Newsweek: What’s the True Cost of Wind Power?

Randy Simmons, professor of political economy at Utah State University, recently co-authored an article with Strata Policy Analyst Megan Hansen that sheds light on the true, hidden cost of wind power. Simmons and Hansen find that the enormous amount of federal subsidies and grants given to wind power every year make it hard for Americans to understand just how much they’re paying for such an inefficient, costly resource. An excerpt from their findings follows:

The high costs of federal subsidies and state mandates for wind power have not paid off for the American public. According to the Mercatus Center at George Mason University, wind energy receives a higher percentage of federal subsidies than any other type of energy while generating a very small percentage of the nation’s electricity.

In 2010 the wind energy sector received 42 percent of total federal subsidies while producing only 2 percent of the nation’s total electricity. By comparison, coal receives 10 percent of all subsidies and generates 45 percent and nuclear is about even at about 20 percent.

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Wind gobbles up the largest share of subsidies yet produces little power.

But policymakers at the federal and state level, unfortunately, have decided that the American people will have renewable energy, no matter how high the costs. As a result, taxpayers will be stuck paying the cost of subsidies to wealthy wind producers.

Meanwhile, electricity consumers will be forced to purchase the more expensive power that results from state-level mandates for renewable energy production. Although such policies may be well intended, the real results will be limited freedom, reduced prosperity and an increasingly unreliable power supply.

You can read the rest of Simmons and Hansen’s piece here.

WSJ Live: Cheaper Oil, Brighter Energy Future

AEA President Tom Pyle joined Mary Kissel on WSJ Live to discuss the ways in which energy producers might adapt to the historically low oil prices made possible by America’s shale revolution. And while private innovation has led the charge, Pyle recognizes that even more could be done if the federal government simply got out of the way.

Taxes In The Wind

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The federal wind Production Tax Credit (PTC) is an incredibly wasteful subsidy that doles out billions of taxpayer dollars to the wind industry and threatens the affordability and reliability of electricity generation from natural gas, coal, and nuclear power. A report by the Institute for Energy Research makes the case for ending Big Wind’s favorite handout. Highlights from the report include:

  • The PTC is costly. A two-year extension will cost $13.35 billion, which is enough to pay 124 million Americans’ monthly electricity bills.
  • Americans oppose the PTC. A survey by the American Energy Alliance finds that 65 percent of voters believe two decades worth of tax credits for the wind industry is long enough.
  • The PTC threatens grid reliability. Wind typically produces the most power when it is needed least: one study finds that “over 84 percent of the installed wind generation infrastructure fails to produce electricity when electric demand is greatest.
  • Wind energy is expensive. When all factors are considered, wind energy costs $109 per megawatt hour, which is twice as much as this year’s average wholesale electricity price of $54 per MWh.
  • A vote for the PTC is a vote for Obama’s climate agenda. A key “building block” of EPA’s CO2 rule for existing power plants is increased wind generation. But wind energy depends on the PTC: wind installations dropped 92 percent after the PTC expired at the end of 2012.

So when you’re thinking about what your tax dollars are going towards on April 15th, remember that Big Wind is living large on your dime.

Click here to read IER’s full report.

America’s Game: Brought to You By Oil & Natural Gas

471574_186657558123552_29119445_oFrom the first pitch on Opening Day to the final out of the World Series in October, baseball is brought to you by oil and natural gas. The smell of the fresh-cut grass; the uniforms our favorite players don 162 times a year. Even the cold beer you enjoy on a sunny spring afternoon in the bleachers comes courtesy of petroleum products.

So next time you head out to the stadium, most likely wearing a shirt made from natural gas and driving a car fueled by oil, be thankful for the energy sources that power America and her oldest professional sports pastime.

Tom Steyer Doesn’t Understand Gas Prices

The Sacramento Bee headline read, “Tom Steyer wants ‘answers’ for California gas price spike.” California lawmakers had just started to hold hearings investigating the recent rise in gas prices, which were below $2 in some areas a few months ago but have since risen to over $3. The billionaire climate activist said he wanted to make sure Californians get a “fair shake” at the pump. This is rich coming from Steyer, who supports policies that drive up energy costs for Americans.

