Recently, President Joe Biden announced he’s invoking the Defense Production Act to boost clean energy production by expediting the build-out of solar panels throughout the U.S. in response to rising gas prices. Setting aside concerns that he is using wartime powers to address a political emergency, this action warrants an assessment into the following question: Will boosting clean energy production lower electricity prices or improve reliability of the grid? And does solar, like some claim, play an important role in our immediate energy needs?
Commerce Secretary Raimondo
Selectively true. True only in context. Partly make believe.
The Biden administration’s deployment of the Defense Production Act to push clean energy will not lower electricity bills. In fact, the opposite will occur.
First, there are the “transition costs”. Americans will end up paying more to transition away from fossil fuels to politically preferred alternatives like solar, which are neither affordable nor reliable. One analysis assesses upfront transition costs to be $5.4 trillion over 10 years or around $39,000 per American household.
A basic solar energy system is valued at $15,000- $25,000 in upfront costs—even after government subsidies. And unless your house has the 100 square feet of roof space needed for one kilowatt (kW) of panels, it’s impossible to install panels on smaller, urban dwellings. Consumer Affairs reports solar energy has a 15% to 22% efficiency rate compared to fossil fuels, which have a 20% to 40% efficiency rate.
Then there is your electricity bill. The most recent Lazard analysis found lifetime costs of power, accounting for subsidies, “are $31 per megawatt-hour for utility solar and $26 per megawatt-hour for wind.” Moreover, the EIA found the annual capacity-weighted average construction costs for solar photovoltaic systems averaged $1,798/kilowatt compared to $1,098/kw for natural gas. In other words, you are getting less energy bang for your relative buck.
Finally, there is the extra cost of back-up. Given these renewables only work when the wind blows or the sun shines, they have to be backed up by fossil energy. The National Bureau of Economic Research found that one megawatt of installed solar requires an equal amount of fossil-energy as back-up.
Here’s what we’ve seen in the states. A 2019 Energy Policy Institute at University of Chicago (EPIC) working paper examined the cost effectiveness of Renewable Portfolio Standards (RPS) programs. It ultimately found consumers paying higher prices and seeing only a modest emissions reduction.
The estimates indicate that 7 years after passage of an RPS program, the required renewable share of generation is 1.8 percentage points higher and average retail electricity prices are 1.3 cents per kWh, or 11% higher; the comparable figures for 12 years after adoption are a 4.2 percentage point increase in renewables’ share and a price increase of 2.0 cents per kWh or 17%. These cost estimates significantly exceed the marginal operational costs of renewables and likely reflect costs that renewables impose on the generation system, including those associated with their intermittency, higher transmission costs, and any stranded asset costs assigned to ratepayers.
DOE’s endorsement of the President’s plan is misleading. In response to the DPA, the Department of Energy claimed solar photovoltaic (PV) energy is “the largest source of new U.S. electricity generation capacity and the cheapest new electricity source in many regions of the country.” While that is technically true, even with its recent growth, solar, including photovoltaic, only accounts for 2.8% of electricity generation. According to the most recently available U.S. Energy Information Administration (EIA) data, 61% of electricity generation came from fossil fuels (as of February 2022). Nuclear, a true clean energy source, accounted for 18.9% of total generation.
IWF Senior Analyst Mandy Gunasekara warned about the government’s continued meddling in energy markets, writing, “Politically-guided government intervention in energy markets has prioritized the deployment of wind and solar despite their unreliable nature and high costs (without the subsidies). This, coupled with regulations aimed at curbing the use of coal and nuclear, has undercut energy providers’ ability to maintain an adequate base of energy which is important for reliability and affordability.”
We didn’t even cover the costs of taxpayer subsidies. To learn more about direct subsidies and the true cost of clean energy, go HERE.