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Are Americans Being Punished for China’s Pollution?

August 20, 2015 by AEA Leave a Comment

While financial analysts consider the impact of how China’s devaluing of the Yuan may affect the country’s exports, residents of western states are receiving one Chinese export for free—pollution.

According to a new study supported by the Jet Propulsion Laboratory (JPL) and NASA, ozone precursor emissions from China are blowing across the Pacific Ocean and increasing ozone levels in the western United States. This finding highlights the difficulty with complying with the Environmental Protection Agency’s (EPA) proposed ozone rule, which forces states to further reduce ozone emissions even though, according to the study, China’s ozone emissions have offset 43 percent of the reductions states achieved over the last few years.

The EPA’s ozone rule would cut national standards for ground-level ozone by as much as 20 percent. This regulation could force hundreds of communities and even several national parks out of compliance with the new rule and put them at risk of losing millions of dollars in federal funding for transportation projects. Several areas in the U.S. are already out of compliance with the current standard, and lowering it even further would set a standard that not even national parks with zero industrial activity can achieve.

The rule would come at high cost: the National Association of Manufacturers estimates the ozone rule will cost $140 billion each year in lost economic growth, and lead to 1.4 million fewer American jobs. President Obama is essentially asking Americans to pay billions of dollars to fix a problem that is not confined to our borders and may have no effect on air pollution or health in the United States. According to JPL scientist Jessica Neu, “…even if you are making big efforts to reduce your emissions, what other countries are doing could offset that.” For this reason, EPA should withdraw its proposed ozone rule.

China’s Ozone Problem

The new study, published in Nature Geoscience, found that Chinese ozone has offset about 43% of the ozone reductions that were expected between 2005 and 2010 in the western United States. This is because China, currently the world’s second biggest economy, saw a 21% rise in ozone-forming pollutants between 2005 and 2010 even as U.S. emissions have declined.

EPA has proposed cutting the national ground-level ozone standard from 75 parts per billion to between 65 and 70 ppb, and perhaps as low as 60 ppb. At these levels, many parts of the country, including national parks in the western United States, which have no industrial activity whatsoever, could be out of compliance. Areas deemed out of compliance can face stiff penalties, including loss of federal funding, and be forced to curtail industrial activity, which would destroy jobs and limit economic growth.

With China’s ozone emissions drifting across the Pacific, many countries on the west coast may find that they cannot achieve EPA’s tighter standards—regardless of any steps they take to curtail emissions.

Huge Costs, Small Benefits

Given the levels of ozone precursors coming into the United States from China, the alleged benefits of the ozone rule will be lower than EPA calculates, and even by EPA’s own estimates, the proposed ozone rule could be the costliest federal rule ever.

EPA claims that further ozone reductions will improve air quality and public health. Even if there was merit to the claim that a tighter ozone standard would improve public health, it is difficult for the United States to realize these benefits unless China adopts serious emission limits to reduce the ozone coming into the U.S. from abroad.

Despite rhetoric from the Chinese leadership that they are engaging in a “war against pollution,” it is unlikely that China will see significant reductions in air pollution anytime soon. It is unsurprising that China has made strong environmental pledges ahead of UN climate talks in December, as the country seeks to secure legitimacy as a global power both with its own people and with the international community. To accomplish lofty environmental goals, economists have said the government must let an already decelerating economic growth slow even further.

Air pollution is an undeniable problem in China, and the people want a solution. At the same time, however, they are demanding more passenger automobiles than any other country in the world and an increased standard of living that can only be achieved with more economic development, not less. While the country is taking steps to reduce air pollution, ozone will continue to make its way across the Pacific and into the United States. Therefore, it is unfair for the Obama administration to force states to further reduce ozone when our air quality is in part determined by Chinese pollution we cannot control.

Conclusions

The Obama administration wants to lower ozone standards in the United States, forcing hundreds of communities to adopt costly policies to comply with unattainable standards. At the same time, China will continue exporting pollution to the United States, offsetting much of the progress we have made under the current standard. The EPA should keep the current ozone standards and avoid inflicting huge economic burdens on Americans towards what could be an unattainable goal.

Filed Under: Emissions Standards Tagged With: China, EPA, Obama, Ozone

Tribune-Review: Obama’s ‘Clean Power’ Costs Too Much

August 14, 2015 by AEA 1 Comment

This week, the Pittsburgh Tribune-Review wrote an editorial showcasing IER’s recent study on the true cost of electricity to help illustrate the exorbitant costs of Obama’s carbon plan. Below is an excerpt from the piece:

Using federal data reported by electricity generators, the study found one megawatt-hour of electricity from existing nuclear plants costs an average of $29.60. Comparable figures for existing hydro-, coal- and natural-gas-powered plants are $34.20, $38.40 and $48.90, respectively.