If Tom Steyer wants answers for California’s high gas prices, he should start by shaking a fist at himself. As Bee opinion writer Dan Walters explains, taxes, mandates, and regulations that Steyer supports are primarily responsible for California’s high gas prices, while the recent spike can be attributed to a temporary supply disruption caused by a refinery fire. From Mr. Walters’ piece:

Gas prices are higher in California than almost anywhere else in the nation, albeit markedly lower than they were a year ago. And there are reasons for that disparity.

California’s fuel taxes are among the highest in the nation, the state Air Resources Board just imposed cap-and-trade fees on fuel, and the state requires unique, smog-fighting formulations.

The state government’s leading expert on the fuel market, the Energy Commission’s Gordon Schremp, told the Senate committee last month that when one refinery was put out of commission by an explosion in February and another by a labor dispute, supplies tightened sharply, forcing refiners to acquire fuel elsewhere that could be re-blended to meet California emissions standards.

The supply squeeze eased after a few weeks, and prices started to decline again.

Most of the remaining price disparity vis-à-vis other states, perhaps 75 cents a gallon, stems from California tax and formulation decrees.

Other than trying to raise his profile for political purposes, it’s difficult to understand why Steyer is complaining.

He is a vociferous advocate of reducing greenhouse gases and logically should want high prices to discourage driving and cut emissions. In fact, one price element – perhaps a dime a gallon – is the cap-and-trade fee imposed in the name of climate change.

Steyer also advocates imposing a tax on oil extraction in California that would push gas prices even higher.

When it comes to gas prices, irrationality reigns.

California’s gas problems are a political problem—one created in no small part by Steyer, who poured millions of dollars into a ballot measure mandating a low carbon fuel standard. That mandate, along with the state’s high taxes and other measures, makes California’s gasoline among the most expensive in the nation. If anyone is preventing Californians from getting a “fair shake” at the pump, it’s Tom Steyer.

Gone With The Wind

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From FY 2010 to 2013, wind subsidies increased by 9 percent from $5.4 billion to $5.9 billion. So while you’re paying your hard-earned taxes, know that Big Wind is living large.

Coalition: States Should Stand Up to EPA’s Power Grab

Today, the American Energy Alliance joined 31 other organizations in support of Senator Mitch McConnell’s opposition to the EPA’s reckless, costly Clean Power Plan (CPP). The text of the letter follows:

Dear Sen. McConnell,

We, the undersigned organizations, applaud your work with state governors and legislators to push back against the Environmental Protection Agency’s (EPA) usurpation of state electricity policy through its proposed Clean Power Plan (CPP). Both federal and state officials are right to question the CPP’s legality and the repercussions that would result from submission of a State Implementation Plan.

Opposition to the CPP is a natural response to a regulation that would further centralize power in Washington. The EPA is asking for state complicity in the CPP because the agency likely does not have the legal authority to unilaterally implement the CPP’s proposals. Specifically, the Clean Air Act provides no authority for the EPA to control state laws on renewable generation, electric dispatch policy, or consumer conservation incentives. It is because EPA is desperate to legitimize its most brazen power grab to date that it is pressuring states to submit State Implementation Plans.

We also agree with you that states are completely within their legal rights to “just say no” and let EPA take sole responsibility for implementing the 111(d) rule. The right of states to keep their fingerprints off what they regard as a misguided or unlawful rule is basic to the very concept of cooperative federalism.

It is therefore appropriate for Congress, the branch of government charged with keeping the Executive in check, to help states fully understand the obligations and consequences flowing from obscure federal regulations. After all, Congress wrote the laws the EPA is using to justify the CPP.

All of this matters because the CPP would have an enormous impact on ratepayers and state economic growth. Implementation of the CPP could cause double-digit electricity rate increases in over 40 states and could cost the country nearly $479 billion over 15 years, according to the National Economic Research Associates.

Grid reliability will also suffer. Allowing the EPA to rearrange our electricity system could threaten up to 130 gigawatts of reliable power from coal, natural gas, and nuclear power plants – enough to meet the residential power needs of more than 105 million Americans.

