Free Market Hypocrisy: Why Do We Hold Renewables To Different Standards Than Fossil Fuels And Nuclear?

Now that renewables are receiving some of the same incentives that fossil fuels have enjoyed for nearly one hundred years, we’re suddenly being inundated with calls for a purely “free-market” approach to energy development from politicians on the right and companies concerned about the growth of clean energy.

Their arguments make for good sound bites. But if we take a look at the history of energy development in the U.S., it’s very clear that we’ve never had a truly “free” market. In fact, all of the technologies that dominate our energy system today were given special incentives by the government in order to get them to commercial scale.

According to a recent report from the venture capital firm DBL Investors, the U.S. coal, oil, gas, and nuclear industries have cumulatively taken in more than $630 billion in tax credits, land grants, R&D programs, and direct investments from the government. That far surpasses the roughly $50 billion in government renewable energy investments (wind, solar PV, solar thermal, geothermal, biofuels) through these same mechanisms over the decades, according to the report.

But when renewable energy is given similar incentives — helping double the penetration of non-hydro renewable electricity since 2008 — the energy free-marketeers come out of hiding and lament how we’re supposedly “picking winners and losers.”

The Republican party’s platform released this week is a perfect example:

Unlike the current Administration, we will not pick winners and losers in the energy market-place. Instead, we will let the free market and the public’s preferences determine the industry out-comes. In assessing the various sources of potential energy, Republicans advocate an all-of-the-above diversified approach, taking advantage of all our American God-given resources. That is the best way to advance North American energy independence.

Sounds pretty straightforward. However, the RNC’s platform is very bullish on maintaining use of coal, a resource that is declining in the U.S. because of … current market forces.

According to the Energy Information Administration, we’ve seen a 20 percent drop in coal generation over the last year. That decline has been “primarily driven by the increasing relative cost advantages of natural gas over coal for power generation in some regions,” wrote EIA.

But when market forces move in the wrong direction for coal supporters, that is apparently when it’s okay for government to intervene. According to the RNC’s platform, the party wants to use the strength of government to “encourage the increased safe development in all regions of the nation’s coal resources.”

So there you have it. When the government encourages renewable energy, that’s called picking winners and losers. But when the government encourages coal — an increasingly-expensive resource that has become an environmental nightmare — that’s “the best way to advance North American energy independence.”

And the picture becomes even more complicated when looking at the forces behind the boom in gas production. In fact, the fracking technologies people love to hold up as a miracle of the free market were made possible through years of government investment.

A 2011 investigation from the Breakthrough Institute showed that the natural gas industry was able to commercialize fracking technologies only after decades of tax credits, government R&D programs, government assistance with mapping, and partnership with companies entering commercial scale.

A geologist from Mitchell Energy, a leading company that pioneered fracking put it this way: “I’m conservative as hell. But the “[Department of Energy] did a hell of a lot of work, and I can’t give them enough credit for that.”

The examples of government assistance to help commercialize energy technologies goes on and on.

And most people only know about the ones that are easy to track. There are other imbedded subsidies — things like land give-aways to coal companies or tax exemptions — that are hidden below the surface. Here are a few examples, as illustrated by this subsidies iceberg infographic from Earth Track:

This long history of assistance to energy technologies is completely lost in the current debate.

The latest political dust-up is over support for wind through the production tax credit, a performance-based incentive crafted by Iowa Republican Senator Chuck Grassley that provides wind farm owners with a credit of 2.2 cents for every kilowatt-hour of electricity produced.

The credit is set to expire at the end of the year. Since it was introduced, the U.S. wind industry has been able to drop costs by 90 percent. However, because of suppressed natural gas prices (again, helped by decades of tax credits, commercialization partnerships, and R&D programs) the wind industry says it needs the tax credit for a couple more years in order to give investors certainty. If the credit expires at the end of the year, the industry could shed up to 37,000 jobs, according to a report from Navigant Consulting.

Extending the credit has very strong bipartisan support. After all, 81 percent of wind is installed in Republican districts nationwide. But there has been growing resistance from a band of free-marketeers who claim that the tax credit distorts the market, thus preventing Congress from extending the incentive for a year or two more. (Ironically, many of these same critics consistently vote to preserve permanent tax credits worth billions of dollars for the most profitable oil companies in the world).

At the same time, companies like the nuclear-heavy utility Exelon are pushing Congress to abandon the tax credit. Here’s what the company’s CEO said in a recent statement:

“These groups agree that it is now time for federal government to stop picking energy technology winners and losers through subsidies like the PTC and to allow market forces and state and local renewable portfolio standards to work.”

