Why Do Renewable Energy Sources Need Government Subsidies?
/If you read the progressive press, or even a little of it, with an interest in matters of energy policy, then surely you know by now that it has become cheaper to produce electricity using the wind and sun than using fossil fuels. You know that because you have read it over and over again, in authoritative articles written by, and quoting, people who seem to know what they are talking about, and with no one ever raising any skeptical questions.
Here are some of the articles that may be among what you have read on this subject:
There was the Financial Times on November 8, 2018, in a piece titled “New wind and solar generation costs fall below existing coal plants.” The Financial Times — now there are people who really know what they are talking about. The article mainly relies on a study then just out from investment bank Lazard, reporting on what is called the “Levelized Cost of Energy” for various sources of generation: “The cost of new wind and solar power generation has fallen below the cost of running existing coal-fired plants in many parts of the US . . . New estimates published on Thursday by Lazard, the investment bank, show that it can often be profitable for US generation companies to shut working coal plants and replace their output with wind and solar power.”
Or perhaps you read the piece from CBS News on November 16, mostly relying on the same Lazard study, and titled “It's now cheaper to build a new wind farm than to keep a coal plant running.” “The cost of building a new utility-scale solar or wind farm has now dropped below the cost of operating an existing coal plant, according to an analysis by the investment bank Lazard. . . . ‘There are some scenarios, in some parts of the U.S., where it is cheaper to build and operate wind and solar than keep a coal plant running,’ said a Lazard banker who was involved in the report.”
Other widely-read pieces regurgitating the Lazard study can be found, for example, at Axios and Think Progress.
Nor is it by any means just that one Lazard study that is the source of the idea that wind and solar are now competitive or cheaper than generation from fossil fuels. For example, the official government research bureaucracy in Australia known as CSIRO (Commonwealth Scientific and Industrial Research Organization) came out with its own widely-read study in December 2018, reported (for example) by the Sydney Morning Herald on December 21 in a piece titled “Renewables to be cheaper than coal even without climate policy, CSIRO says.” “‘Our data confirms that while existing fossil fuel power plants are competitive due to their sunk capital costs, solar and wind generation technologies are currently the lowest-cost ways to generate electricity for Australia, compared to any other new-build technology,’ CSIRO chief energy economist Paul Graham said. ‘This also holds when the cost of fossil generation technology is adjusted for climate policy risk or not.’"
And then there was the November 2018 study from BloombergNEF (New Energy Finance), reported (for example) by Asian Power on November 21, 2018 in a piece headlined “Onshore wind and solar are now cheaper than coal: report.” “Unsubsidised onshore wind and solar have replaced coal as the cheapest power sources in almost all of the world’s major economies, including India and China, but excluding Japan, BloombergNEF revealed. The firm’s analysis of the levelised costs of electricity (LCOE) for H2 2018 showed that the benchmark global levelised cost for onshore wind sits at $52/MWh, down 6% from H1 2018. Moreover, onshore wind is now as cheap as $27/MWh in India and Texas, without subsidy. . . . In India, solar and wind plants are now half the cost of new coal plants, BNEF added.”
Obviously, this is great news. It’s great news because when wind and solar sources are the cheapest way to produce electricity, they don’t need any government subsidies, benefits, or tax breaks to compete with fossil fuel sources. If the reports above are true, then wind and solar can stand completely on their own.
The Trump administration seems to have picked up on the good news. In December 2018, Trump economic advisor Larry Kudlow was quoted by something called the Governors’ Wind and Solar Energy Coalition as saying that the administration wants to end all subsidies and tax breaks for wind and solar generation and, for that matter, electric vehicles.
White House economic adviser Larry Kudlow said yesterday that the White House wants to end subsidies for electric vehicles and other items, including renewable energy. “As a matter of our policy, we want to end all of those subsidies,” Kudlow told reporters, according to Reuters. “And by the way, other subsidies that were imposed during the Obama administration, we are ending, whether it’s for renewables and so forth.”
Then, just yesterday it has come out that Trump’s forthcoming 2020 budget is going to include a proposed cut of 70% or so in the funding for something called the Energy Department Office of Energy Efficiency and Renewable Energy. This one little corner of federal energy largesse hands out some $2+ billion per year, mostly for “research” into renewable energy.
[An] official, who spoke on the condition of anonymity, said the Office of Energy Efficiency and Renewable Energy would see its $2.3 billion budget slashed by about 70 percent, to $700 million, under President Donald Trump’s fiscal 2020 budget request, which is set to be released on Monday.
Is there any problem with that, now that wind and solar are already the cheapest sources of energy out there? And yet somehow, wind and solar promoters don’t seem to be happy with what’s going on. For example, that last Bloomberg piece quotes an ex-Obama Energy Department guy named Mike Carr:
“It’s a shutdown budget,” said Mike Carr, who served as the No. 2 official within the division under President Barack Obama.
Or consider this in the reactions to the Kudlow quote above:
Abigail Ross Hopper, president of the Solar Energy Industries Association, said it’s unclear what is being proposed and for when. “There is strong bipartisan support for the solar credits. We’ll wait to hear more specifics, but the ITC has created hundreds of thousands of jobs and tens of billions of dollars in economic activity,” Hopper said.
Abigail provides no explanation of why solar won’t provide the same “thousands of jobs and tens of billions of dollars in economic activity” without any subsidies, now that it is the cheapest source.
Of course, readers here know that the claim that wind and solar are the cheapest sources of power are just based on the simple deception of leaving out the incremental costs — including costs of backup and/or storage — imposed by their random intermittency. Somehow, you can read dozens of these articles and never find any mention of that subject. If you are new here and want to study up, try previous posts here, here and here.