News - American Energy Alliance

Lessons for Congress from the Land Down Under

July 17, 2015 by AEA 1 Comment

Congress may soon consider legislation retroactively extending a raft of expired tax subsidies, known as “tax extenders.” One of those is the wind Production Tax Credit, a multi-billion dollar tax credit that subsidizes wind developers for the electricity they generate. This costly handout raises energy prices, destabilizes the electric grid, and benefits wealthy wind lobbyists at the expense of American taxpayers.

The rest of the developed world has learned this lesson the hard way: decades of wind energy subsidies have wreaked havoc on the economies and budgets of Australia and several European countries. Some of these countries have seen the error of their ways and are now curtailing subsidies. This month, Australia Prime Minister Tony Abbott announced that “mature technologies like wind” will no longer qualify for renewable energy subsidies.

As Congress debates tax extenders, lawmakers should learn from Australia’s and Europe’s failed wind subsidy experiment and reject any attempt to revive the wind PTC.

Background

Wind energy is an old, mature technology. It is much older than most people realize: people have used wind power to generate electricity since at least 1887. Despite the wind lobby’s claims, wind power is more expensive and less reliable than traditional energy sources: a new report from the Institute for Energy Research shows that new wind facilities are three times more expensive than existing coal and four times more costly than existing nuclear power plants. This helps explain why governments in the United States and Europe have continually relied on subsidies to prop up their wind industries at the expense of taxpayers and more affordable energy sources.

Even the European Union, which has been dealing with the self-inflicted wounds of subsidized wind for decades, agrees that wind is a “mature” industry. Last year, EU Climate Action Commissioner Connie Hedegaard said “my view is that if you have mature technologies, renewables or not, they should not have state aid. If they can manage themselves why have state aid?” In other words, mature industries like wind power should not require government subsidies to survive.

In the United States, wind energy has received $30 billion in federal subsidies and grants over the last three decades while supplying less than 5 percent of U.S. electricity, according to a report from the Mercatus Center. The wind PTC is one of the most costly federal subsidies for wind power—the one-year extension Congress passed last year will cost $6.4 billion over the next decade. First enacted in 1992, the PTC was meant as a temporary means of propelling the wind industry to make wind competitive with other electricity sources. In 2003, Sen. Chuck Grassley, author of the PTC, said wind would only need the PTC “maybe for 10 years.” Twelve years later, Grassley and the wind industry are asking Congress for yet another PTC extension.

Europe’s wind subsidies are even more expensive and extensive than ours. Countries across the EU—including the United Kingdom, Germany, Spain, and Italy—have worked for decades to promote wind energy and were once proud of their record as “green energy” champions. Recently, many Europeans are having buyer’s remorse. Faced with runaway costs, stagnant economies, and destabilized electric grids, Europe is freezing, trimming, and repealing many of its subsidies and mandates. Outside of Europe, the Australian government recently announced that “mature technologies like wind” will no longer qualify for renewable energy subsidies.

President Obama has hailed Europe as a model for a renewable energy future. Instead, wind subsidies should be cut to lower energy prices and ease the economic burden placed on families. A good place to start is for Congress to let the PTC remain expired.

Below are a few examples from Europe and Australia that demonstrate the damaging effects of wind power subsidies.

United Kingdom

Although the United Kingdom is one of the leading countries in subsidized wind energy production, the government has decided to cut back on its wind subsidies. Last month, the government announced a key subsidy scheme, the Renewables Obligation (RO), will be closed a year earlier than planned in the hopes of bringing down high electricity costs and protecting the “beautiful countryside of the United Kingdom” from wind turbines. Last year, $1.3 billion of government subsidies propped up onshore wind that generated only five percent of Britain’s total electricity supply. (The UK heavily subsidizes offshore wind, and the government is being criticized for “needlessly high energy bill levies.”)

The cost of subsidizing new wind facilities in the United Kingdom is spiraling out of control and crippling an already stagnant economy. These green energy schemes will require 9 billion pounds ($14 billion) a year in subsidies by 2020 and will cost households about 170 pounds ($265) annually by the end of the decade. The UK’s subsidy problem has been described as creating a “black hole in [the] budget.” These staggering costs have prompted over 100 Members of Parliament from across the political spectrum to request that Prime Minister David Cameron rethink the government’s support for on-shore wind energy production.

The U.K is also concerned about losing businesses to countries where energy costs are lower. According to Chancellor of the Exchequer George Osborne, “if we burden [British businesses] with endless social and environmental goals—however worthy in their own right—then not only will we not achieve those goals, but the businesses will fail, jobs will be lost, and our country will be poorer.”

Despite the looming UN climate talks in Paris, the UK is taking steps to cut back on expensive renewable energy policies in the hope of easing the economic burden they have placed on energy consumers throughout the country.

Germany

Germany passed its first renewable law in 1991 and has since spent $440 billion on its “energy transition.” Germany’s costly energy crusade has raised renewable production from 4.3 percent in 1990 to almost 24 percent in 2012 with the goal of reaching 80 percent of total energy production by 2050. Germany has paid for this ambitious plan through taxes and dramatically higher energy prices. Today, electricity rates in Germany are about 30 U.S. cents a kilowatt hour compared to an average of less than 13 cents a kilowatt hour in the U.S.

The devastating effects of these subsidies have rippled throughout Germany’s economy, resulting in a flight of German companies overseas where energy costs are lower. According to a report from IER, Germany’s renewable energy subsidies are driving up energy prices and forcing hundreds of thousands of people into energy poverty. The study found:

Residential German electricity prices are nearly three times higher than electricity prices in the U.S. and among the highest in the industrialized world.
As many as 800,000 Germans have had their power cut off because of an inability to pay for rising energy costs.
On-shore wind has required feed-in tariffs that are in excess of 300 percent higher than market prices.
Germany’s Renewable Energy Levy, which subsidizes renewable energy production, cost German households €7.2 billion ($9.6 billion) in 2013.
The cost to expand transmission networks to integrate renewables stands at $33.6 billion, which grid operators say accounts “for only a fraction of the cost of the energy transition.”