Exelon has a pretty substantial wind portfolio worth 900 megawatts of capacity. However, most of its portfolio — 93 percent — is made up of nuclear power plants. But if it were not for the immense support for nuclear through loan guarantees, government-backed insurance, waste containment programs, and cost-recovery allowances for cost overruns over the last five decades, we wouldn’t have much of a nuclear industry in this country.

But here’s something more remarkable: even while warning about “picking winners and losers,” Exelon executives have gone to the government to request loan guarantees and tax credits for its other operations.

In 2007, Exelon President Christopher Crane testified to Congress in favor of new loan guarantees for the nuclear industry. Of course, without these loan guarantees and government-backed insurance programs, no private investor would finance a nuclear plant in this country.

And just this year — two days after saying the production tax credit for wind should be ended — it was reported that Exelon would receive tax credits for two hydropower projects it had under development.

We desperately need an honest conversation about energy incentives.

In order to smooth out this complicated picture, there are some analysts and political leaders who say we should get rid of all subsidies to all technologies and let the free market hash it out. That’s an appealing argument to many. But it completely ignores the embedded impact of a century of support to fossil fuels and 50 years of support to nuclear.

It also ignores a more fundamental problem: Our climate is reaching a tipping point and we don’t have time to waste in transitioning away from carbon-based fuels. Period.

Most supporters of clean energy agree there will be a time to phase out incentives that are currently helping boost the industry. There are a lot of disagreements about exactly how and when it should be done, but that conversation is well underway as the cost of renewables continues to fall.

As we drudge through this political season and listen to the calls from selective free-marketeers on “picking winners and losers,” let’s remember how we got to where we are in the first place.

And more importantly, let’s remember where we’re trying to go.

11 Responses to Free Market Hypocrisy: Why Do We Hold Renewables To Different Standards Than Fossil Fuels And Nuclear?

  1. Patrick Moctezuma says:

    Of course it’s Hypocrisy, but only in expression. Ia action, the GOP has been consistent and clear- committed to maximizing the profits of their corporate donors. Do not mistake a willingness to “discuss” the issue with any sort of investment in the long term health of the American environment or energy systems.

  2. Leif says:

    Way to call the GOP/Corpro/People out Stephen. Still the big gorilla lurks in the shadows. That is the ability of the ecocide Fossil to pollute the commons for personal wealth. The denier-sphere is all financed by this fundamental flaw of Western Capitalism. The fresh waters and oceans of the world become acidified, the air becomes overly energized, the topsoil parched, food shortages face the world, epic floods rampage the nations of the world and more, yet the few profit from dumping 19 pounds/gal. of toxins out the exhaust of the commerce. (Try throwing out 19# of paper cups /gal of fuel you burn out the car window and please report back.) The GOP do not fund abortion. My tax dollars as well as a large portion of my taxed income pay to promote the ecocide of the planet and progressives cannot even get the question acknowledged!

  3. fj says:

    A true free-market value of renewables would give them unlimited value since we are not even close to characterizing and being able to reproduce the natural services provided by this planet that supports life including us.

  4. Steve Waller says:

    One has to question whether the public realise how big the government assistance to fossil fules and nuclear is – here in the UK it is often argued that renewables are costing the taxpayer a fortune and adding untold extra onto our energy bills but this is not the whole truth and it annoys me that people are so happy to accept one side of the argument without considering whether there even is an alternative view.

  5. Paul Klinkman says:

    Nuclear power specifically isn’t a dependable source of electricity.

    First, simply because of its size, when it trips offline it causes a big disruption.

    Second, nuclear power plant engineers are scared to death of a disaster. So, when the grid’s power is marginal, the nuclear plants are always the first to trip offline, taking the grid down with them without even a controlled rolling blackout. A huge swath from Ohio to New York City was blacked out because of nuclear’s skittishness.

    Third, Japan has found out that when one complex of nuclear plants destroys a big chunk of the country, they all go off and stay off permanently. Their bottom line is that any industry which can possibly run away from the country will run away, because Japan’s energy situation will be undependable over the extremely long term, and that costs money.

