There was sort of a debate presented in The Wall Street Journal a few days ago concerning the efficacy of Federal subsidies for solar and wind energy companies. I say “sort of” because the Mark Muro’s arguments in favor of the subsidies demonstrate an utter cluelessness of the basics of economics as well as of how well the subsidies have already performed.
For instance, the WSJ‘s lede cites generic proponents as saying in all seriousness,
There is widespread agreement that pulling the plug on the subsidy at this point could hobble the wind-power industry. Meanwhile, the biggest federal subsidy for solar power, a tax credit for 30% of the cost of installed equipment, is set to drop to 10% at the end of 2016. A cash grant for up to 30% of solar equipment costs expired at the end of last year.
Proponents say wind and solar subsidies are needed for a few more years to allow these clean, renewable sources of energy to develop to the point where they can compete on price with electricity produced from coal and natural gas.
Yet, if the technology can’t compete in a free market on its own, if it needs the subsidy to survive, the technology is not ready for commercial use or sale. Spending taxpayer money—private citizen money—on such a thing is a textbook example of Fraud, Waste, and Abuse. As the proponents admit without realizing it in that second paragraph: “…wind and solar subsidies are needed for a few more years to allow these clean, renewable sources of energy to develop….”
Muro then says in his argument,
Let’s remember the point of these temporary subsidies: to help emerging clean-energy technologies gain toeholds in challenging markets and advance toward unsubsidized price-competitiveness.
And
The ultimate reward is cheaper, cleaner energy and greater energy diversity, which will help guard against price shocks, keep energy costs down through competition and lessen the damage our energy consumption does to the environment….
Except that it isn’t cheaper if it needs subsidies coupled with coal, oil, gas (hydrocarbon) prices that are artificially elevated by government mandates to include “green” additives as the Feds do, or to buy electric power from solar and wind generators, as California does, in order to compete. Moreover, diversity is reduced, not expanded by limiting us to solar and wind—or even by demanding that we buy a certain amount of solar and wind, regardless of market forces—and actively blocking access to hydrocarbon energy. And finally, if these really are viable technologies that will deliver cheap energy easily, private investors will flock to invest, and no taxpayer subsidy will be even in the picture.
On top of that, there’s no case for environmental “damage,” given the great amount of cleanup already done, and the falsified “damage” attributed, for instance, to fracking by the EPA.
Muro goes on:
Wind and solar need the help because the barriers for new technologies in the energy industry are tougher than those in any other industry in this country. Fossil fuels, with the help of their own government subsidies over the years, are thoroughly entrenched, with trillions of dollars’ worth of infrastructure in place.
Never mind that that entrenched infrastructure sits on top of centuries’ worth of economical, unsubsidized hydrocarbon deposits in the ground right here in the US and Canada, and the infrastructure easily can be extended to reach into the deposits in our respective territorial and economic zone waters, as the People’s Republic of China already is doing, filling the vacuum left by the present administration’s slow-walking of drilling permits for American companies.
Additionally, the beef that “the barriers for new technologies in the energy industry” are tough is just a cynical red herring. Those technical barriers existed for the hydrocarbon industries, also, as they were developing. Why should solar and wind get special treatment? Muro has no answer; he merely asserts the “need.”
Muro concludes with this long-standing “promise:”
In sum, onshore wind is likely just a few years away from true subsidy independence, while several forms of solar aren’t far beyond.
Like commercial fusion, we’ve been “just a few years away” for decades. It’s an empty promise.
As Dr David Kreutzer points out in his argument against these subsidies, though,
Surely some alternatives to fossil fuels will be developed, but they will only work if they are affordable. Wind and solar aren’t, and that isn’t changed by shifting the costs from consumers and producers to the taxpayers.
Bureaucrats and politicians shouldn’t be the ones deciding which technologies are the most promising or what timeline is too long or what losses are too deep. The market will do a much better job of answering the question: are wind and solar power really viable?
Let’s get rid of the subsidies and find out.