Germany’s green energy experiment has not only cost families and businesses, but it has also failed to reduce greenhouse gas emissions —the entire point of subsidizing low-carbon energy sources. As IER’s report explained, after the Fukushima nuclear disaster the German government hastily scaled back nuclear energy development. Since wind and solar are too scarce and intermittent to fill in the gap, coal stepped up to replace the lost nuclear output. This central planning has resulted in higher greenhouse gas emissions even as the government pours subsidies into renewables at huge expense to German families.

Unsurprisingly, this economic burden, in the midst of an already tight economy, has led the German government to re-evaluate their costly policies. The Commission for Research and Innovation, a group of experts appointed by the German parliament, found that Germany’s subsidies have not had a positive effect on the environment or innovation, and has recommended that they be abolished.

Spain

Once hailed by President Obama as a poster-child for green energy development, Spain has been forced to rethink green energy subsidies. In 1994, Spain implemented feed-in-tariffs to help bolster their renewable industry and help renewables like wind and solar penetrate the energy market. Now, realizing the economic burdens of these inefficient policies, Spain has capped green companies’ profits at a 7.4 percent return, while eliminating all subsidies to wind projects built before 2005.

According to Industry Minister Jose Manuel Soria, these renewable energy subsidies or the power system would have gone bankrupt. Spain had already paid about 56 billion euros ($76.5 billion) to clean energy generators since 1998 and will pay another 142 billion euros over their lifetimes. In 2013 alone, subsidies totaled 9 billion euros. The costs of these subsidies put further burdens on the country as Spain took on huge amounts of energy debt to fund their policies, cumulatively reaching $35 billion in 2013.

Spaniards have suffered greatly under the government’s subsidy scheme. The country has chronically stagnant economic growth, high unemployment (23 percent), and expensive electricity. Indeed, a study conducted by Dr. Gabriel Calzada found that Spain’s subsidies destroyed 2 jobs for every 1 job created. This is because subsidies do not create wealth on net. By shifting resources from the most economical to most politically favored, subsidies destroy more jobs than they create.

Now, the Spanish government has joined the ranks of its European neighbors in working to reverse these detrimental subsidy policies. The country has now ended subsidies to nearly 40 percent of its wind energy capacity in the hope that lowered electricity costs will ease the burden placed on consumers and fuel economic growth.

Italy

Italy pursued similar wind-promoting policies in the form of a feed-in-tariff and ultimately came to the same conclusions found by European neighbors: wind and other green-energy subsidies are too costly and deter growth. According to Carlo Stagnaro, a senior fellow at a Milan-based think tank, as “subsidies were added to subsidies were added to subsidies,” Italy saw electricity prices skyrocket, causing them to soar to 35 percent above the EU average, which is already more than double the U.S. average.

As a result, Federica Guidi, Italy’s minister for economic development, promoted a reform package last year that reduced the amount of subsidies by about 1.6 billion euros per year (about ten percent of the overall subsidy bill) with the goal of lowering electricity prices for consumers. Although there is continued pressure from interest groups for continued support of green energy technologies, Italy is cutting back on subsidies to spare consumers.

Australia

Outside of Europe, Prime Minister Tony Abbott is making headlines in Australia as his government has recently banned its renewable energy fund from investing in “mature technologies like wind” energy. Abbott has said that the government’s policy is to eventually abolish the fund altogether.

Abbott’s hope is that by ending costly subsidies to the wind industry, Australia’s energy sector will become more economical. “We want to keep power prices as low as possible,” the prime minister said. As in Europe, green-energy subsidies have resulted in an upward trend in energy prices in the country, primarily borne by consumers. According to the Australian Financial Review, in many states wind facilities require three times the price at which Australian coal generators can supply electricity.

The Australian government’s order to the renewable energy fund is just another step in Abbott’s drive to put an end to damaging wind energy subsidies. Additionally, in the face of upcoming UN climate talks, Abbott has shown limited enthusiasm to join the U.S. and EU, as he has become increasingly aware of the economic consequences of doing so.

Lessons for America

As Congress considers yet another PTC extension, the United States should learn from Europe’s failed subsidy experiment. Wind subsidies like the PTC have the dual problem of driving up energy costs for families while burdening taxpayers with the bill. But while Europe and Australia begin to recognize the error of their ways, the president and some in Congress continue to push for perpetual subsidies for the large, mature wind industry.

If lawmakers want to protect their constituents from higher electricity costs, lost jobs, and sluggish economic growth, then they should follow Europe’s and Australia’s lead and eliminate wind energy subsidies–especially the PTC.

Filed Under: Wind Tagged With: Australia, Germany, Italy, PTC, Spain, subsidies, United Kingdom, wind

Wind Fail: 20 Quotes for 30 Years of False Hopes

July 15, 2015 by AEA 5 Comments

Last week, news reports indicated the Senate Finance Committee will soon mark up legislation to retroactively extend a number of tax provisions that expired at the end of last year. Of note in this package is the wind Production Tax Credit (PTC). This would be the 10^th extension of the PTC since it became law in 1992.

Senator Charles Grassley of Iowa, one of the original authors of the wind PTC, made clear last week in a letter to Chairman Hatch that despite his past statements, he wants yet another extension of this damaging provision. He stated:

“But, I also know this credit won’t go on forever. It was never meant to, and it shouldn’t. In 2012, the wind industry was the only industry to put forward a phase out plan. I have expressed support in the past for a responsible, multi-year phase out of the wind tax credit. But, I believe any phase out should be done in the context of comprehensive tax reform, where all energy tax provisions are on the table.” Senator Grassley letter to Chairman Hatch, 7/7/15

Sen. Grassley admits the wind PTC should not last forever and indicated he supports a phase out. It is clear that today Sen. Grassley does not want to see the wind PTC expire on his watch. Of course, this is significantly different than what he said 12 years ago:

“I’d say we’re going to have to do it [keep the PTC] for at least another five years, maybe for 10 years. Sometime we’re going to reach that point where it’s competitive (with other forms of energy). I think the argument for any tax credit is to make the new source of energy economically competitive.” (“Wind Energy Rides Roller Coaster Year.” Electrical Wholesaling, 4/1/03)

Sen. Grassley now appears not to believe what he said in 2003. Not only have more than 10 years passed, but the American Wind Energy Association claims that wind is not only competitive, but cheaper than other sources. In fact, AWEA claims that “the current cost of wind energy of under $50/MWh.” To put that in perspective, the Energy Information Administration explains that new combined cycle natural gas plants will produce electricity for $72/MWh. It appears that Sen. Grassley either does not believe the wind lobbyists or he was not being truthful in 2003 when he spoke about the PTC.