But for new natural gas plants, it’s $73.40, and for new wind turbines, $106.80 — with the dramatic cost differences due largely to capital costs and the requirement for natural gas-fired plants to “be ramped up and down rapidly” as winds blow and calm.

Mr. Pyle urges states, which are supposed to submit compliance plans or see the feds impose their own, to “think twice about working with the EPA.” As he puts it, building new power plants to comply “would impose expensive and unnecessary costs — and the public would foot the bill,” with low-income households hit hardest.

Ah, another “progressive” pig in a poke.

Click here to read the rest of the editorial.

Filed Under: Emissions Standards Tagged With: coal, electricity costs, EPA, natural gas, Obama, wind

Six Things Every American Should Really Know About EPA’s Carbon Agenda

August 12, 2015 by AEA Leave a Comment

Last week, AEA President Thomas Pyle responded to a Medium post by EPA Chief Gina McCarthy with his own six reasons as to why states and the American people should be wary of entrusting EPA with their energy futures. Below is an excerpt from the piece:

McCarthy claims her plan “will save us billions of dollars every year.” This is just plain wrong. This plan will cause existing coal-fired power plants to shutter. The most cost-effective new source of electricity generation is combined cycle natural gas, electricity from which is twice as expensive as electricity from existing coal plants. New wind, meanwhile, is three times as expensive as existing coal and new solar is even more expensive. You can’t save Americans’ money when you make wholesale electricity generation more than twice as expensive. It just doesn’t work.

The EPA’s carbon rule has no impact on climate change but inflicts severe burdens on American families. Fortunately, states have the power to defeat this regulation by refusing to submit plans to the EPA. To learn more about how states are fighting to protect their citizens, visit SmartPowerPlan.org

Click here to read the rest of Pyle’s post.

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

Obama’s Carbon Plan Could Cause Thousands of Premature Deaths

August 12, 2015 by AEA Leave a Comment

Earlier this month, the Environmental Protection Agency (EPA) finalized its so-called “Clean Power Plan,” or carbon rule, which regulates carbon dioxide emissions from existing power plants. Although EPA claims that the benefits of the rule are substantial, in reality it will have negative repercussions for Americans, especially the most vulnerable. In fact, by our estimate, the EPA’s regulation will likely cause more premature deaths than it prevents, have an undetectable impact on climate change, and fail to produce significant health benefits.

To implement this regulation, President Obama is depending on states to submit plans to EPA. Yet many states, recognizing the high costs and lack of climate benefits, are fighting back. The best way for state leaders to protect their citizens from skyrocketing energy costs is to reject EPA’s request for a state plan.

Obama’s Carbon Rule Causes Thousands of Premature Deaths

EPA claims the finalized carbon rule will have climate and health benefits for Americans worth tens of billions of dollars and save thousands of lives per year. However, while EPA asserts its carbon rule will save lives, the agency fails to acknowledge how many deaths the plan may cause.

EPA’s rule will raise energy prices by forcing the closure of affordable coal-fired plants to make way for more expensive plants fueled by other sources. This could raise electricity prices by double digits for residents of 43 states, a burden that will be felt most by poorer households. Americans will find that they must sacrifice other necessities, like medicine and doctor visits, in order to afford the higher energy prices.

EPA ignores the “health-wealth” link as it promotes the carbon rule, resulting in dangerous miscalculations of health benefits. By forcing higher energy prices on American families, the carbon rule will end up making the poor poorer and the sick sicker.

By EPA’s estimates, the carbon rule could prevent thousands of premature deaths by 2030 by decreasing Americans’ exposure to outdoor pollutants. However, EPA’s estimates fail to consider the negative health impacts associated with a loss of wealth that the rule will cause. Even if we take the EPA’s numbers at face value, estimates from the Institute for Energy Research (IER) indicate the regulation could cause, on balance, 14,000 more premature deaths than it prevents by 2030.

Source: Based on IER calculations of Environmental Protection Agency and NERA Economic Consulting data

To learn more about how EPA’s carbon rule causes more premature death than it prevents, read IER’s recent post here.

