Sunshine Doesn’t Dry the Swamp

A former colleague passed on this observation from a letter to the editor to the Idaho Post Register.  “The USA’s solar energy industry is currently telling its Congressional supporters that it’s finally become willing to lose some of its subsidies. …  It’s not a consequence of declining real costs …The real reason is that its leadership knows that investment tax credits (ITCs) aren’t their most important subsidy.  The real gold mine is the renewable portfolio requirements adopted by many states dictating that a certain percentage of electricity be produced by what they’re selling. Moreover, this country’s technically clueless green new dealers will likely ramp those requirements upwards over time creating a chain of events guaranteeing profits for its solar and wind energy entrepreneurs for decades to come.”

This move to mandated renewable standards is a classic example of the Bootlegger and Baptist public choice theory.  In this case, the Bootleggers are electric utilities and the Baptists are state legislatures and environmental advocacy groups.  The Baptists seek to reduce CO2 emissions as a way to avoid an asserted  climate catastrophe.  When renewables don’t do the job, the legislatures will simply increase the mandates. Solar is making the swamp wider and deeper.

The Bootleggers can laugh all the way to the bank by embracing and championing renewable  standards even though they know that solar and wind are not cost effective.   Because they only generate electricity erratically, more conventional generating capacity is needed to provide backup. Utilities make their real money by making investments in plants and infrastructure for which they receive a rate of return. Building more power plants and power lines, makes more money.  Compensating utilities this way represents what is in their best interest; not the best interest of ratepayers or cost-efficient investments.

Since wind and solar are fast growing sources of power generation, utilities must also invest in maintaining reliability since reliable electricity is essential to our economy.  The National Renewable Electricity Lab noted that “Wind and solar provide increased reliability risks because they are new changing technologies”, that are intermittent. High levels of reliability are gained from experience and the gradual adoption of new technologies.  When a legislature mandates a schedule for achieving specific percentages of alternative energy, it challenges stresses the learning process.

For utilities to have the capacity to produce electric power when the wind doesn’t blow or the sun doesn’t shine as well as maintain high levels of reliability, utilities have to over invest to avoid problems such as those experienced by Germany, the leader in promoting renewable energy.  In January 2017, Germany’s power grid almost collapsed because wind and solar power plants under-performed as a result of cloudy weather with little or no wind.  This set the stage for massive blackouts and Germany was forced to recommission coal power plants to simply keep the lights on.  

Maintaining the necessary conventional backup has its own set of unintended consequences. According to the MIT Technology Review, “Because fossil-fuel power plants cannot easily ramp down generation in response to excess supply on the grid, on sunny, windy days there is sometimes so much power in the system that the price goes negative—in other words, operators of large plants, most of which run on coal or natural gas, must pay commercial customers to consume electricity.”

While all of this additional complexity creates additional risks of grid problems, utilities—the Bootleggers—do not see risks as much as they see money making opportunities resulting from mandated investments.  And, who pays?  Consumers, which helps to explain why Germany’s electricity rates are about three times the US average.  Pretending to be green, isn’t cheap.

Author: billo38@icloud.com

Founder and president of Solutions Consulting which focuses on public policy issues, strategic planning, and strategic communications.

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