It turns out that wind promoters like Sen. Grassley and AWEA have long made claims that wind would soon be cost competitive and that the PTC would not be needed forever. Here are of some of their claims over the years:

1983 – Booz, Allen & Hamilton did a study for the Solar Energy Industries Association, American Wind Energy Association, and Renewable Energy Institute. It stated: “The private sector can be expected to develop improved solar and wind technologies which will begin to become competitive and self-supporting on a national level by the end of the decade [i.e. by 1990] if assisted by tax credits and augmented by federally sponsored R&D.”(Renewable Energy Industry, Joint Hearing before the Subcommittees of the Committee on Energy and Commerce et al., House of Representatives, 98^th Cong., 1^st sess. 1983)

1984 – Christopher Flavin of the Worldwatch Institute: “Tax credits have been essential to the economic viability of wind farms so far, but will not be needed within a few years.” (Christopher Flavin, “Electricity’s Future: The Shift to Efficiency and Small-Scale Power,” Worldwatch Paper 61, Worldwatch Institute, 11/84)

1985 – Christopher Flavin of the Worldwatch Institute: “Although wind farms still depend on tax credits, they are likely to be economical without this support within a few years.” (Christopher Flavin and Cynthia Pollock, “Harnessing Renewable Energy,” in Worldwatch Institute, State of the World 1985)

1985 – “Wind Energy Cannot Only Become Competitive, But Will In The 1990’s Be One Of The Cheapest Sources Of New Power.” “While wind power cannot yet deliver electricity at costs competitive with other energy sources – some experts estimate that it may cost anywhere from 9 to 12 cents a kilowatt-hour, as opposed to the 7-cents-a-kilowatt-hour cost of oil and gas -proponents point to a recent study by the Electric Power Research Institute of Palo Alto, Calif., a research group financed by electric utilities. That study indicated that wind energy cannot only become competitive, but will in the 1990’s be one of the cheapest sources of new power.” (Barry Fisher, “The Threat To Wind Energy,” The New York Times, 10/26/85)

1986 – Christopher Flavin of the Worldwatch Institute: “Early evidence indicates that wind power will soon take its place as a decentralized power source that is economical in many areas…. Utility-sponsored studies show that the better wind farms can produce power at a cost of about 7¢ per kilowatt-hour, which is competitive with conventional power sources in the United States.” (Christopher Flavin, “Electricity for a Developing World: New Directions,”Worldwatch Paper 70, Worldwatch Institute, 6/86)

1986 – Amory Lovins of the Rocky Mountain Institute lamented the untimely scale-back of tax breaks for renewable energy, since the competitive viability of wind and solar technologies was “one to three years away.” (Lovins, K. Wells, “As a National Goal, Renewable Energy Has An Uncertain Future.” Wall Street Journal, 2/13/86)

1986 – A representative of the American Wind Energy Association testified: “The U.S. wind industry has … demonstrated reliability and performance levels that make them very competitive. It has come to the point that the California Energy Commission has predicted windpower will be that State’s lowest cost source of energy in the 1990s, beating out even large-scale hydro.”(Statement of Michael L.S. Bergey, American Wind Energy Association in Renewable Energy Industries, Hearing before the Subcommittee on Energy Conservation and Power of the Committee on Energy and Commerce, House of Representatives, 99^th Cong., 2^nd sess. 1986)

1990 – In 1990, two energy analysts at the Worldwatch Institute predicted an almost complete displacement of fossil fuels in the electric generation market within a couple decades [i.e. 2010]: “Within a few decades, a geographically diverse country such as the United States might get 30 percent of its electricity from sunshine, 20 percent from hydropower, 20 percent from wind power, 10 percent from biomass, 10 percent from geothermal energy, and 10 percent from natural-gas-fired cogeneration.” (Christopher Flavin and Nicholas Lenssen, Beyond the Petroleum Age: Designing a Solar Economy, Worldwatch Institute, 1990)

1991 – Dale Osborn, Former AWEA President: “The Wind Industry Could Produce, At Competitive Prices, Up To One-Third Of The Nation’s Electricity Needs Within The Next 30 Years.” “‘Here we go again. Nuclear, coal and oil appear to be receiving all the benefits, while clean, proven energy technologies like wind are receiving little serious attention,’ said Dale Osborn, president of the California-based company, U.S. Windpower, and president of the American Wind Energy Association. ‘Given an equal opportunity to compete fairly, the wind industry could produce, at competitive prices, up to one-third of the nation’s electricity needs within the next 30 years.’” (“Bush Administration’s Energy Plan Represents Another Missed Opportunity For America, Says U.S. Windpower,” PR Newswire, 2/20/91)

1991 – “Wind Power Will Be Cheaper Than Conventional Power By 2000.” “’Wind power will be cheaper than conventional power by 2000 when strides in engineering will have made windmills even more economically competitive,’ said Paulus Soullie, a windmills engineer at Holland’s Energy Research Centre in Petten. A windmill with a record 1.3Mw output will be built later this year in Holland.” (Peter Spinks, “Charm Of The Farm Goes With The Wind,” The Observer, 1/13/91)

1996 – Christopher Flavin, President of WorldWatch Institute. “Following the laws of technological progress and large-scale manufacturing, the cost of wind-generated electricity has fallen by more than two-thirds over the past decade, to the point where it is lower than that of new coal plants in many regions. Within the next decade, it is projected to fall to 3 to 4 cents per kilowatt-hour, making wind the least expensive power source that can be developed on a large scale worldwide.” (“Power Shock: The Next Energy Revolution.” WorldWatch, January/February 1996)