Obama’s Carbon Rule Has No Impact on Climate Change

EPA’s carbon rule is an integral component of the Obama administration’s climate agenda. As a result, the alleged purpose of the regulation is to reduce carbon dioxide emissions that contribute to climate change. Nevertheless, the rule’s impact on global temperatures is so minimal as to be completely undetectable. According to climate experts from the Cato Institute, the rule will prevent an increase of 0.019°C by the year 2100. They conducted this analysis using EPA’s own models. Furthermore, a separate analysis done by the American Coalition for Clean Coal Electricity reached very similar conclusions: by 2050 the rule would yield (1) a reduction in atmospheric carbon dioxide concentrations by 0.2 percent, (2) a decrease of 0.006°C in global temperatures, and (3) a sea level rise diminished by 0.2 millimeters.

Regardless, EPA is claiming that the final rule will garner $20 billion a year in “climate benefits” in 2030. So, if there is no effect on global temperatures, what are the alleged climate benefits that EPA claims the plan will produce? Essentially, EPA estimates the benefits based on a metric called the Social Cost of Carbon (SCC), which isn’t based on the tangible impacts on temperatures. Instead, it calculates the alleged economic impact caused by every ton of carbon that’s emitted. This metric has been criticized by a number of researchers, statisticians, and economists as arbitrary, unreliable for crafting policy, “close to useless,” and “susceptible to political gaming.”

Ultimately, the theoretical and practical issues with SCC make it a poor tool for policymaking. The fact that the claimed climate benefits from EPA’s rule are entirely based on SCC estimates, rather than actual impacts on global temperatures or sea levels, makes the regulation very problematic.

Zero Climate Benefits, Dubious Health Benefits

Because the rule has no discernible impact on climate change, EPA is attempting to link the plan to public health. However, its claimed health benefits are also highly suspect. EPA claims that its rule will improve the health of Americans by reducing criteria pollutants that contribute to asthma and other illnesses. Yet historical trends indicate that illnesses are rising despite emission reductions. The data show that while air pollution has declined for several decades, asthma rates are rising. This casts doubt on the health benefits of EPA’s rule and suggests that other factors, such as poverty, may play a larger role in affecting health than air pollution does.

Currently, about 25 million Americans suffer from asthma, and the EPA is claiming that its carbon rule, by reducing Americans’ exposure to outdoor air pollutants, can help alleviate this health burden. However, EPA’s health claims are dubious and some of them rely on cherry-picked and misinterpreted analysis. As previously discussed, EPA has ignored the health-wealth link that shows the plan may in fact kill more people than it saves. In particular, a study by the National Black Chamber of Commerce concluded that the rule is likely to negatively affect low-income groups and minorities. Rather than creating health benefits, the rule may cause disproportionate harm to the poorest among us. By making Americans poorer, the rule will make people sicker and damage public health.

Conclusion

EPA’s carbon rule, a crucial piece of the Obama administration’s climate agenda, makes sweeping claims about the benefits of regulating carbon dioxide emissions from affordable and reliable power plants. However, upon closer inspection, the rule falls short of its claimed benefits—and even has significant negative impacts.

By raising energy prices, the carbon plan will have substantial economic repercussions that make Americans poorer—and ultimately, it may cause more deaths than it prevents. At the same time, it won’t produce any tangible impact on climate change; instead, the rule relies on climate benefits produced by arbitrary and unreliable models. Finally, the health benefits of the rule are questionable and don’t align with the government’s own data on pollution and asthma rates.

State should take note. Now that the rule is final, EPA is depending on states to submit implementation plans. However, a growing number of states have come out against EPA’s carbon regulation, raising the possibility that EPA will be unable to implement the rule as written. Given these high costs and dubious benefits, state leaders should protect their citizens by rejecting EPA’s call for state plans.

To read about the “10 Reasons States Should Not Submit a State Plan,” click here.

Filed Under: Emissions Standards Tagged With: carbon rule, Energy prices, EPA, health, Obama, premature deaths, wealth

Obama’s Carbon Rule Still a Bad Deal for Americans

August 3, 2015 by AEA 3 Comments

WASHINGTON — American Energy Alliance President Thomas Pyle issued the following statement following the Obama administration’s announcement of their final carbon rule:

“The final version of President Obama’s ‘Clean Power Plan’ is somehow more harmful than the proposed rule. It forces states to make even steeper cuts, it guts natural gas in favor of costly renewables, and it still has no effect on climate change. While the EPA touts these adjustments to the rule as a sign of ‘flexibility’, it’s really an admission that Obama needs states to do his dirty work. But state leaders shouldn’t give in to the administration’s bribery schemes. Regardless of these cosmetic changes to the rule, the fundamental flaws remain.

