Yes, Let's Have a Free Market in Energy

ANALYSIS

All of a sudden everyone on the Left wants "free markets in energy policy." As someone who's advocated for that for, oh, about three decades (let's start by shutting down the Energy Department), this riff should be music to my ears. But is laissez-faire energy policy really what liberals are seeking?
 
First, some context. A few weeks ago liberal activists leaked a draft Trump administration directive that would order utilities to purchase coal and nuclear power as part of their energy mix in supplying electricity to homes and businesses. There are good arguments for and against this policy – I'm fairly neutral – but what was fascinating was the indignant response by those on the Left who hate fossil fuels.  "Crony capitalism!" they shrieked in unison.  Listen to Catherine Rampell, an economic columnist at the Washington Post, who moaned, "Trump is wielding the power of the state to keep uncompetitive companies in business, and costing taxpayers and consumers lots of money in the process... if that doesn't count as 'picking winners and losers,' it's hard to say what would."

David Schissel of the left-leaning Institute for Energy Economics scolds Trump by writing that nuclear and coal plants are "at risk because of the market-driven transition that is pushing the system toward other forms of fuel."  

The New York Times slammed the Trump plan as "a preposterous idea. Continuing to operate financially nonviable power plants and forcing grid operators to buy power they don't need or want is an unacceptable governmental intrusion into the power market that, by one analysis, would needlessly cost consumers hundreds of millions of dollars."

Wait. This could cost hundreds of millions of dollars? That's bad for sure, but have you ever in 20 years heard the New York Times rail against, the hundreds of BILLIONS of dollars of subsidies to wind and solar power? I haven't. For eight years the Obama administration's energy policy was to try to bankrupt coal, oil and other fossil fuels through regulation while enriching their renewable energy pals in Silicon Valley with lavish subsidies.

Anyone remember Solyndra? That was the solar company that was going to revolutionize sun power, and it went bankrupt AFTER the Obama administration lavished the firm with hundreds of millions of dollars. All told, $150 billion was pipelined into the green empire under George W. Bush and Barack Obama and most of the money funded such fiascos. But now TRUMP is the one who is accused of "picking winners and losers?" This would be like Stormy Daniels complaining there is too much attention paid to women's appearance.      

An even bigger farce is that Adam Smith's invisible hand of free-market forces are what's driving certain nuclear power and coal plants into bankruptcy. (Coal still provides five times more electric power than wind and solar combined.) Ms. Rampell of the Washington Post explains: "The reason these (coal and nuclear) plants are struggling, after all, is that they can't compete with cheaper natural gas and (sic) renewables."  That's half-true. Yes, $3 natural gas prices have revolutionized the electric power markets and ‎driven down costs. By the way, the Left hates natural gas too because they hate fracking.  

But the idea that renewables are "cheap" is a lie and the Left knows it, yet no one in the media ever challenges them. Let's be clear about an economic reality that environmentalists have spent four decades trying to hide: without massive government subsidies, there is no wind or solar energy to speak of. They are complete creatures of government favoritism and after 30 years we still can't cut the umbilical cord.  
 
Consider how gargantuan the green energy subsidies are. First, wind and solar receive a tax credit that is basically a 35% off coupon for the energy they supply with taxpayers picking up the tab. If coal or nuclear power got a 35% taxpayer subsidy for every kilowatt of electricity they supplied, they would be basking in profits. I helped write and negotiate the just-passed Trump tax bill. When we tried to get rid of the renewable energy tax credit (i.e., create a "free market in energy") the green lobby went ballistic and told Republicans this would put much of the industry out of business. 

The nearby chart shows just how un-level the playing field is today. For every dollar that coal and nuclear power receive, wind power gets almost $5 of subsidy and solar receives about $20. This does not even include the biggest subsidy of all - which is that about half the states have renewable energy standards requiring utilities to buy 20 to 30 percent of their power from wind and solar regardless of the price. What other industry in America has that kind of golden parachute?  

My view is that, in terms of assessing the merits of energy alternatives, we ought to have an insurance policy against brownouts and blackouts as California has suffered and other nations as well, because of over-dependence on intermittent power sources like wind and solar. We may regret shutting down reliable nuclear or coal plants that can't be easily powered up again during storms, cold winters, or steamy hot summer days when we need electricity the most.  

In the meantime, enough hypocrisy from liberals who lecture us about bailouts and subsidies as if they were Milton Friedman disciples. There is nothing the renewable energy crowd is more horrified of than a genuine free market in energy.

‎Stephen Moore is an economic consultant with Freedom Works. He served as a senior economic advisor to the Trump campaign.