1998 – Ken Lay, former CEO of Enron, to Gov. Bush in 1998. “The bill, H.R. 1401 (Thomas R-CA), extends for five years the existing wind production tax credit (PTC), which was passed by the Bush Administration in the Energy Policy Act of 1992. Wind is the fastest growing new electrical generation technology in the world today and has rapidly decreased its production costs until it is close to being competitive with conventional generation technologies.” (“Enron’s Ken Lay asks for Texas Gov. Bush’s help in securing tax credits for wind.” National Wind Watch, 9/10/2008)

1999 – A DOE Assistant Secretary Said Wind Power Is Getting Close To Being Competitive With Wholesale Power. ‘”Although wind power is not yet competitive with wholesale power, it’s getting close… ‘Of all the renewable technologies, wind power is the closest to market competitiveness today. When you consider the improved technology the opportunity for consumers to choose green power, and the concerns over climate change, it all adds up to a strong potential for wind to really take off over the next 20 years.’” (Taylor Moore, “Wind Power: Gaining Momentum,” EPRI Journal, 12/22/99)

2001 – Robert Boyd, Enron Wind Corp. VP: “With Additional R & D Funding And The Continuation Of The Production Tax Credit For The Next Five Years Wind Should Become Price Competitive With Conventional Generation Technologies.” “Wind energy is close to becoming competitive with conventional fuels. With additional R & D funding and the continuation of the Production Tax Credit for the next five years wind should become price competitive with conventional generation technologies.” (Robert T. Boyd, Committee On Finance, U.S. Senate, Testimony, 7/19/01)

2003 – Senator Chuck Grassley (R-IA) on the PTC. “I’d say we’re going to have to do it for at least another five years, maybe for 10 years. Sometime we’re going to reach that point where it’s competitive (with other forms of energy). I think the argument for any tax credit is to make the new source of energy economically competitive.” (“Wind Energy Rides Roller Coaster Year.” Electrical Wholesaling, 4/1/03)

2004 – Experts Said in 2004 Wind Was “Getting Close” To Viability And “Very Nearly Competitive.” “Not long ago wind power was the domain of fringe scientists and environmentalists…. But the industry is maturing and growing quickly–and is beginning to find its place as one viable element in the energy puzzle. … Still, says Bob Thresher of the Department of Energy’s National Renewable Energy Lab, ‘wind is the first renewable technology that is very nearly competitive in the market for bulk power generation.’ … [Wind pioneer Jim] Dehlsen says the cost of wind needs to fall below three cents per kilowatt hour–without tax credits–to truly break society’s addiction to fossil fuels. “It’s still not there, but we’re getting close,” he says.” (Brad Stone, “The Master of Wind,” Newsweek, 9/20/2004)

2004 – Edward Berkel, Senior VP Shell WindEnergy: “Cost Reductions Will Eventually Make Wind Fully Competitive With CCTG Power.” “Cost reductions will eventually make wind fully competitive with CCTG power. If PTCs are not replaced other mechanism might be used, i.e. green certificates. Driven by customer needs, overall world pressure to reduce GGEs.” (“Where’s The Bill?” Project Finance, 3/2004)

2006 – A Former FERC Chairman Said The Wind Industry Will Be Eventually Be Able To Survive Without Subsidies. “[Pat Wood, former chairman of the Federal Energy Regulatory Commission (FERC)] said that the high price of fossil fuels make it a ‘pretty safe bet’ that the wind energy industry will eventually be able to survive without government subsidies in the form of the wind production tax credit.” (Suzanna Strangmeier, “Former FERC Chairman Pat Wood Sees Bright Future for Wind Power,” Oil Daily, 5/2/06)

2012 – Denise Bode, Former AWEA CEO on PTC Phase-out. “In coordination with any phase down of the credit, we would urge Congress to consider additional policy mechanisms to encourage a diverse portfolio that includes renewable energy. With the policy certainty that accompanies a stable extension, the industry believes it can achieve the greater economies of scale and technology improvements that it needs to become cost competitive without the PTC.” (AWEA letter to Congress. 12/12/12)

2012 – Secretary of Energy Steven Chu: “I think it’s something the wind industry sees: “As the technology gets better, there’s no need to be subsidizing a competitive industry once it’s competitive.” “So over a period of time, especially as — and no dates were discussed — but over a period of time, a road map of phasing out, you see where the prices are going and you can see” how to eliminate the credit…. Just as eventually VEETC and other things were eventually phased out, I think it’s something the wind industry sees: As the technology gets better, there’s no need to be subsidizing a competitive industry once it’s competitive,” (“Chu opens the door to phaseout of wind incentive.” Governors’ Wind Energy Coalition, 3/15/12)

2014 – Warren Buffett on how wind isn’t profitable without subsidies. “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Buffet told an audience in Omaha, Nebraska recently. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.” (U.S. News & World Report, 5/12/14)

2015 – Senator Chuck Grassley on (yet another) PTC extension. “But, I also know this credit won’t go on forever. It was never meant to, and it shouldn’t. In 2012, the wind industry was the only industry to put forward a phase out plan. I have expressed support in the past for a responsible, multi-year phase out of the wind tax credit. But, I believe any phase out should be done in the context of comprehensive tax reform, where all energy tax provisions are on the table.” (Senator Grassley letter to Chairman Hatch, 7/7/15)

The definition of insanity is doing the same thing over and over again and expecting a different result. For more than 30 years, wind promoters have claimed that wind would soon not need subsidies because it would be cost-competitive. But here we are in 2015, and despite claims from AWEA that wind is cost competitive, their actions suggest they don’t believe their own talking points. After all, if wind were competitive, the wind lobby would be greedy to insist on $6 billion from the taxpayer for the PTC.

AWEA certainly knows that their claims about wind truly being cost competitive are not true. New research by the Institute for Energy Research found that electricity from new wind is three times as expensive as electricity for the existing fleet of coal units. This is the real reason wind supporters need the wind PTC to be continually extended. Without the PTC, no one would build wind turbines. As Warren Buffet said, “On wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

Instead of looking towards Senator Grassley, Congress should heed the advice of another author of the wind PTC, former Rep. Phil Sharp from Indiana. He said in 2013 that the tax credit should have “a sunset provision to ensure that the temporary incentive does not become a permanent subsidy.” (“Extending the wind tax credit.” Washington Times, 12/5/13)

Members like Senator Grassley want the wind PTC to be a permanent subsidy. It is time to break this cycle and allow this subsidy to phase out. Congress should embrace HR 1901, the PTC Elimination Act by Reps. Marchant and Pompeo, to accomplish this goal.

