Don’t cap, subsidize: Wind industry needs to become cost competitive

By Steve Milloy
The Gazette (Cedar Rapids, IA), October 3, 2010

It’s terrific that Sen. Chuck Grassley wants to help out Iowa’s wind industry, but does he have to sell out the rest of the state in the process?

Last week, Sen. Grassley co-sponsored a bill (S.3813) to establish a national renewable electricity standard (RES), legislation that Sen. Harry Reid (D-NV) has indicated he would try to make the consolation prize in this Congress’ final lame duck-clash over global warming regulation.

Despite his co-sponsorship, Sen. Grassley is rightly wary of Sen. Reid’s gambit and told the media that unless more than a handful of Republicans also sign on to the bill, “I’m not going to be a part of one or two Republicans, get 60 votes, so they can have a partisan victory.”

What is RES and why should Sen. Grassley not go down the RES road at all?

An RES would require that electric utilities generate a set percentage of their power from so-called “renewable” power sources, like solar and wind, by a certain date. The disastrous-for-House-Democrats Waxman-Markey cap-and-trade bill passed in June 2009, for example, would require that utilities generate 20 percent of their power from renewables by the year 2020. S. 3813 would reduce the Waxman-Markey standard to 15 percent.

But even a 15 percent RES would be quite the monumental challenge given that solar and wind power provide less than 2 percent of current electricity generation and require massive subsidies to do so. According to the Department of Energy, solar and wind are each subsidized at a rate 55 times that of coal, 97 times that of natural gas and 15 times that of nuclear power.

Solar panels and windmills aside, it’s only the taxpayer wallet that makes these forms of energy “renewable.”

But even cost is not the main reason for rejecting the arbitrary targets and deadlines of a national RES.

Imagine a utility that generates 100 percent of the electricity it sells by burning coal or natural gas. Impose the S. 3813 RES standard on that utility and, all of a sudden, only a maximum of 85 percent of its electricity can be generated by fossil fuels. In other words, the utility’s use of fossil fuels has been capped — the result would be skyrocketing energy prices.

Since the passage of the Waxman-Markey bill, Americans have been up in arms against cap-and-trade. As Sen. Grassley recently observed “If we pass cap and trade we’d export all of our jobs, manufacturing jobs to China.”

But the same reasons for opposing cap-and-trade can and ought to be applied to RES, which ought to be labeled as calling cap-and-subsidize.

Under cap-and-trade, electric utilities would be compensated for higher generation costs by charging consumers more for electricity and by selling billions of dollars of carbon credits, which they received for free courtesy of taxpayers. Under RES, electric utilities would be similarly compensated for higher generation costs, courtesy of over-charged consumers and untold billions in taxpayer subsidies.

So the difference between RES and cap-and-trade is merely a change in form, not a change in substance of an economy-killing consumer/taxpayer rip-off.

None of this is to dissuade Sen. Grassley from trying to help Iowa’s wind industry, which is the second largest in the U.S. – but that path forward is much different than a job- and economy-killing cap on fossil fuel use.

The first step forward for wind entrepreneurs is to push for tax and regulatory policies that will restart economic growth. A growing economy requires more energy, thus enlarging the opportunities for renewable technologies. Next consumers who value renewable electricity should be allowed — not forced — to purchase it at whatever price the market will bear.

The renewables industry should also be encouraged to look for niches where its technologies are competitive with conventional energy technologies. Finally, like all other business enterprises, the renewable energy businesses should look for efficiencies that make its products more cost competitive.

Many in the renewable energy sector have gotten lazy and have decided that hiring lobbyists is easier than innovating and competing. Sen. Grassley should work to help the latter and to discourage the former.

Steve Milloy publishes and is the author of “Green Hell: How Environmentalists Plan to Control Your Life and What You Can Do to Stop Them” (Regnery 2009).

7 thoughts on “Don’t cap, subsidize: Wind industry needs to become cost competitive”

  1. There is now such thing as renewable energy … I doubt they know what they are talking about, unless they have a stable of green unicorns to build and maintain the windmills.

  2. As a scientist, I can’t claim to understand the finer points of economics, but this is incredibly stupid. This reinforces my opinion of the Green mentality, the lot or them are prime candidates for the “funny farm.”

  3. At the heart of the problem is the utopian idea that any energy is really “renewable”. Wind turbines last only 15-20 years, before they have to be refurbished or replaced with new copper, steel, magnets and so on, each of which are a finite resource. At the same time you could build a nuclear plant, and the fuel is so compact, you could store enough fuel on-site to last 50 years, so it never has to be refueled and is virtually “renewable”.

  4. Get rid of the FERC ‘reliability’ requirements, and wind energy will drop to under $0.02 cents per kilowatt hour.

    If electricity markets were a functional market that consumers could actually participate in without government-sanctioned monopolies, you’d see more electric cars and water heaters that charged and turned on when energy was cheap… And the cheapest energy available is going to be in the midwest wind belt when it’s windy.

    The greenies will either put up with blackouts to have the cheap power, or be exposed as hypocrites when they pay higher prices to keep the coal-burning power on.

    We’d have cheaper electricity and more economic growth in other sectors if the government owned and managed the power lines, instead of this quasi-government, quasi-private overpriced mess of regulated utilities.

  5. Are you saying that the generators turned by the steam turbines somehow never wear out, or even wear out any slower than the generators on the windmills? Beyond that radioactive material has to be mined, and its not exactly abundant, hence that fact that earth is a hospitable place.

  6. Im not sure what this statements means I guess it depends on if you meant “now” or “no” but there is renewable energy, in the form or wind, solar, and hydroelectric. As long as the sun continues to heat the earth at different rates those energy sources cant be used up; IE “renewable”. Our ability to harness them is a little more troublesome, and why there needs to be more funding put into the development of better technologies. So maybe consider keeping your blanket statements on talk radio where people lack the cognitive ability and desire to think for themselves and question such statements.

  7. If you are such a good scientist, why aren’t you forming a start-up to develop a personal nuclear reactor? It can be done… it’s just a money-losing proposition all around.

    Let me try a scientific argument instead. What I believe you’ll find is that the energy sources we use are the ones with the highest energy density of the raw material.

    This is why we use coal, and oil, as they are both energy dense. Once we run out of both, we have solar (800 Watts/square meter), wind, and geothermal.

    I believe you will also find that the energy density of the uranium-bearing rock you have to mine to fuel a nuclear reactor is much lower than wind, solar, or geothermal, and the only reason it makes sense is if you want to be able to build a ship or submarine that can go years without refueling.

    If you just want bulk power generation, let the radioactive decay already happening in the earth provide power from engineered geothermal. All you have to do is drill a couple of very deep holes.. no messing around with moving tons of rock.

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