May 4, 2012
Energy Subsidies, Or A Power Bill Directly From Uncle Sam?
Two recent articles from Stanford University writers Jeffrey Ball and Kassia Yanosek assert that America´s approach to clean energy must change if we are to meaningfully affect energy security or the environment. Both writers are based at the Stanford Steyer-Taylor Center for Energy Policy and Finance.
The structure for supporting renewable energy growth in the US has been a start-and-stop policy for years. No business can grow steadily with the type of uncertainty this policy causes. The renewable energy sector has 'boomed and busted' every time the Production Tax Credit has been allowed to lapse, and come roaring back when it is reinstated.
The up-front capital expenditures for all types of power generation are tremendous. Power plant projects along with the means to transmit that power over distance are some of the largest and most expensive infrastructure projects in the world. If private industry was not willing or able to complete the projects, then the government would have to step in. And nobody on any side of the debate wants to depend on the government for basic power.
The subsidies and tax breaks for private companies that build power plants are essential at a basic level. Do you want the lights to turn on when you hit the switch? Without the subsidies it is very difficult to bring the needed large private investment to the power plant.
Nuclear, coal, oil, and gas have received a series of tax breaks and outright grants for many years to mitigate the early expense and secure private financing. It is nearly impossible for renewable to match up economically with an industry that has been entrenched for over 60 years, with permanent government benefits.
Power plants are essential infrastructure, like roads and bridges, both in scale and importance. Private industry has managed this job for years. However, the capital required is of the scale usually reserved for state-level funding. To attract private industry to continue to invest in and build power infrastructure, the government has to give a break. Or do it themselves, tax citizens and business to build the plants, manage the plants efficiently, and send a bill to every house in the country for electric usage. The inevitable bureaucracy and inefficiency is of nightmarish proportion. This will not work.
These policies should be extended to the renewable energy sector permanently as well. A point that should not be ignored is that manufacturing related to wind and solar energy is one of the brighter spots in a bleak economic picture.
The national security issue could become a complicated discussion if desired. I will point to the fact that our nation has spent the last several decades spending time, resources, and lives protecting the flow of foreign fossil fuels. The more energy we produce here the better.
The authors of the Stanford papers point to the bankruptcy of Solyndra as a problem for renewable subsidies. Yes, 500 million dollars is a lot of money. But it is a drop in the bucket compared to the cost of historical and continuing involvement in the Middle East to protect and control supply. The failure of a single company in an emerging industry, or even several is not a reason to condemn the effort.
By encouraging renewable energy at the federal level the US accomplishes three goals: Manufacturing is brought back home, the supply for basic power is increasingly located here and is thus more secure, and pollution is greatly reduced.