Filed Under: Wind Tagged With: electricity, wind, wind ptc

ICYMI: Gov. Pence Encourages States to Reject EPA’s Climate Rule

July 10, 2015 by AEA Leave a Comment

WASHINGTON — Yesterday, the American Energy Alliance held a press conference call with Indiana Governor Mike Pence regarding the EPA’s Climate Rule regulating carbon dioxide from power plants. On the call, Gov. Pence explained how states are well within their rights to not submit a plan to the EPA. Below is some of the media coverage of yesterday’s call:

“Pence encourages states to fight greenhouse gas rules”
By Maureen Groppe
7/9/15

Fighting the federal government over proposed greenhouse gas rules for power plants is worth the legal costs, Gov. Mike Pence said Thursday in a news conference with an industry advocacy group aimed at encouraging more states to follow his lead.

“We do have a choice,” Pence said. “You can refuse to submit a state plan. You can challenge the EPA’s ability to impose a federal plan. There’s nothing illegal about saying ‘no’ on behalf of ratepayers and businesses in your state.”

If enough states do that, the Environmental Protection Agency will be forced to capitulate, said Tom Pyle, president of the American Energy Alliance.

“The sheer enormity of having to potentially deal with a dozen or so federal implementation plans would overwhelm the EPA to the point where they would probably have to throw up their hands,” Pyle said.

Pence informed President Barack Obama in a letter last month that he would refuse to comply with the pending rules, unless they were substantially changed.

The rules, which are expected to be finalized this summer, are the cornerstone of the administration’s plan to curb climate change.

If states refuse to comply, the EPA has said, it will impose its own plan. But that would delay implementation, even without the legal challenge Pence says he’s committed to make.

“We think we’ve got a strong opportunity to defend ratepayers, and I think it would be worth the fight,” he said about the cost of litigation.

Click here to read the full article.

“Coal industry has new litmus test for Republican governors”
By James Hohmann and Elise Viebeck
7/10/15

Refusing to implement standards being unveiled next month by the Environmental Protection Agency is the fossil fuel industry’s biggest new ask of Republican governors, especially the four running for president. The Obama administration is putting the finishing touches on far-reaching rules to cut power plant emissions. Recognizing he will not have the votes to override a presidential veto, Senate Majority Leader Mitch McConnell told governors in February that they should decline to respond to federal requests for state-issued plans on how they would meet lower emission targets.
Indiana Gov. Mike Pence, a Republican who retains national ambitions despite passing on a 2016 presidential run, has been the most vocal about his plan to ignore federal orders. Pence said Thursday that he will “refuse to comply” unless a previously issued draft is massively watered down. “The best way for this rule to be improved is for it to be withdrawn completely,” he told reporters on a 40-minute conference call, which was organized by a leading energy industry association. “No state is obligated to adopt the president’s climate change agenda as their own … We’ve drawn a line in the sand and made it clear that the state of Indiana will not comply … We’ll avail ourselves of all legal remedies.”
The American Energy Alliance is pushing governors to “embrace a Just-Say-No approach,” President Tom Pyle said yesterday after a friendly Q&A with Pence. He praised Texas’ Greg Abbott, Oklahoma’s Mary Fallin, Louisiana’s Bobby Jindal and Wisconsin’s Scott Walker — all Republicans — for threatening to defy the feds.

Click here to read the full article.

“Ind. governor sees mercury ruling fueling ‘just say no’ push”
By Jean Chemnick
7/9/15

Indiana Gov. Mike Pence (R) said today that states weighing a “just say no” stance on U.S. EPA’s Clean Power Plan should take heart from last week’s Supreme Court ruling on the Mercury and Air Toxics Standards (MATS).

One of four state governors who have said they won’t implement EPA’s carbon rule for power plants, Pence said in an American Energy Alliance call today the ruling shows the high court will be an ally against economically harmful environmental mandates if governors allow judicial review to proceed.

“There is a majority on the court that recognizes the importance of some common-sense cost-benefit analyses by the EPA in the rulemaking process,” Pence said. “We think we’ve got a strong opportunity here to defend ratepayers, and I think it’s worth the fight.”

Click here to read the full article (subscription required).

###

Filed Under: Press Releases Tagged With: Climate Rule, EPA, Governor Pence, Indiana

Opponents of EPA Climate Regulations Should Reject the Wind PTC

July 10, 2015 by AEA 3 Comments

This summer, the Environmental Protection Agency (EPA) will finalize its Climate Rule regulating carbon dioxide emissions from power plants—what EPA euphemistically calls its “Clean Power Plan.” The Climate Rule is the foundation of President Obama’s broader agenda to restrict the use of America’s natural energy resources. Also central to the president’s climate agenda is the Production Tax Credit (PTC), a federal tax subsidy for wind energy producers.

These two policies—the wind PTC and the Climate Rule—not only independently support the administration’s climate agenda, but also reinforce each other in important ways. Lawmakers who are critical of the Climate Rule should likewise reject the PTC as part of the same climate agenda behind both policies.

Consider recent comments by White House climate change adviser Brian Deese. During a conference call with reporters, Deese admitted the EPA’s regulation of carbon dioxide from power plants is designed to create “strong, long-term incentives for investments in renewables” such as wind and solar. At the same time, the PTC, a multi-billion dollar subsidy, artificially hides the costs of wind generation. As we have written before, the incentives offered by the PTC and the Climate Rule reinforce each other and magnify their benefits, creating a lucrative and artificial market for wind energy while masking the true expense of both policies.

Anyone interested in affordable energy should understand the inextricable link between the EPA’s Climate Rule and the wind PTC.

