Hearing someone speak out against subsidies for renewable energy programs leads many to jump to the conclusion that the speaker must either hate the environment and get a kick out of higher emissions, or is funded by big coal and big oil. But speaking out against subsidies is merely taking a stance against the government picking poor winners in energy markets by handing out hard-earned taxpayer money to favored industries for political reasons.
Regarding this last point, see William Yeatman at GlobalWarming.org who presents evidence from a recent study that political favors tend to influence who gets Department of Energy loans for their renewable projects:
… consider this recent report by the Center for Public Integrity and ABC News, on the remarkable correlation between the success of DOE Loan Guarantee applications and the amount of money that the applicant raised for Barack Obama’s campaign for the White House.
When renewable sources of energy become cost-effective to the extent that they can compete on their own in the energy marketplace, the benefits to be reaped from such clean, emissions-free, and renewable sources as the sun, are tremendously exciting. Reihan Salaman has an optimistic article in the NRO Agenda that suggests that “we could see carbon emissions plummet without the federal government asserting more control over the economy.” That is an exciting prospect indeed!
“… according to new predictions from Bloomberg New Energy Finance, solar power is going to be the wallet-friendly option as soon as 2013. This is faster than was originally thought. Grid parity is the technical term for when an alternative energy’s cost equals that of the traditional electricity supply-which, in the U.S., is mostly coal. It simply means that solar panels are becoming so cheap to produce and so efficient that they can now battle with the giant coal-fired power-generating structure we’ve developed.”
But how do you get the big power companies to invest in this expensive infrastructure?
“The free-market path to getting grid electricity to our wheels hinges on giving every company that already owns, or cares to invest in, any part of the electron pipeline-electric utilities certainly included-the freedom and flexibility to invest new capital, set prices, recover costs, and earn profits commensurate with the risks, while working closely with car companies, car owners, municipalities, employers, mall owners, parking garages, individual homeowners, and others.
That is, you allow utilities to charge what the market will bear. Added bonus? This power supply is a hell of a lot cheaper than gasoline.”
The free-market, subsidy-free path to solar energy and electric cars is a proposal I can stand behind. It’s a future that we should not strive to achieve at all cost and using all means, as President Obama claims, but a future whose viability will become apparent in voluntary, economic market transactions. As I wrote in IWF’s March Policy Newsletter, government subsidies are more likely to be counterproductive:
Subsidies and mandates mean that governments, instead of markets, are picking winners and losers in the energy sector. Markets drive resources toward where they will be used best and therefore encourage the development of efficient solutions. Governments, on the other hand, budget basedon political calculations. Money is wasted by propping up inefficient technologies and companies, which also makes it harder for better solutions to emerge. The results are fewer cost-reducing innovations and a less secure energy future. …
Instead of wasting taxpayer dollars by lavishing subsidies on select renewable energy sources and driving up energy prices by mandating their usage, policymakers should reduce artificial barriers to domestic energy production and create a level playing field so that energy providers compete on their merits. …
Does anyone doubt that if solar and wind energy could really replace oil and coal that smart investors wouldn’t be pouring resources into making that happen, hoping to gain a share of this huge market?
If solar power and electric cars begin to play a bigger role in the US electricity and transportation sector because the voluntary transactions between companies and consumers make it so, this would be good news indeed.
(H/T: Tyler Cowen)