“It’s important to remember that President Obama’s carbon regulation, the crown jewel of his climate legacy, has no impact on climate change. EPA’s own models show that their carbon rule will limit global temperature rise by a mere 0.018 degrees Celsius by 2100. That’s a bad deal for the American people. State leaders should protect their citizens from Obama’s costly carbon rule by refusing to submit a plan.”

Click here to find out more about the opposition to the Obama administration’s carbon rule.

Filed Under: Blog, Press Releases Tagged With: clean power plan, climate change, coal, Obama

Mounting Opposition to EPA’s Carbon Rule

July 30, 2015 by AEA 6 Comments

AEA Launches Initiative Detailing How States and the Public are Fighting Back

WASHINGTON – Today, the American Energy Alliance is launching SmartPowerPlan.org—a hub for the latest information on how states and the public are fighting back against the EPA’s so-called Clean Power Plan.

This one-stop shop provides the latest news, legal analysis, public comments, and state action against the EPA’s carbon rule. The site also includes a legislative tracker and an interactive map detailing which states are taking action to protect their citizens from the rule.

Opposition to EPA’s carbon rule is strong and growing. A majority of states have already demonstrated opposition to the proposed rule, with six governors threatening to not submit a plan.

Due in part to this growing opposition, EPA is expected to make adjustments when it announces its final rule as early as next week. In hopes of goading states to submit plans, it has been reported that EPA is expected to delay deadlines and offer up “incentives” for states that submit plans early and deploy green energy and energy efficiency programs. State leaders should not let these bribery schemes dupe them into submitting state plans.

Here are 5 issues to keep in mind before the final the rule is released:

1.) How does EPA try to enforce “building blocks” it lacks the authority to impose?First and foremost, the EPA doesn’t have the legal authority to regulate power plants under Section 111d since they are already regulated under Section 112 (MATS). They also don’t have the legal authority to go outside the fence and regulate building blocks 2-4 at the state level. To do so would force states to overhaul their electricity systems in violation of the anti-commandeering and anti-coercion doctrines. If President Obama wants to impose cap and trade or a carbon tax scheme, he needs to go through the legislative process (something that his own party rejected when they controlled the House and Senate) not just rely on regulatory fiat.

2.) Does EPA recognize its cost estimates don’t reflect reality? The Supreme Court recently remanded EPA’s mercury rule for failing to consider costs. EPA’s carbon rule is expected to be much costlier, likely raising electricity rates by double digits in many states. A new study from the National Rural Electric Cooperative Association found that a 10 percent increase in electricity rates would destroy 882,000 jobs annually, on average, between 2020 and 2040, with peak job losses of 1.2 million in 2021. A 25 percent increase in utility bills would destroy 1.5 million jobs annually with a peak of 2.2 million in 2021. No amount of “flexibility” EPA offers in its final rule will prevent electricity rates from rising and Americans from suffering.

3.) Does EPA finally address the health – wealth link? The EPA has thus far failed to properly consider the impact of rising electricity prices on Americans’ health. A major factor in health outcomes is socioeconomic status (I.e., whether you have a job and can pay your bills). By raising energy prices and making people poorer, EPA’s regulation could also make people sicker. This would undermine EPA’s claims that the rule benefits public health. EPA cannot continue to ignore the negative impact of higher energy prices on Americans health and well-being.

4.) Does EPA consider what will happen if states don’t submit plans? As noted above, EPA lacks the legal authority to impose any of its four “building blocks”. As a result, the only way to achieve the proposed emission reductions is for states to submit plans that self-impose these measures. However, a growing number of states are resisting EPA’s call to submit a plan: to date, six governors have announced they do not intend to submit a plan and more than a dozen states have enacted legislative hurdles. If enough states reject the regulation, EPA could be forced to severely amend the emission target or withdraw the rule altogether.

5.) How does EPA try to justify a climate rule that does nothing to address climate change? Despite these enormous costs on families and businesses, the rule would yield little to no benefit to the climate. For instance, the stated purpose of the proposed rule is to fight climate change by reducing carbon dioxide emissions by 30%. But using the EPA’s own models, the rule would amount to a 0.02 degrees Celsius difference in world temperatures by 2100 and reduced sea levels by the equivalent of three sheets of paper. If EPA’s final rule reduces the emission target under the guise of “flexibility” these puny benefits will be even smaller. All for the symbolic gesture that America is doing something on climate.