White House Admits Climate Rule is Wind Subsidy

The so-called “Clean Power Plan,” or Climate Rule, is the focal point of the administration’s climate agenda, requiring a 30 percent reduction in carbon dioxide emissions from power plants by 2030. The Climate Rule will more than double closures of coal-fired generators, with a total of coal generating capacity projected to retire by 2040 due to EPA rules and market factors—the equivalent of shutting down every power plant in the United Kingdom. The economic cost is enormous, and it buys us virtually no environmental benefit: the plan will result in a global temperature reduction of a mere 0.018 degrees Celsius by 2100, for a price of at least $366 billion.

Instead of an emission reduction plan, the Climate Rule functions primarily as a one-way handout to the wind industry. Deese said as much on the conference call, explaining that the plan creates “strong, long-term incentives,” or subsidies, for wind and solar. In fact, installed wind generating capacity is projected to triple under the plan. That is because EPA’s regulation sets a carbon dioxide emission target for states and makes it their responsibility to develop an implementation plan using four “building blocks” stipulated by the EPA. Building block 3 mandates increased use of renewable energy sources, primarily wind and solar, to replace closed coal plants.

By acting as a long-term subsidy for renewables, the Climate Rule does nothing to help the climate and everything to help wind producers and their powerful lobbyists at the American Wind Energy Association.

Production Tax Credit

“Strong incentives”—or massive subsidies—already exist for the wind industry, primarily through the PTC, a multi-billion dollar subsidy that artificially drives down the cost of wind energy by driving up Americans’ tax bills. The success of the Climate Rule hinges on the continuation of the PTC, which is why President Obama has repeatedly asked Congress to make the corporate handout permanent. As states are forced to install expensive renewable generators under the Climate Rule, the PTC will artificially depress prices and hide rate increases, creating an illusion of equitable pricing between conventional fuels and renewables, while taxpayers finance the difference.

In reality, electricity from wind facilities is far more expensive than electricity from existing conventional resources: a recent study by the Institute for Energy Research found that electricity from new wind resources is nearly four times more expensive than from existing nuclear and nearly three times more expensive than from existing coal. Not to mention the inescapable fact that wind power simply does not turn on and off the way conventional plants do, meaning wind facilities have a parasitic effect on the reliable generators that back them up when the wind doesn’t blow. These costs, like the PTC, are hidden and make wind appear to be an attractive option for complying with the Climate Rule. In reality, subsidized wind energy is more like a Trojan Horse.

Conclusion

The EPA’s “Clean Power Plan,” or Climate Rule, will cost Americans hundreds of billions of dollars, drive up electricity rates across the country, and plunge millions of people into poverty—especially the poor and minorities—while the rule’s effect on the climate is virtually non-existent. The only true beneficiaries are members of the wind and solar industry, as states are forced to install renewables while companies pocket billions in subsidies through the PTC. While the PTC expired at the end of last year, the wind lobby is pushing Congress to renew the handout, which is essential to the president’s Climate Rule and broader climate change agenda. Understanding the connection between the EPA’s Climate Rule and the wind PTC is crucial to protecting the American people from the Obama administration’s costly climate agenda. Wise lawmakers should reject both.

Filed Under: Emissions Standards, Wind Tagged With: climate change, Climate Rule, EPA, wind ptc

WSJ Op-Ed: Obama’s Climate Agenda Fails Cost-Benefit Analysis

July 7, 2015 by AEA Leave a Comment

This past Sunday, writer Rupert Darwall published an opinion piece in The Wall Street Journal detailing the economic and technological problems with the Obama administration’s costly climate change agenda. In advance of the UN climate summit in Paris this year, President Obama has pledged to reduce U.S. carbon dioxide emissions up to 28 percent by 2025. Mr. Darwall, author of The Age of Global Warming: A History, explained that the costs of the commitment would significantly outweigh any of the potential benefits, given that renewables are more expensive and less reliable than natural gas, oil, and coal. Below is an excerpt from the article:

Recently Bill Gates explained in an interview with the Financial Times why current renewables are dead-end technologies. They are unreliable. Battery storage is inadequate. Wind and solar output depends on the weather. The cost of decarbonization using today’s technology is “beyond astronomical,” Mr. Gates concluded.

Google engineers came to a similar conclusion last year. After seven years of investigation, they found no way to get the cost of renewables competitive with coal. “Unfortunately,” the engineers reported, “most of today’s clean generation sources can’t provide power that is both distributed and dispatchable”—that is, electricity that can be ramped up and down quickly. “Solar panels, for example, can be put on every rooftop, but can’t provide power if the sun isn’t shining.”

If Mr. Obama gets his way, the U.S. will go down the rocky road traveled by the European Union. In 2007 the EU adopted the target of deriving 20% of its energy consumption from renewables by 2020. Europe is therefore around a decade ahead of the U.S. in meeting a more challenging target—the EU’s 20% is of total energy, not just electricity. To see what the U.S. might look like, Europe is a good place to start.

Germany passed its first renewable law in 1991 and already has spent $440 billion (€400 billion) on its so-called Energy Transition. The German environment minister has estimated a cost of up to $1.1 trillion (€1 trillion) by the end of the 2030s. With an economy nearly five times as large as Germany’s and generating nearly seven times the amount of electricity (but a less demanding renewables target), this suggests the cost of meeting Mr. Obama’s pledge is of the order of $2 trillion.

The cornerstone of the president’s “climate action plan” is an EPA rule requiring states to reduce carbon dioxide emissions by 20 percent by 2030. While the so-called “Clean Power Plan” would impose enormous costs on American families, it would do almost nothing to actually mitigate climate change. This is why states should refuse to submit plans to EPA and the American people should reject the Obama administration’s radical climate agenda.

Click here to read the rest of the op-ed.

Filed Under: Emissions Standards Tagged With: carbon dioxide emissions, climate change, Obama

How Defunding the RFS Could Hurt Consumers

July 6, 2015 by AEA Leave a Comment

Before the July 4^th Congressional recess, the House began considering the FY 2016 Interior & Environment appropriations bill. A number of other amendments are awaiting consideration for debate when they return. One such well-intentioned amendment by Rep Loudermilk from Georgia stands out from the pack. His amendment reads:

“None of the funds made available by this Act may be used to implement, administer, or enforce section 211(o) of the Clean Air Act (42 U.S.C. 7545(o)).”