It was due to similar consequences that the 111th Congress rejected cap-and-trade legislation. That legislative failure has not deterred President Obama who made explicit his intent to ignore the will of the American people, famously stating, “cap-and-trade was just one way of skinning the cat.” Given that the current administration has decided to circumvent Congress and achieve the same ends via regulatory fiat, you and other Members of Congress, elected by the People, should do everything possible to prevent unelected EPA bureaucrats from dictating national energy policy.

You can see the original text of the letter and the undersigned organizations here.

Green Dreams on Campus: Rising Tuition, Crippling Debt

As college tuition and student debt soar, schools across the country are pumping billions of dollars annually into so-called “sustainability” initiatives, which include using expensive renewable energy sources to reduce their greenhouse gas emissions. But what does sustainability really mean? And does it make sense for colleges to divert so much money and resources to nebulous environmental causes at the expense of scholarships, financial aid, or educational programs?

A new report from the nonprofit National Association of Scholars (NAS) explains the numerous ways campus sustainability harms higher education. The report estimates that American colleges and universities spend more than $3.4 billion per year on sustainability-related programs. In exchange, the report finds that “the sustainability movement distorts college curricula” and has “shut down reasoned debate on campuses by foreclosing open inquiry” on environmental issues.

In reality, students and parents are bearing the high cost of sustainability. As the NAS report shows, colleges are pouring vast sums of money into renewable energy programs that drive up costs, inflate tuition, and have little real impact on the environment. Moreover, the sustainability movement has contributed to the rise of a new movement: one that pressures universities to “divest” their financial holdings in natural gas, oil, and coal companies.

The problem is that these universities would divest not only from these fuels, but from the products made from natural gas, oil, and coal, including life-saving pharmaceuticals, high-tech fabrics, steel, and computers, to name a few. Instead of divesting from the energy and products of modern life, we should divest from the unsustainable cost of sustainability.

The Unsustainable Cost of Campus Sustainability

According to the U.S. Environmental Protection Agency, “sustainability creates and maintains the conditions under which humans and nature can exist in productive harmony, that permit fulfilling the social, economic and other requirements of present and future generations.” As EPA explains, “Sustainability is important to making sure that we have and will continue to have, the water, materials, and resources to protect human health and our environment.” That sounds like a worthwhile cause—nobody is against protecting the environment and public health.

In practice, however, sustainability has devolved into an enormous waste of time and resources. One example of this can be found on college campuses. The National Association of Scholars (NAS) released a new report examining the negative effects of campus sustainability programs. The thrust of the report is that colleges are diverting vast resources to sustainability programs even as tuition rates rise, student loan debt soars, and the unemployment rate among college graduates climbs.

First, consider that NAS estimates American colleges and universities spend more than $3.4 billion each year on sustainability programs. That’s enough money to cover tuition for more than 108,866 students to attend private university, or provide in-state tuition for more than 372,031 students. Yet instead of expanding educational access, hundreds of colleges are spending that money promoting expensive renewable energy schemes.

This problem is exacerbated by the fact that the cost of attending college has exploded in recent years. The latest data show tuition and fees at private nonprofit colleges rose 3.7 percent last year, or twice the rate of inflation, to $31,231 per year. Meanwhile, student loan debt is rising to cover higher tuition costs: average debt per student with loans has nearly tripled from $9,450 in 1993 to $29,400 in 2012. Over that time, the percentage of seniors who graduated with loans rose from 47 percent to 71 percent, according to recent data. And finally, 7.5 percent of recent college graduates are unemployed, compared to the national unemployment rate of 5.5 percent.

The NAS report examined Middlebury College as a case study in the high cost of sustainability. In 2006, Middlebury pledged to go “carbon neutral” by 2016. To achieve that goal, NAS estimates the college spends almost $5 million per year, or more than $2,000 per student. The following chart details Middlebury’s annual spending on sustainability programs. More than 42 percent of the total, or about $2.1 million, is spent not on sustainability itself, but on salaries and benefits for the bureaucrats hired to carry out the school’s sustainability efforts.

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These annual costs are only part of the story. NAS estimates that Middlebury spent an additional $13.9 million in fixed, one-time costs, including construction of the campus biomass plant. And while Middlebury claims its wood-fed biomass plant saves the college $840,000 per year in fuel oil and $323,709 in operation costs, net costs for Middlebury’s sustainability programs still eclipse $3.7 million annually. It also means it would take the college more than 15 years to pay off its $13.9 million fixed costs, assuming a 5 percent interest rate.

