The high price of “cheap” green energy.

Written by Jonathan Lesser via RealClearEnergy,

As danger! show, green energy subsidies have been Congress’ answer to every energy policy question. OPEC’s first oil embargo in 1973-74 catalyzed decades of energy policy, including the formation of the Department of Energy. Wind, solar, and hydropower subsidies began in earnest with the Utility Regulatory Policy Act of 1978. Similarly, subsidies for corn-based ethanol were enacted as part of the National Energy Conservation Policy Act of 1978 . Both were designed to reduce the country’s dependence on Middle Eastern oil.

PURPA subsidies sparked a race for independent developers to build small power plants whose output electric utilities were required to purchase at administratively set prices. In some cases, the subsidies were independent of the amount of electricity actually produced by the plants, giving rise to the nickname “PURPA cars” because their real purpose was to extract subsidies; electricity production was secondary.

The Energy Policy Act of 1992 modified these subsidies, creating a “temporary” production tax credit for wind power and certain types of biomass generation. Congress also enacted an investment tax credit, initially for solar but later expanded to all renewables, which could choose between the ITC and the PTC. Although the PTC was supposed to expire in 1999, it has been extended and extended repeatedly, most recently in the Inflation Relief Act. The PTC now includes all zero-emission generation, including new nuclear plants. Under the IRA, the ITC has been increased, with eligible green energy investments able to claim a credit of up to 60% of their construction cost.

Moreover, the IRA extends the PTC and ITC until greenhouse gas emissions from electric generation fall to just 25% of their 2005 levels.after which they will be gradually decreased. According to the US Energy Information Administration, the estimated date for achieving this goal is 2048.

The IRA also provides subsidies for “green” hydrogen, meaning hydrogen produced from emission-free electricity, battery storage facilities and facilities that capture carbon and bury it underground.

Ethanol subsidies have been similarly expanded and increased, with the government now subsidizing various types of biofuels and numerous states adopting clean fuel standards that, like the renewable portfolio standards, require increasing percentages of transportation fuels to be biofuels .

Congress wasn’t the only institution to dole out subsidies for green energy. Many states have offered their own subsidies, particularly the mid-Atlantic states, which force ratepayers to buy electricity from offshore wind projects at many times the market price. States have also adopted renewable portfolio standards, forcing electric utilities to increase the percentages of renewable electricity that would otherwise never be built.

This subsidy smorgasbord is supposed to reduce greenhouse gas emissions by promoting new clean energy technologies. It should also accelerate economic growth by creating new “green” industries and well-paying jobs.

There is little evidence for the former. U.S. energy-related greenhouse gas emissions have fallen nearly 20 percent from 2005 levels, primarily as natural gas replaced coal as the primary fuel for electricity generation. Between 2005 and 2023, electricity generation from natural gas was six times greater than generation from wind and solar combined. In 2023 alone, electricity generated with natural gas was three times higher than wind and solar generation.

In addition, the growth of subsidized wind and solar generation has distorted wholesale electricity marketscreating the need for subsidies to ensure that existing nuclear plants continue to operate, lest their owners shut them down and eliminate thousands of well-paying jobs. Enacting necessary subsidies to compensate for the distortions caused by other subsidies is surely a definition of economic insanity.

In terms of stimulating new industries and economic growth, today, the US solar manufacturing industry is moribund, nearly 90% of the solar panels installed in this country are now made in China. All but one of the offshore wind projects under construction or to be built are owned by European companies that their respective governments control.

The economic costs of these subsidies are borne by taxpayers, who must finance the additional deficit spending; electricity ratepayers who, despite claims that renewable energy resources are less expensive than traditional generation resources, have seen their electricity prices rise; and drivers, who are paying more for petrol and diesel as refineries have closed or been converted to produce subsidized biofuels.

These higher costs for electricity and transportation fuels raise the cost of producing and distributing almost everything else, which ripples throughout the economy, reducing economic growth and destroying jobs.

As for green energy subsidies spurring the development of new, lower-cost, clean technologies, there is nothing new about wind and solar generation receiving the lion’s share of the subsidies. After nearly half a century, neither is cost-competitive, especially when the additional costs of dealing with their inherent intermittency are included—costs that others must pay. And new technologies such as direct carbon capture in the air will only be commercially viable if the US imposes carbon taxes of several hundred dollars per ton, which few politicians will be willing to do.

The vast majority of green energy subsidies reward politically powerful constituencies and businesses whose main purpose is not to build better energy mousetraps but to build only those that qualify for the largest subsidies.

The government could instead target subsidies only to genuine research and development efforts in new clean energy technologies, such as advanced and small modular nuclear reactors.

With the country deeply in debt, wasting hundreds of billions of dollars on green energy subsidies, as required by the Inflation Relief Act, is an idea long overdue. Green energy danger! it can be a profitable game for the lucky beneficiaries, but in the end everyone loses.

By Zerohedge.com

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