Despite all the attention paid to the convulsive political change President Trump has brought to Washington, relatively little attention has been focused on a very significant policy shift. For the first time in almost a decade, the Department of Energy (DOE) will once again manage energy issues instead of the Environmental Protection Agency (EPA).
Most Americans probably can. It would likely strike them as sensible to move the EPA back to basics so that it can once again focus on its core mission of clean air and water under Administrator Scott Pruitt — and leave the stewardship of the nation’s electricity grid to Energy Secretary Rick Perry.
But as so often happens, what middle America views as sensible strikes Washington as deeply concerning. Take the recent announcement that the DOE will study the impacts of federal regulations on America’s electrical grid. Perry said he will examine “critical issues central to protecting the long-term reliability of the electric grid,” including whether “regulatory burdens” and “mandates and tax and subsidy policies” for renewable energy are forcing coal units into retirement.
This fundamental consideration was completely ignored by the Obama-era EPA while it busily cobbled together the Clean Power Plan. And the Federal Energy Reliability Commission (FERC) also declined to assess the plan’s impact despite the wholesale “transformation” of the power grid promised by an agency heavily staffed with air quality statisticians and wetlands hydrologists.
The results of these regulations are now painfully evident. In 2012, the Mercury and Air Toxic Standards rule — which limits emissions from power plants — alone forced almost 20 percent of coal plants 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 Energy Information Administration (EIA) estimated that the Clean Power Plan would cut coal production by 240 million tonsannually.
And contrary to the self-serving argument that natural gas, not EPA regulations, caused coal’s decline, researchers at the Duke University Nicholas School of the Environment reported that government regulations threatened the viability of more than half of the country’s coal plants while low natural gas prices threatened less than 10 percent.
All of these findings suggest the need for just the kind of impact study the administration is now proposing.
Evidently, though, Perry crossed a red line. In an April 28 letter to the secretary, the nation’s wind and solar trade groups expressed shock at the audacity of the Energy Department to study energy.
Why? Because his findings could raise awkward questions about the massive impact of regulations and renewable energy subsidies on grid reliability and energy diversity. 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. Since 2008, the EPA has enjoyed an unprecedented authority over the U.S. energy grid, giving renewable fuels a free ride. Federal portfolio requirements, net metering — which gives consumers credits for returning unused energy to the power grid — 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.
Now that Pruitt is getting the EPA out of the energy business, energy supply issues are sensibly being handed back to the DOE. Thus there are palpitations aplenty among fledgling renewable projects, fearing a less generous benefactor may force them to struggle in the Hobbesian “war of all against all” energy market ruled by natural gas.
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. Consider the largesse extended to renewables in recent years: When a friendly government lowers your operating costs with tax breaks, raises your competitors’ costs through regulations and mandates a market for your product — all while shielding your customers from paying for the grid they use — that growth isn’t real, much less revolutionary. It’s easy to get pricing power if you have enough political power.
Subsidies are never free, though, especially not for the millions of 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 megawatt hour, while solar creates 98 jobs. But coal creates a whopping 7,800 jobs per megawatt hour.
To some, green subsidies are necessary sacrifices that taxpayers must make to help wind and solar win the race for power market domination and potentially help affluent consumers indulge their green vanity. But U.S. taxpayers left paying more for energy — and for a smaller supply of it — may soon disagree.