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We Must Eliminate Renewable Energy Subsidies to Ensure Reliable, Affordable Electricity

November 29, 2017

Republicans in the U.S. House of Representatives recently took a step toward ensuring Americans have access to affordable electricity at the flip of a switch.

Republicans in the U.S. House of Representatives recently took a step toward ensuring Americans have access to affordable electricity at the flip of a switch, by proposing as part of their tax reform package to reduce the wind Production Tax Credit from its current rate of 2.3 cents per kilowatt hour of electricity produced to 1.5 cents.

Unfortunately, some Senate Republicans, including Chuck Grassley of Iowa, seem to favor policies that make our electricity system more expensive and less reliable and incentivize ineffective state-level policy in the form of renewable energy mandates.

Wind and solar receive more federal subsidies than any other form of energy. In 2013, the federal government shelled out $5.9 billion to owners of industrial wind turbines and $5.3 billion for solar producers. In stark contrast, oil, coal and natural gas received just $3.4 billion combined in tax credits.

There are two main subsidies for renewable energy: the wind PTC discussed above and the solar Investment Tax Credit, which provides a 30 percent tax credit for those who purchase and install solar energy systems. Without these generous subsidies, very few wind or solar installations would be built, because generating electricity from wind or solar is much more expensive than from conventional power plants.

Contrary to the common misconception that wind and solar are able to generate affordable electricity because they have no fuel costs (the wind and sunlight are free), electricity generated from wind is 2.5 times more costly than generating electricity from existing coal, nuclear and natural gas power plants, and solar is 3.5 times more costly. The subsidies paid to the owners of wind and solar systems hide the true cost of these expensive sources of energy and cushion states from the negative consequences of their detrimental policies mandating the use of renewable energy.

Twenty-nine states and the District of Columbia currently have in place some form of renewable energy mandate, which requires the use of less efficient renewable energy sources in states’ electricity generation supply. These mandates, which are enabled by federal subsidies, are a primary reason why people choose to install wind turbines or solar panels. In fact, according to Lawrence Berkeley National Labs, 62 percent of the growth in non-hydroelectric renewable energy generation was installed largely as a result of state-level renewable energy mandates.

States with higher renewable energy mandates have seen electricity prices skyrocket over the past two decades, even though large portions of costs related to renewable power have been footed by federal taxpayers over the same period. For example, California has a law requiring the state to source 50 percent of its electricity from renewable sources by 2030. While this mandate has resulted in substantial investments in wind and solar, electricity prices have soared in recent years; residential electricity prices in California are now 34 percent higher than the national average.

Not only have wind and solar made electricity in California more expensive, they have also made the power grid less reliable, because wind and solar are intermittent and can only produce electricity when the sun is shining or the wind is blowing. This may seem trivial, but it is critically important.

Because there is no easy or cost effective way to store electricity, it must be produced at the very second it is needed. This means natural gas generators must be able to quickly come online to produce electricity when there is no sunshine or wind available.

Making matters even worse for Californians, the natural gas plants used to ensure Californians can access electricity at the flip of a switch are going out of business because they cannot sell enough electricity to make up for their high operating expenses, which are in part a result of California’s energy mandates. As a result, California is now subsidizing natural gas plants to stay online so families can keep the lights on.

Eliminating subsidies for wind and solar is not simply political theater, it is imperative to guarantee Americans have access to affordable, reliable electricity. Senate Republicans should take the much-needed step to remove market-distorting energy subsidies now, or else they’ll be forced to follow the California model of subsidizing all forms of energy in the future.

[Originally Published at the Orange County Register]

Article Tags
Energy
Author
Isaac Orr is a research fellow for energy and environment policy at The Heartland Institute. Orr is a speaker, researcher, and writer specializing in hydraulic fracturing, frac sand mining, agricultural, and environmental policy issues.
iorr@heartland.org

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