So what does that mean in English? It means the EPA would not be allowed to spend money to work on the Renewable Fuel Standard. At first blush it would seem if this amendment were successful it would be a huge win for American drivers, conservatives, and free market advocates.

Unfortunately, these things are often more complicated than they seem. While this amendment would prohibit EPA from implementing, administering, or enforcing the RFS it does not change the law—and that is the key. The law would remain on the books and industry would still be responsible for meeting the law despite EPA’s limitation of funds.

This could actually lead to worse outcomes for consumers than what the existing landscape provides. While EPA’s administration of the RFS has been a train wreck, sometimes they have at least acknowledged reality and used their waiver authority to reduce the amount of biofuels that must be blended into the fuel supply below the statutory levels. This is good for anyone who buys gasoline.

By contrast, the Loudermilk amendment could harm consumers. If the amendment were to pass then the waiver authority goes away and you can see a situation where citizen suits could force industry to blend biofuels to statutory levels. Mandating biofuels at the statutory levels would be significantly above today’s levels and could result in a breaking of the blend wall, the physical limitation on the amount of ethanol that can be safely blended into gasoline without causing vehicle problems and voiding warranties. At the very least this amendment introduces further uncertainty into the fuel market. Consider the following table of statutory RFS volumes as specified in the Clean Air Act:

EPA has used its waiver authority to propose volumes for 2014 – 2016 that are significantly lower than what Congress called for in the statute. The following table shows EPA’s proposed volumes for 2016 are about 5 billion gallons fewer than the statute.

Eliminating the funds available for EPA to implement the RFS could result in EPA losing its waiver authority. If that happens, mandated volumes could revert back to the statute, forcing Americans to use even more biofuels. This unintended consequence of the Loudermilk amendment would harm American families.

Lastly, it is important to note this is not the same situation as an amendment that prohibits the administration from spending money on something like the “social cost of carbon.” The SCC is not tied to any law passed by Congress so a prohibition amendment is appropriate in this situation. The point here is that Congress needs to be careful when considering funding prohibitions tied to statutory laws, as some will have unintended consequences.

The Loudermilk amendment is well-intentioned, but it appears that it will do more harm than good. If Congress wants to stop the harmful impacts of the RFS then they need to completely repeal the entire program. That is the only solution to this problem. The American Energy Alliance is supporting H.R. 703 by Rep Goodlatte and S. 1584 by Senator Cassidy completely repealing the RFS and we urge all Members of Congress to support these important pieces of legislation.

Filed Under: Blog, Products and Power, Renewable Energy Mandates, Renewable Fuel Standard Tagged With: Amendment, Appropriations, Loudermilk, rfs

EPA’s Disastrous Power Plan in One Minute

July 2, 2015 by AEA Leave a Comment

Boiling down the EPA’s so-called “Clean Power Plan” into a 1 minute video is no small task, but our friends at the Independence Institute did just that.

As they explain, the plan could shut down affordable, reliable power plants in favor of more expensive energy resources. While the EPA claims that CPP will increase public health and expand the economy, recent studies indicate otherwise.

A study commissioned by the National Black Chamber of Commerce found that EPA’s climate rule would increase both black poverty by 23% and Hispanic poverty by 26%, while causing the loss of 7 million jobs for black Americans and 12 million jobs for Hispanic Americans—all by 2035.

Because minorities and working-class Americans spend more of their monthly budget on energy, increases in energy prices could shrink the amount that families can spend on nutritious foods and medicine. The CPP could cause double-digit electricity price increases in 43 states and have severe health consequences.

Even worse, the EPA says the plan may not result in any notable reduction in CO2 emissions. Simply put, EPA’s ballyhooed climate rule will raise electricity prices, force job loss, and increase poverty—potentially to no avail.

Filed Under: Emissions Standards Tagged With: climate change, electricity, EPA

O’Malley Pledges to Power Country on Unicorns and Pixie Dust

July 1, 2015 by AEA Leave a Comment

In an op-ed for the Des Moines Register, presidential candidate Martin O’Malley claims that his “administration would call for 100 percent of our energy to come from renewable sources by 2050.” The former Governor of Maryland and long-shot Democratic hopeful stated “as president, I would use my executive power on day one to declare the transition to a clean energy future the number one priority of our federal government.”

O’Malley’s statement amounts to an empty campaign promise. Not only is it impossible for the U.S. to rely entirely on wind and solar power, but even if it were possible it would be catastrophically expensive. O’Malley’s is the latest in a long line of quixotic predictions over the years about wind and solar power.

The 100% Renewable Myth

The first problem with O’Malley’s promise is that he can’t keep it. Powering our country on 100% renewable energy is neither possible nor desirable. Hydroelectric power, the largest source of renewable energy in the country at about 10%, is a reliable source of electricity, but its use is limited to areas with a steady water supply. Therefore, O’Malley’s plan depends on massively expanding wind and solar production. The problem is that wind and solar are not reliable energy resources. Wind and solar only work when the wind is blowing or the sun is shining—they are inherently unreliable.

Even the meager amounts of wind and solar we use today, about 5% of our electricity use, pose problems for grid reliability. The more wind and solar we force onto the grid, the harder it will be for grid operators to manage the grid, which must be carefully calibrated so supply matches demand precisely at every moment of the day. Volatile spikes in wind and solar production threaten to destabilize the grid, which can lead to blackouts.

For an idea of what it would feel like to live in a world powered 100% by wind energy, click here. Spoiler: it isn’t good.

More Wind, More Problem$

Even if it were possible to run our country on 100% renewable power, we shouldn’t. Natural gas, nuclear, and coal provide 86% of America’s electricity. That’s a good thing, since these sources are abundant, reliable, and affordable. Scrapping these existing sources and replacing them with new renewables, including wind, would be hugely expensive.

As pointed out in a new study by the Institute for Energy Research, electricity from new wind resources is nearly four times more expensive than from existing nuclear and nearly three times more expensive than from existing coal. This will lead to dramatically higher energy costs for American families and harm low-income, minorities, and the elderly the most, forcing these vulnerable populations to make painful tradeoffs between energy and other basic necessities such as food, shelter, and health care. In other words, more mandated wind and solar means more hardship for American families.