With such a high price tag, students and parents should expect a reasonable return on their investment. Unfortunately, Middlebury’s efforts to combat climate change amount to a drop in the proverbial bucket. Since 2007, the college has reduced carbon dioxide emissions by 27,618 metric tons, or the amount of carbon dioxide 0.007 of an average coal-fired power plant emits in a single year, according to EPA’s greenhouse gas calculator. That means Middlebury spent $543 per metric ton of carbon dioxide reduced, according to NAS. For context, the Obama administration’s official estimate for the value of reducing carbon dioxide is about $39 per metric ton.

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As we have explained numerous times, the so-called “social cost of carbon” is a dubious metric that likely inflates the value of CO2 reduction. That means Middlebury paid almost 14 times more than even what the Obama administration claims is the true value of reducing carbon dioxide. In exchange, the college reduced emissions equivalent to less than one hundredth of a single, average coal plant.[1]

This scheme is the opposite of sustainable. It is an enormous waste of money, the costs of which are borne by students and parents. Perhaps more importantly, it is also a waste of time, which is a nonrenewable resource. Every moment dedicated to researching and implementing Middlebury’s “carbon neutral” pledge is time not spent doing what colleges are supposed to do: educate students.

Fossil Fuel Divestment: “Sustainability’s Last Frontier”

Over the last few years, fossil fuel divestment campaigns have cropped up on college campuses across the country. These activists pressure universities to “divest” their financial holdings in natural gas, oil, and coal companies. Though largely unsuccessful, divestment activists have convinced some schools, mostly small liberal arts colleges, to sell off their energy assets.

The NAS report describes divesting from natural gas, oil, and coal stocks as a logical extension of campus sustainability. Indeed, as noted above, Middlebury pays $41,000 per year to Bill McKibben, the godfather of the fossil fuel divestment movement, to serve on staff as a scholar in residence. NAS draws the following parallel between sustainability and divestment:

[Divestment] embodies the ethos that sustainability embraces. The underlying idea is that fossil fuels desecrate the environment, that this desecration is sinful, and that those who would persevere in their reprehensible ways deserve condemnation. The campaign to divest from fossil fuels manifests the fervor of a religious quest for purity and absolution. It declares the public guilty of oil on their hands.

As we explain on our Divestment Truth page, fossil fuel divestment is morally bankrupt for a variety of reasons: taken to its logical conclusion, it would consign billions of people around the world to poverty and darkness; eliminate more than 82 percent of the energy Americans use; deny access to the lifesaving products made from fossil fuels; and make it more difficult for low-income students to attend college.

Sustainability and divestment activists have succeeded in passing the costs of their activism on to parents and students, many of whom may not support their radical causes but nonetheless bankroll these efforts in the form of higher tuition and crippling loans. Natural gas, oil, and coal make modern life possible: they comprise the vast majority of our energy are key feedstock for many every day products, including pharmaceuticals and medical devices. True sustainability is embracing the notion that energy makes life better. If we should divest from anything, let’s start with the unsustainable costs of campus sustainability.


[1] The Environmental Protection Agency calculated carbon dioxide emissions per power plant by dividing the total emissions from coal-fired power plants by the total number of power plants. See http://www.epa.gov/cleanenergy/energy-resources/refs.html#coalplant

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It’s Time To Reclaim The Planet From Environmentalists

Last week, AEA’s Dan Ziegler penned an op-ed discussing the need for free-market advocates to reframe the global discussion about our environment. The text of the piece follows:

We don’t have to wreck our economy to save the planet.

The national environmental lobby has never been stronger. The federal government, led by President Obama and an army of bureaucrats at the Environmental Protection Agency (EPA), is radically transforming how Americans use and consume energy. Meanwhile, well-funded environmental groups have convinced a clear majority of the country that the environment is only in fair or poor condition. As a result, Americans are increasingly willing to accept government regulations, subsidies, and mandates that make energy more expensive and diminish their quality of life.