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Filed Under: Emissions Standards, Press Releases Tagged With: carbon rule, climate change, EPA, health, states

5 Questions to Consider as EPA Issues Final Carbon Rule

July 30, 2015 by AEA 1 Comment

The Obama administration is set to finalize its signature carbon rule, the so-called “Clean Power Plan”, as early as next week. This regulation aims to reduce U.S. carbon dioxide emissions by 30 percent by 2030 and is estimated to cost over $350 billion. To implement the rule, EPA is depending on states to do the heavy lifting by submitting their own state implementation plans. However, states and other interested parties have submitted a litany of comments and concerns about the rule, and a number of states have even announced that they will not submit a plan.

There has been a lot of speculation about how EPA will address these comments and concerns. It has been reported that EPA could delay the deadlines for submitting a plan and complying with the rule, and that the agency will offer up “incentives” for states that submit plans early and deploy green energy and energy efficiency programs. The agency is hoping that their bribery schemes will goad states into submitting plans. However, these superficial adjustments do not address the underlying flaws with the rule. States should not be duped into submitting plans to the EPA. Here are 5 issues to keep in mind before the final the rule is released:

How does EPA try to enforce “building blocks” it lacks the authority to impose? First and foremost, the EPA doesn’t have the legal authority to regulate power plants under Section 111d since they are already regulated under Section 112 (MATS). They also don’t have the legal authority to go outside the fence and regulate building blocks 2-4 at the state level. To do so would force states to overhaul their electricity systems in violation of the anti-commandeering and anti-coercion doctrines. If President Obama wants to impose cap and trade or a carbon tax scheme, he needs to go through the legislative process (something that his own party rejected when they controlled the House and Senate), not just rely on regulatory fiat.

Does EPA recognize its cost estimates don’t reflect reality? The Supreme Court recently remanded EPA’s mercury rule for failing to consider costs. EPA’s carbon rule is expected to be much costlier, likely raising electricity rates by double digits in many states. A new study from the National Rural Electric Cooperative Association found that a 10 percent increase in electricity rates would destroy 882,000 jobs annually, on average, between 2020 and 2040, with peak job losses of 1.2 million in 2021. A 25 percent increase in utility bills would destroy 1.5 million jobs annually with a peak of 2.2 million in 2021. No amount of “flexibility” EPA offers in its final rule will prevent electricity rates from rising and Americans from suffering.

Does EPA finally address the health – wealth link? The EPA has thus far failed to properly consider the impact of rising electricity prices on Americans’ health. A major factor in health outcomes is socioeconomic status (i.e., whether you have a job and can pay your bills). By raising energy prices and making people poorer, EPA’s regulation could also make people sicker. This would undermine EPA’s claims that the rule benefits public health. EPA cannot continue to ignore the negative impact of higher energy prices on Americans’ health and well-being.

Does EPA consider what will happen if states don’t submit plans? As noted above, EPA lacks the legal authority to impose any of its four “building blocks”. As a result, the only way to achieve the proposed emission reductions is for states to submit plans that self-impose these measures. However, a growing number of states are resisting EPA’s call to submit a plan: to date, six governors have announced they do not intend to submit a plan, and more than a dozen states have enacted legislative hurdles. If enough states reject the regulation, EPA could be forced to severely amend the emission target or withdraw the rule altogether.

How does EPA try to justify a climate rule that does nothing to address climate change? Despite these enormous costs on families and businesses, the rule would yield little to no benefit to the climate. For instance, the stated purpose of the proposed rule is to fight climate change by reducing carbon dioxide emissions by 30%. But using the EPA’s own models, the rule would amount to a 0.02 degrees Celsius difference in world temperatures by 2100 and reduced sea levels by the equivalent of three sheets of paper. If EPA’s final rule reduces the emission target under the guise of “flexibility” these puny benefits will be even smaller. All for the symbolic gesture that America is doing something on climate.

Given these fundamental flaws, states should reject EPA’s carbon regulation. Refusing to submit a state plan is a right of states under the Clean Air Act. Numerous governors, legislators, and other state leaders have risen in opposition, with likely more to follow once the rule is final. Any cosmetic changes EPA makes to the final rule cannot address the underlying flaws with the regulation. States that want to protect their constituents from higher energy bills are right to resist.

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

Clinton’s Anti-Energy Pledge Would Make Electricity Rates Skyrocket

July 29, 2015 by AEA 1 Comment

Hillary Clinton recently proposed a “comprehensive energy and climate agenda,” which includes increasing installed solar capacity to 140 gigawatts (GW) by 2020. She claims this would be achieved by installing 500 million more solar panels across the country, and doing so would increase the current solar capacity by 700 percent: a 32 percent annual growth rate.