  6. Leif says:

    People the world over readily accept the scientific fact that changing a patch of South Pacific from warm to cool by only a couple of degrees C, and the resulting comparatively narrow El Nino/La Nina current across the Equatorial Pacific to South America, can have a profound effect on the weather. Not only here in the United States, but to a lesser degree Europe and Africa.
    On the other hand, transforming a much closer, (boarders in many cases), highly reflective patch of earth from significantly bellow freezing to dark open water above freezing, a difference of 10′s of degrees C and it is all cool? Couple that with an area that is larger than the states of Alaska and Texas combined and it is all just going to be “Ho Hum”! Get real. I am telling you, Science is telling you, and the on the ground reality are all raising red flags here. Of course vested interests are spending big bucks trotting out “red herrings” as fast as they can. Perhaps that must be factored into the attitudes of the masses, you think?
    Time to toast the deniers, not the Kidders…
    We all pay fees to dump garbage, waste water and more. Corpro/People dump tons for free and accumulate mega-bucks. Even get tax subsidies. The GOP don’t fund abortion. Fine. A precedent! Why must my tax dollars fund the ecocide of the PLANET via fossil subsidies?!!! We’re talking “MORALS” here. Try throwing 19 pounds of paper cups out the car window for each gallon of gas you burn. Who is making money here and who is losing? Toxins verses paper cups? (I bet you could be real creative about increasing your trash stream if it were paper cups.) Even absorb a “slap on the wrist” fine once in awhile. Surely a good lawyer on retainer. Once established perhaps even a congressman or two.
    I pay $150/ton to dump my household garbage. $50/T to recycle yard waste. Waste water fees, of course. I even have a rain water run of fee of $5/m. (guide lines here?) Yet Corpro/people piss all over themselves at the thought of $25/ton for TOXINS! Sweet Jesus… They are making billions. After a life time of skilled labor I get ~$30/day to stay alive and must fund health insurance. Go Figure!
    In brief:
    Stop profits from the pollution of the commons.
    Go Green, Resistance is FATAL to Earth’s life support systems. You know like extinctions are FATAL. No gene pool left!

  7. CW says:

    After a generation of seeing the Republicans in action, does anyone really believe that Republicans are truly out to create “free markets”?

    Oh right … while you can’t fool all the people all of the time, apparently you can fool a lot of people for a long, long time …

  8. AA says:

    If you’re referring to the 2003 blackout, it wasn’t due to nuclear power plants.

    All types of generation went off line.

    The blackout was due to transmission failures and the inability to shed load properly.

    You say nuclear is not dependable… compared to what and based on what metric?

    Every week there’s some new complaint about nuclear, usually with little or no basis in fact, promulgated simply because some people don’t like nuclear and therefore invent reasons it’s not acceptable.

    It’s utterly bizarre to me how people say a power source which cranks out gigawatts of low carbon electricity for pennies a kWh is somehow considered “unreliable and expensive.”

  9. Mulga Mumblebrain says:

    Privatize the profits, socialise the losses. ‘Incentivise’ the rich by giving them more and more, and the poor by taking what little they have from them. Let the financial parasites run amok, making gambling wagers without limit, knowing that the public will be forced to bail them out every time. Meanwhile they pay themselves tens of billions in entirely larcenous wages and bonuses. Privatise everything, destroy all public provision, concentrate more and more wealth in fewer and fewer hands, and create a gigantic edifice of surveillance and ‘anti-terror’ laws, and private armies of para-military thugs, for the day when the serfs finally revolt. Thatcher promised a ‘return to Victorian values’ when this vile crusade was in its infancy, but we are being driven back, not to the 19th century, but to the 11th or 12th, and a new feudalism is being ruthlessly imposed on humanity.

  10. Chris Winter says:

    I appreciate your comments here, Paul, but I think you’re off base with this one in that you’re tarring nuclear energy in general with the onus that belongs on badly designed or poorly operated plants.

    You wrote:

    “Second, nuclear power plant engineers are scared to death of a disaster.”

    This statement is probably true.

    “So, when the grid’s power is marginal, the nuclear plants are always the first to trip offline, taking the grid down with them without even a controlled rolling blackout.”

    I think this one is false.

    Also, while the current crop of nuclear power reactors has inherent problems, new designs which address most of these problems exist. For example, hot weather has lately caused several NPPs to shut down because they could not use local water for cooling. But there are designs for plants with closed-cycle cooling systems.

  11. J4zonian says:

    There was a recent recent audio piece on “Making Contact” with Time Wise and Angela Davis in which Wise talked about welfare programs and public housing etc being OK until African Americans and Hispanic-Americans started being not only legally but actually able to access them. Then conservatives starting having more trouble with the very idea of those things. It’s the basis behind the recent attacks on everything public–public radio and TV, public housing, (public assistance of course was gotten rid of by one of our recent Republican Democrats, Clinton.), public libraries, etc.

    Different aspects of our world recieve different projections from us, that is, since we can’t accept certain characteristics of ourselves in ourselves we imagine them outside of us and come to believe that’s where they actually are. People of color receive projections of conservatives’ own laziness etc that make conservatives loathe to help them; coal and oil companies get projected onto as ‘winners’ and therefore deserving of help (in the conservative view), in addition to making other conservatives winners as well. Wind and solar, on the other hand, being new and not rich yet, are ‘losers’ in this twisted viewpoint, as well as–horrors!–democratic rather than aristocratic. They don’t deserve any help. And being new and unrich, they can’t return favors like oil, coal, gas and nukes can.