June 19, 2018

Fake Support for a Free Market in Energy

All of a sudden, everyone on the Left wants “free markets in energy policy.” As someone who’s advocated for that for, oh, about three decades, this riff should be music to my ears. But is laissez faire energy policy really what liberals are seeking?

All of a sudden, everyone on the Left wants “free markets in energy policy.” As someone who’s advocated for that for, oh, about three decades, this riff should be music to my ears. But is laissez faire energy policy really what liberals are seeking?

First, some context. A few weeks ago, liberal activists leaked a draft of a Trump administration directive that would order utilities to purchase coal and nuclear power as part of their energy mix in supplying electricity to homes and businesses. There are good arguments for and against this policy — I’m fairly neutral — but what was fascinating was the indignant response from those on the Left who hate fossil fuels. “Crony capitalism!” they shrieked in unison. Catherine Rampell, an economic columnist at The Washington Post, moaned that President Donald Trump “is wielding the power of the state to keep uncompetitive companies in business, and costing taxpayers and consumers lots of money in the process.” “If that doesn’t count as ‘picking winners and losers,’ it’s hard to say what would,” Rampell wrote.

The Los Angeles Times slammed the Trump plan as “a preposterous idea”: “Continuing to operate financially nonviable power plants and forcing grid operators to buy power they don’t need or want is an unacceptable governmental intrusion into the power market that, by one analysis, would needlessly cost consumers hundreds of millions of dollars.”

This could cost hundreds of millions of dollars? That’s bad, for sure, but have you ever heard the Los Angeles Times rail against subsidies for wind and solar power? I haven’t. The Obama administration’s policy was to try to bankrupt coal, oil and other fossil fuels through regulation, while enriching their renewable energy pals in Silicon Valley with lavish subsidies.

Remember Solyndra? That was the company that was going to revolutionize solar power, and it went bankrupt after the Obama administration gave the firm hundreds of millions of dollars. All told, $150 billion was pipelined into the green empire under George W. Bush and Barack Obama, and most of the money funded such fiascoes. But now Trump is the one who is accused of “picking winners and losers”?

An even bigger farce is the idea that Adam Smith’s invisible hand of free-market forces is what is driving certain nuclear power and coal plants into bankruptcy. (Coal still provides five times more electric power than wind and solar combined.) Rampell of The Washington Post explains: “The reason these [coal and nuclear] plants are struggling, after all, is that they can’t compete with cheaper natural gas and renewables.” That’s half-true. Yes, $3 natural gas prices have revolutionized the electric power markets and driven down costs.

But the idea that renewables are “cheap” is a lie, and those on the Left know it. Let’s be clear about an economic reality that environmentalists have spent four decades trying to hide: Without massive government subsidies, there would be no wind or solar energy to speak of. They are complete creatures of government favoritism, and after 30 years, we still can’t cut the umbilical cord.

Consider how gargantuan the green-energy subsidies are. First, wind and solar receive a tax credit that is basically a 35 percent-off coupon for the energy they supply, with taxpayers picking up the tab. If coal or nuclear power got a 35 percent taxpayer subsidy for every kilowatt of electricity they supplied, they would be basking in profits. I helped write and negotiate the just-passed Trump tax bill. When we tried to get rid of the renewable energy tax credit (i.e., create a “free market in energy”), the green lobby went ballistic and told Republicans this would put much of the industry out of business.

For every dollar of subsidy that coal and nuclear power receive, wind power gets almost $5 and solar receives about $20. This does not even include the biggest subsidy of all: About half the states have renewable-energy standards requiring utilities to buy 20 percent to 30 percent of their power from wind and solar, regardless of the price. What other industry in America has that kind of golden parachute?

In terms of assessing the merits of energy alternatives, we ought to have an insurance policy against brownouts and blackouts. Other nations and California have suffered from these because of overdependence on intermittent power sources such as wind and solar. We may regret shutting down reliable nuclear or coal plants, which can’t be easily powered up again, during storms, cold winters or hot summer days when we need electricity the most.

In the meantime, enough hypocrisy from liberals who lecture us about bailouts and subsidies as if they were Milton Friedman disciples. There is nothing more horrifying to proponents of renewable energy than a genuine free market in energy.

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