Installing 140 GW of solar panels is unwise for three reasons: 1) electricity from new solar panels is significantly more expensive than electricity from existing resources, 2) new solar panels are one of the highest-cost sources of new electricity generation, and 3) at high penetration levels, solar panels disrupt the reliable functioning of the power grid.

Putting a Price on Clinton’s Solar Pledge

The Energy Information Administration (EIA) publishes estimates of the levelized cost of electricity (LCOE) from new resources, which takes into account the capital and operating costs of new power plants over their operating lives. EIA estimates that electricity from a new solar photovoltaic (PV) system will cost $125.3 per megawatt hour (MWh) in 2020. By contrast, we calculated in a recent paper that electricity generated from existing coal plants costs $38.40/MWh, on average, while electricity from existing nuclear plants costs $29.60/MWh.

Clinton’s plan would lead to the closure of existing coal plants and the building of new solar PV that are 322 percent more expensive. Compared to existing nuclear plants, new solar is 417 percent more costly. In both cases, electricity costs would necessarily skyrocket with any appreciable increase in solar power. Certainly at the levels Clinton is proposing, the cost associated with increasing solar penetration would be a significant burden on American families.

Going All-In on Solar Power is Bad Policy

Clinton’s plan would dramatically increase the cost of electricity by building high-cost and unreliable (i.e. non-dispatchable) sources of electricity generation—such as solar—that do not reduce the need for other generation resources. Solar power cannot completely replace reliable natural gas, coal, or nuclear plants because solar cannot be counted on to produce electricity when it is needed.

As the chart below shows, increased generation from solar panels creates a dangerous situation for grid operators—solar generation falls off sharply in the afternoon, just as system demand is peaking, causing dispatchable sources of generation to ramp up and make up the difference. Under Clinton’s plan, this pattern would be an everyday occurrence.

Source: http://www.utilitydive.com/news/the-epic-fail-on-solars-doorstepand-how-the-grid-can-help/324411/

Solar panels can only be built in addition to reliable sources, not to replace them. As a result, solar power can reduce the fuel costs of some natural gas plants—for example, by reducing the amount these plants operate when the sun is shining. However, solar panels do not replace natural gas plants or reduce the need for reliable plants at times of peak demand. This means that solar cannot reduce the overall capital costs of the reliable generation system, and only increases the overall capital cost of the generation system when the cost of solar panels is considered.

Not only does solar increase capital costs, but subsidized solar power has a parasitic effect on low-cost baseload power plants. Adding a large amount of subsidized solar adversely affects the economics of baseload power plants and this means low-cost, reliable electricity generation resources will be shut down.

On a more abstract level, Clinton’s plan represents a shift backwards—Americans need more energy, not less, and we need the most effective and lowest cost sources. Clinton’s plan would promote expensive, unreliable energy sources and shut down our most affordable and reliable sources. Rather than giving us an energy plan, Clinton has given us a new blueprint for making electricity prices skyrocket.

Conclusion

Hillary Clinton’s plan to increase installed solar capacity by 700 percent by 2020 is uneconomic and would burden Americans with significantly higher electricity costs: new solar is 322 percent more costly than existing coal resources and 417 percent more expensive than existing nuclear. The only way to achieve Clinton’s goal would be through spending billions of dollars on subsidies such as the solar Investment Tax Credit and enforcing strict environmental regulations aimed at shutting down coal plants, including the administration’s plan to regulate carbon dioxide emissions from existing power plants—both of which Clinton supports.

Filed Under: Emissions Standards, Renewable Energy Mandates Tagged With: climate change, coal, electricity, Hillary Clinton, solar

If Wind Energy is “Strong” Why Does it Need Subsidies?

July 29, 2015 by AEA 5 Comments

Last week, the American Wind Energy Association (AWEA) released its second quarter 2015 U.S. wind energy market report. In a press release, AWEA CEO Tom Kiernan hails the report as indicative of a vibrant wind energy industry: “With a near-record amount of wind capacity under construction, this looks to be a strong year for American wind power.” However, Kiernan quickly changes tone, stating that “…to create longer term stability for the industry the full Senate and the House of Representatives must move quickly to extend the PTC,” or wind Production Tax Credit.

If the wind industry is “strong,” then why does it need subsidies for “stability”? This doublespeak is a favorite tactic of AWEA, who continues to boast about how vibrant the wind industry is while also lobbying for more subsidies that they supposedly need to survive. AWEA and wind advocates can’t have it both ways: if they expect Americans to believe their claims that wind energy is booming, then the industry should give up the PTC and stand on its own two feet.