The O’Malley–Carter Delusion

O’Malley’s fantasy is not new. In the 1970s, President Jimmy Carter called for massive increases in wind and solar production. He even put solar panels on the roof of the White House, which President Reagan later removed. Consider the following headlines from The Wall Street Journal. The first, from August 1978, predicts that solar power would supply 20% of our electricity by 2000. Today, more than three decades later, solar still supplies less than 1%.

Presidential campaigns are known for over-promising and under-delivering. O’Malley’s pledge to get 100% of our energy from renewable energy is no exception. Except, unlike more vague campaign promises (see “hope and change”), we don’t need to wait four years to figure out we’ve been duped.

Filed Under: Emissions Standards Tagged With: EPA, Martin O'Malley, renewables

What Does It Cost to Fix Something That Isn’t Broken?

July 1, 2015 by AEA 1 Comment

The Obama administration is pursuing an aggressive plan of closing existing power plants and providing large subsidies of wind and solar electricity generation. Because of the administration’s regulations, 90 gigawatts (GW) of coal-generated power are projected to close. The Environmental Protection Agency (EPA) tells us that power bills will go down as a result of its regulations, but a new report by the Institute for Energy Research shows why electricity rates will only skyrocket under the EPA’s agenda.

New Sources Such as Wind and Even New Natural Gas Wind More Costly Than Existing Coal and Nuclear

Attempting to replace existing coal and nuclear generators with expensive new sources, especially unreliable wind and solar, will impose heavy costs on electricity consumers. Yet that is exactly what the Obama administration is trying to do by imposing their regulation of carbon dioxide emissions from existing power plants.

It is only common sense that using our existing resources is much more cost-effective than building new resources that would be required under the EPA’s agenda. However, it has been difficult to put an accurate price tag on these cost differences—until now.

A new report from the Institute for Energy Research, our sister organization, quantifies the costs of existing sources of electricity generation. The main takeaway from the report is below. The chart shows that existing coal, hydro, and nuclear are much, much less expensive than building new plants, even new natural gas plants.

The report compares the levelized cost of electricity from the existing generation fleet (LCOE-Existing), a brand new measure developed by the authors, versus the levelized cost of new generation sources (LCOE-New), a measure commonly used by government and industry. Both measures report the cost of electricity in terms of dollars per megawatt hour (MWh).

Not only are our existing electricity generators low-cost, but these generators could continue to be used for years if federal policies weren’t forcing the retirement of existing power plants.

The cost difference between existing plants and the types of electricity generation the administration is promoting is stark. For instance, the report found that electricity from new wind installations is three times more expensive, on average, than electricity from existing coal-fired generators and four times more expensive than existing nuclear. The report also estimates the cost that unreliable wind power imposes on reliable generators.

The levelized cost of electricity from existing sources is an essential measure that has been absent from debates over the EPA’s regulations and renewable energy policy. The paper’s findings dispel the myth that subsidized wind and solar facilities are cost-competitive replacements for existing power plants that use conventional fuels. Never mind that wind and solar cannot produce electricity on demand—the cost of their intermittent electricity is much more expensive than electricity from existing nuclear, hydro, and coal facilities.

LCOE-Existing: Cost of the Existing Generation Fleet

The authors of the report calculate the levelized cost per MWh of the existing fleet by incorporating reams of historical data on the actual expenses of coal, nuclear, hydroelectric, and gas plants as reported to FERC and EIA. The authors also adjust the EIA’s LCOE (LCOE-New) to accurately reflect the imposed costs associated with low-capacity distributed generation sources such as wind. The existing fleet, according to the report, has a far lower cost than new sources:

The report’s findings reveal that existing power plants can produce low-cost electricity for years to come:

Existing Fleet Far Cheaper Than New Sources. The authors find that “existing coal nuclear and hydroelectric are about one-third of the cost of new wind resources.”
Costs are Lowest at 30 Years. Existing plants have already paid initial transmission costs, and many have retired construction debt and equity obligations, lowering their LCOE substantially. LCOE was lowest for plants at around 30 years of age.
Oldest Plants Still Cheaper Than New Sources. The oldest plants of each generation resource were still less expensive than the LCOE from new plants, despite rising operating costs. The existing fleet could reliably produce electricity over the next decade and beyond at a substantially lower cost than new generation resources.

Conclusion

The belief that new solar and wind generators are cost-competitive with existing conventional plants has served as a justification for forcing renewables onto the power grid. State policies such as Renewable Portfolio Standards and federal policies like the Wind Production Tax Credit and the Clean Power Plan work in tandem to encourage renewables and force existing power plants into early retirement. That means these policies will unambiguously increase the costs of electricity generation.

This is the first report to use data reported to federal agencies to calculate the cost of existing sources of generation. The authors have made a vital contribution to the electricity policy debate in offering this new measure, LCOE-Existing, which allows policymakers to accurately assess the costs and benefits of sweeping changes to America’s electricity generation fleet.

Now that the actual cost of the loss of these plants is known, it is obvious that programs that promote sources such as wind and solar will only increase the price of electricity. As the IER report illuminates, there is no question that these policies will place enormous strain on American families and businesses.

For the full report and a complete explanation of the methodology, see The Levelized Cost of Electricity from Existing Generation Resources.

Filed Under: Emissions Standards Tagged With: coal, electricity, EPA, nuclear, wind

AEA Issues Statement on MATS Ruling

June 29, 2015 by AEA 4 Comments

SCOTUS Slaps EPA for Ignoring the Costs of its Reckless Agenda

WASHINGTON — American Energy Alliance President Thomas Pyle issued the following statement on the Supreme Court’s Mercury and Air Toxics Standard (MATS) ruling:

“Today’s Supreme Court decision is an important step toward reining in the Environmental Protection Agency. For too long EPA has ignored the costs of its regulations, which have become so large that they not only harm the economy, but also the health and welfare of American families.

“The Supreme Court made it clear: EPA can no longer ignore the costs of its reckless agenda. This decision shows that states should resist EPA’s calls to submit plans for the upcoming climate rule, which will impose enormous economic burdens on the American people for little, if any, environmental gain.”

###

Filed Under: Press Releases Tagged With: climate, EPA, MATS