Power & Market

The Feds Choose Winners and Losers in the Energy Industries

Power & Market Mike Holly

In my previous article, I looked at how government regulations have created an an uneven playing field that favors natural gas and oil over coal. This time, we'll look at how regulators favor some types of "renewable" energy over others while biasing the system against nuclear energy.

Wind and Solar Favored Over Bioenergy

Renewable energy accounts for 11 percent of US energy use. The country has gone from preferring bioenergy for all three energy applications of renewable energy development to favoring wind and solar energy:

(a) In transportation, a now stagnant 5 percent of fuels are biofuels and the sector is seeing a small but growing number of heavily subsidized electric vehicles targeted for fueling with wind and solar.

(b) Heating includes a now stagnant 7 percent biomass and a small percentage (but also growing) of solar and geothermal.

(c) Electricity consumption includes a now stagnant hydro and biomass at 7 percent and 1.5 percent, respectively, while wind and solar are rapidly growing at 7 and 1.5 percent, respectively.

Again, changes have occurred mainly in the electricity sector. Germany uses only 13 percent renewable energy but has among the world’s highest levels for electricity at 38 percent of consumption, albeit at relatively high prices, compared to 17 percent in the US. Germany is continuing to use all three renewable energy sources for power generation: wind, solar, and biomass (renewable energy crops, e.g., grass biomass). The US is adding mostly wind, recently more solar, and little, if any, renewable energy crops. Germany favors all renewable energy generators with cost-based electricity prices (or so-called feed-in tariffs) in contrast to US bidding and subsidies favoring wind and solar.

US politicians, especially Democrats, favor wind and solar while hiding the true costs. Wind and solar have been favored by subsidies offered through complicated tax credits or shelters that are not even based on environmental externalities. The biggest of the two major wind subsidies expired at the end of 2019, but it has expired and later been extended in the past. Electricity monopolies absorb higher costs for transmission and load following required by the intermittent output from wind and solar in increasing consumer electricity rates. Regulators and utility monopolies won’t even disclose the economics and environmental impacts of load following.

At the CNN Climate Crisis Town Hall with presidential candidate Elizabeth Warren, moderator Chris Cuomo cited Germany as a model when asking: “When it's bright and sunny, they generate so much wind and solar that it can flood the market and puts the wholesale price almost to zero. When it's dark in the wintertime, when they need the power, they have to use nuclear, they have to look for other sources. Can the ambition meet the reality of phasing out fossil fuels?” Senator Warren replied that she would “put a lot of money into” the research and development of storage technologies.

The US will likely be able to continue expanding wind and solar, since the intermittent loads can be exported throughout regions and national levels are still low compared to Germany. However, the Democrats’ plan to rely solely on wind and solar for electricity and transportation needs will fail without significantly more breakthroughs in storage technology.

Meanwhile, US politicians are suppressing bioenergy. Since the 1990s, electricity mandates and subsidies favoring wind have made biomass power uncompetitive, and some states such as Minnesota have even mandated that renewable electricity be supplied by only wind and solar. After US ethanol mandates drove up production and grain prices too quickly from 2005 to 2008, the nation enacted mandates requiring production from the cellulose in biomass fiber, even though it costs too much to process.

Brazil has shown that it is possible to grow high-yielding renewable energy crops such as sugar cane for the production of low-cost vehicle biofuel when the biomass waste is used to cogenerate electricity and the waste heat is used for process heat. Only when utility monopolies in Brazil have blocked the sale of excess electricity have the abundant wastes become a disposal problem and made costs less competitive.

Meanwhile, the US has not been adding nuclear power plants while Germany has mothballed about half of its plants. Nuclear power isn’t growing due to the higher costs created by safety regulations. However, the US Price-Anderson Act favors the industry with a cap against liability claims arising from nuclear incidents.

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