AWEA’s quarterly report shows growth in subsidized wind

According to AWEA’s report, subsidized wind energy experienced quite the bump in installation and capacity numbers. AWEA claims that “the U.S. wind industry installed 845 turbines totaling 1,661 MW, a record for wind installations in the second quarter.” Further, AWEA claims that the 1,994 megawatts installed in the first half of 2015 more than doubles the amount installed during the same period in 2014.

In addition to those numbers, AWEA shows yearly increases in overall capacity since 2001, and shows a positive trend in wind capacity under construction since 2011. However, this growth is not organic, but dependent on taxpayer subsidies. According to EIA, in 2013 federal wind subsidies totaled $5.9 billion. Wind energy is inextricably tied to government subsidies, including the PTC, and claims of wind energy growth should take these massive government handouts into account.

The wind industry’s broken record

For decades, wind advocates have claimed that wind will be cost competitive in the near future, thereby negating the need for the PTC. Below are some examples from AWEA officials:

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)

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)

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)”

Despite claims that wind will soon no longer need subsidies to compete, year in and year out AWEA spends millions of dollars lobbying Congress to extend the wind PTC. While AWEA has supported the idea of a phase out in the past, the industry now seems more interested in perpetual subsidies than keeping its word.

Note about “capacity” versus generation

Wind lobbyists love to tout growth in installed wind capacity. AWEA points out that last year wind capacity installations eclipsed those of any other energy source, including natural gas. But electrical capacity isn’t the same as electricity generation. According to EIA, capacity is the maximum amount of electricity an energy source can produce. Generation is the amount of electricity an energy source actually produces. It is the difference between potential and reality.

This key difference underscores one of wind energy’s big weaknesses: it isn’t good at turning potential energy into real energy. EIA gives wind a “capacity factor” of 34 percent, which means wind reaches its maximum output (capacity) just one-third of the time. By contrast, nuclear has an average capacity factor of 92 percent and coal 61 percent, according to EIA.[i] Because of these varying capacity factors, capacity additions bear little resemblance to electrical generation. For example, 1 gigawatt of nuclear capacity will produce over 3 times the amount of generation that 1 gigawatt of wind capacity can produce.

Wind energy isn’t good at converting capacity into generation because the wind cannot be controlled. When the wind isn’t blowing, wind installations aren’t producing. More reliable energy sources like nuclear, coal, and natural gas can produce energy at any time precisely when it is needed. For this reason, reliable sources like nuclear and coal “generally have more value to a system than less flexible units” like wind, according to EIA.

Conclusion

Congress is currently debating whether to revive the wind PTC in a tax extenders package. Sadly, the Senate Finance Committee rushed through the package with little debate and no opportunity for amendments, in a business-as-usual mentality too common in Washington. Congress should reject the PTC for a host of reasons: it raises Americans’ electric rates, destabilizes the power grid, enriches wealthy investors at the expense of taxpayers, and is central to President Obama’s EPA carbon regulations. Lawmakers that want to stand up for their constituents can co-sponsor H. R. 1901, the PTC Elimination Act, which AEA is including in the American Energy Scorecard.

One of the most compelling reasons to end this corporate welfare is because even the wind industry claims the industry is “strong”—taxpayers shouldn’t have to subsidize an industry that can compete on its own. If AWEA truly believes wind energy is a “success story,” then the industry should back up its words by letting go of the wind PTC.

[i] See Energy Information Administration, Electric Power Monthly, May 2015, Table 6.7.A. and 6.7.B., http://www.eia.gov/electricity/monthly/current_year/may2015.pdf

Filed Under: Blog, Wind Tagged With: AWEA, wind ptc

Congress Moves to Revive Obama’s Green Energy Piggybank

July 28, 2015 by AEA Leave a Comment

As the battle over the Senate’s objectionable tax extenders package continues, another fight over special interests and corporate welfare is building in Congress—namely, the reauthorization of the Export-Import (Ex-Im) Bank. After Ex-Im’s mandate expired on June 30, senators voted Sunday to revive the Bank.

The U.S. government runs the bank as its “official export credit agency.” It provides a way for the government to back up projects that the private sector is purportedly unwilling to undertake by shifting the risk onto taxpayers. Although Ex-Im currently cannot forge any new deals, it can still execute the $112 billion already in its portfolio.

By risking billions in taxpayer dollars on numerous questionable deals, the Obama administration has utilized the bank to promote its green energy agenda. The end result is significant damage to small businesses and American families.

