combined, these subsidies and mandates have led to huge distortions in the energy market that have directly contributed to where we are today. The distortions are so bad that many wind and solar companies bill negative pricing – a loss of money compared to genuine market costs – into the wholesale power market, then sell it to still turn a profit. How? Government and taxpayer-backed green energy welfare programs on a massive scale.
In the meantime, the markets often fail to adequately compensate coal and nuclear energies for their contribution to grid reliability and resiliency. During last year’s cold snap in the Northeast, natural gas pipelines froze, and wind and solar could not generate enough power to meet demand. The region resorted to importing liquefied natural gas from Russia, of all places.
In a future without coal and nuclear energy available, this scenario may become more common.
States have been trying for decades to have so-called competitive wholesale markets while picking and choosing the favored energy sources. They can’t have it both ways.
Regardless of what path Secretary Perry chooses, this is clear: The current energy market is far from being a free market. Policymakers should seek solutions that promote the security, resiliency, reliability and affordability of power markets in the long term. A good start is eliminating every single green energy subsidy and mandate that got us here in the first place.
This commentary by Paul Blair, director of Strategic Initiatives at Americans for Tax Reform, appeared in the Washington Examiner and is reprinted with permission by the Georgia Public Policy Foundation. The Foundation is an independent, nonprofit think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.
© Georgia Public Policy Foundation (June 22, 2018). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.