Here’s the catch: The national environmental lobby’s doom-and-gloom narrative is false.

The environment isn’t getting worse—it’s rapidly improving, even as our economy grows and our energy use increases. The EPA recently released new data on air quality showing that total emissions of the six major air pollutants have dropped by 68 percent since 1970. This is all the more impressive considering that during this same period, America’s population has grown by 54 percent, we’re using 44 percent more energy, we’re driving 168 percent more miles in our cars, and our economy has grown by 238 percent.

It goes from impressive to astounding when you consider that natural gas, coal, and oil have driven this growth. Technological innovations have made obtaining these energy sources smarter, safer, and more efficient than ever before.

In other words, we don’t have to wreck our economy to save the planet—an important realization which casts the green lobby’s preferred policies in a new light. There’s also the very real possibility that such policies would provide very little environmental benefit and even harm the environment.

Environmentalists Hurt the Planet

Several of President Obama’s climate policies will do exactly that. The most important example is the EPA’s sweeping new regulations for power plants. These regulations attempt to reduce carbon dioxide by 30 percent by the year 2030, which could shutter enough power plants to provide electricity to 80 million Americans while raising electricity rates.

The administration’s policies will merely move the energy industry to countries with weaker environmental standards. By curtailing energy production and use in the United States, along with the jobs they support, the administration’s policies will merely move this industry to countries with weaker environmental standards, including China and India. Less stringent standards in these countries are already causing pollution from China to cross the Pacific Ocean, negatively affecting the West Coast. The administration’s environmental agenda would worsen these problems.

Sadly, the EPA pending regulations aren’t the only examples of government pursuing policies in the name of environmental protection that actually hinder environmental progress.

President Obama’s failure to approve the Keystone XL Pipeline is another. It means that more oil will be transported by rail and barge, both of which have higher spill rates and produce more greenhouse gas emissions than pipelines. Ethanol mandates at the federal and state level actually increase smog and greenhouse-gas emissions. Despite its name, the Endangered Species Act has failed to save many species—in fact, environmental activists who sue the federal government in the name of protecting endangered species actually divert resources away from species recovery.

Even the cash for clunkers program hurt the environment. Among its numerous unintended consequences, it focused on shredding the cars instead of recycling them, wasting resources that could have been used for other purposes.

This points to a simple conclusion: Across the board, the federal government has proven to be an inept and even counterproductive environmental steward.

How People Are Saving the Planet

So where should we look to for good environmental stewardship? Perhaps outside of Washington is a good place to start. Individuals and entrepreneurs, through private-sector innovation, have proven effective at improving the environment—and our lives.

American businesses and families are leading the charge to address environmental challenges. We can see this all around us. Commercial drone developers are working to equip farmers with drones that can fly over fields to better spot diseases and pests. That could soon allow farmers to target and treat smaller areas of land, resulting in less insecticide use while saving farmers money.

Private-sector innovation has also made accessing natural gas and oil more environmentally friendly. For example, directional drilling allows companies to drill multiple wells from a single well pad, minimizing overall surface disturbance while extracting more energy.

Businesses aren’t the only ones innovating. Individuals are also a driving force, making us more energy efficient than ever. Products like the Nest thermostat allow us to adjust the heating and cooling of our homes from our mobile phones. Apps like FuelGood calculate the potential savings of more efficient fuel usage, claiming that users can save up to two months’ worth of fuel per year. The Property and Environment Research Center (PERC) in Montana has started an Enviropreneur Institute to highlight individuals who are using innovation and market principles to save businesses money and improve environmental outcomes.

These examples only scratch the surface of the innovation boom that’s facilitating America’s environmental progress. And consumers and businesses are embracing these tools and tactics without government mandates.

Free-market advocates must do a better job telling this story. Despite government failures at environmental stewardship, the environment is still better than it has been in generations. That trend will continue: American businesses and families are leading the charge to address environmental challenges, and innovators across the country are devising new and ingenious ways for individuals and entrepreneurs to use energy more efficiently. For the sake of the environment, it’s time for free-market advocates to retake the moral high ground from the national environmental lobby.

Dan Ziegler is the vice president of strategic initiatives at the American Energy Alliance.

Solar Freeloader

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