Ex-Im Makes the Playing Field Unfair

While the bank is regularly touted as an effective way to fill in the gaps that the private sector leaves behind and counteract subsidies from foreign nations, The Wall Street Journal provides a compelling explanation of why this isn’t the case:

But Ex-Im has been subsidizing credit for so long that it’s impossible to know if those “gaps” would be filled if Ex-Im went away. Everything we know about markets says they largely would. Boeing, Ex-Im’s biggest beneficiary, has already said it can secure alternative financing. General Electric doesn’t lack for bankers. The Government Accountability Office (GAO) looked at Ex-Im in 2013 and said the bank “cannot answer the question of what would have happened without Ex-Im financing.” Maybe that’s because it didn’t want to.

A careful look at the numbers reveals the same conclusion. According to the Mercatus Center at George Mason University, Ex-Im backs only a small percentage of total U.S. exports and merely of a sliver of that is directed toward leveling the playing field for U.S. companies. Furthermore, its actions distort the market and actually make it harder for other U.S. companies to compete with subsidized ones.

And Ex-Im isn’t profitable. If the bank used fair-value instead of government accounting, its top programs would put taxpayers $2 billion in the red. Taxpayers have only taken on more risk as Ex-Im’s financial exposure increased by more than $36 billion over the last four years.

Ex-Im Supports Green Energy Cronyism

Due to Ex-Im’s mandate to support renewable energy, the bank provided billions in subsidies to projects that support the administration’s green energy agenda. Among these deals have been some spectacular failures. Here are a few examples:

Solyndra: Ex-Im approved a $10 million loan guarantee to a Belgian bank that financed the purchase of solar panels from Solyndra, a firm tied to the Obama administration that went bankrupt after leaving taxpayers on the hook for hundreds of millions of dollars.

Exports In Name Only: Ex-Im approved subsidies for a company to sell solar panels to itself and call it an “export,” a Washington Examiner investigation revealed. The bank issued $455.7 million in loan guarantees for a Canadian company, St. Clair Solar, to buy solar panels from First Solar. The problem: First Solar owns St. Clair—so First Solar shipped solar panels to itself, taxpayers subsidized the sale, and Ex-Im called it an “export.”

Double Dipping: As Mercatus points out, several large energy companies, some of which are foreign-owned, have received taxpayer subsidies from multiple federal programs in addition to handouts from Ex-Im. Examples include:
- Gamesa, a Spanish wind firm: $1.3 billion total (including Ex-Im).
- Areva, a French nuclear company: $2.1 billion.
- Abengoa, a solar and biofuel conglomerate: $3 billion.

Further, the Ex-Im bank has been tied to Brazilian industrial magnate Marcelo Odebrecht, who was recently arrested on corruption charges. Diane Katz of The Heritage Foundation points out instances of Petrobras receiving Ex-Im handouts:

1998, for example, the Ex-Im board conferred “delegated authority” on Petrobras to issue up to $100 million in loan insurance and guarantees backed by the bank. Other deals include:

January/May 2001: $44 million in financing for Petrobras to purchase a steam turbine and generator from General Electric for a power plant project. Four months later, the loan amount was increased to $97 million.

October 2001: A $178 million loan to buy gas turbines and other equipment for a power plant project involving Petrobras and two other companies.

May 2005: A $39 million loan guarantee for equipment to build an oil production platform for Petrobras off the coast of Brazil.

2009: A preliminary commitment of $2 billion to Petrobras as part of the bank’s “proactive outreach.” The financing was intended to develop offshore oil and gas reserves and upgrade its refining and distribution infrastructure. (This financing coincided with the Obama administration’s restrictions on offshore oil and gas projects.)

February 2010: A $308 million loan guarantee to a Petrobras subsidiary for oil and gas field development. Bank records show $100 million is still outstanding.

2012: A $23 million loan guarantee to a Brazilian firm that will supply helicopter services to Petrobras for its deep-water drilling rigs.

While the Ex-Im bank was busy financing to the corruption-troubled Petrobras in Brazil, the Obama administration has made it more difficult for American oil companies to obtain offshore drilling permits in the U.S.

Conclusion

AEA has issued a key vote alert urging Congress to reject any attempt to reauthorize the Ex-Im Bank. Sadly, most of the Senate opted to side with President Obama’s green energy agenda over American families. Congress should prevent the extension of an agency that harms taxpayers by leaving them on the hook for costly green energy programs and other forms of corporate welfare.

Filed Under: Energy Development Tagged With: Cronyism, Ex-Im Bank, Green Energy, Obama, Senate