Coal and Nuclear Subsidies Rejected, Time to End All Energy Subsidies

Government subsidies for so-called green energy are contributing to the closings of coal and nuclear plants that keep Pennsylvania’s electricity system reliable. In response, the U.S. Department of Energy (DOE) recently tried to implement subsidies for coal and nuclear plants.

Bad idea.

“The answer to government distortions can’t be new distortions that just favor different companies,” says Kenny Stein, director of policy for the Institute for Energy Research.

Yet, that’s just what DOE Secretary Rick Perry proposed when he asked the Federal Energy Regulatory Commission (FERC) to require the value of coal and nuclear plants’ reliability to be reflected in electricity prices. In other words, raise the price of electricity so that coal and nuclear plants get paid more to continue to operate.

No question: coal and nuclear plants are valuable. They can store months of fuel supply that protects against electricity blackouts, as seen in the 2014 polar vortex when gas supplies were diverted from industrial customers to residential heating.

The question is, how does this advantage impact the price of this energy?

This month, FERC rejected Sec. Perry’s direct subsidy proposal and referred the question of reliability to operators of electricity grids, but this move highlighted an important issue. Coal and nuclear energy struggle to compete against green energy subsidies and the growing supply of affordable natural gas – at the risk of a secure energy system.

If government officials are worried about reliable energy due to the closure of coal mines and nuclear plants they should end subsidies for less-reliable green energy.

 

For years, alternative forms of energy, such as wind and solar, have been subsidized with higher consumer prices. Despite being less reliable than coal and nuclear, they are paid more for their electricity.

Likewise, as low-priced natural gas is pushing out coal and nuclear energy in some places. This threatens price volatility, should gas prices return to higher historical levels, and supply reliability if pipeline service is interrupted. Richard Mroz, president of the New Jersey Board of Public Utilities, says interruption of gas pipeline service in Pennsylvania nearly caused a large-scale loss of electricity in his state.

If government officials are worried about reliable energy due to the closure of coal mines and nuclear plants they should end subsidies for less-reliable green energy.

Grant Quasha, CEO of Paringa Resources, which is developing a new coal mine in Kentucky, says his industry would be just fine if energy sources could compete freely without subsidies. Taxpayer subsidies for solar and wind are $231 per megawatt compared to 57 cents for coal, according to the CEO.

“Massive government subsidies have been distorting the U.S. energy market for the last decade or so,” says Mr. Quasha. He highlights three ways these subsidies hurt taxpayers.

1.      Higher government spending: The production tax credit spends $10 billion every year on solar and wind subsidies.

2.      Inflated electricity rates: By “feeding in solar and wind into our electric system when it doesn’t necessarily need it," in accordance with green energy mandates in at least 29 different states.

3.      Unreliable electricity: Taxpayers will have less access to “high quality, reliable electricity when they need it” because the nation is ridding itself of reliable, efficient, inexpensive coal energy.

Mr. Quasha concludes:

(These subsidies) are a pernicious, regressive tax that hits lower and middle income Americans most significantly. If left unchecked, these subsidies will cost over the next five years over $100 billion.

David Hill, executive vice president of NRG Energy, agrees, saying the “organizing principle” for energy markets should be competition.

The only reason the American public isn’t absolutely apoplectic about (energy subsidies) is because the price of energy (in the U.S.) is pretty low.”

That is not the case in Germany, where green energy subsidies have contributed to high electricity rates — 36 cents per kilowatt-hour compared to 13 cents in the U.S., according to a Wall Street Journal report.

In Pennsylvania, the Alternative Energy Portfolio Standards subsidizes more than a dozen non-traditional energy sources — some of them expensive and relatively unreliable — by requiring utilities to buy a percentage of their electricity. One analysis estimates that the program will raise energy costs by $700 million and eliminate 11,400 jobs by 2025.

Adding coal and nuclear to the variety of energy sources subsidized by the federal government will only benefit politically-selected companies and hurt consumers with higher electric bills. It’s time to level the playing field and let consumers, not politicians, decide our energy mix.