Why is the U.S. Government subsidizing wind and solar power when renewables are not on an economic precipice?
Rather, the dramatic fall in the price of wind and solar power makes it clear they are mature technologies that don’t need huge tax breaks. Production costs of wind and solar equipment have dropped dramatically, yet the subsidies continue. According to a study by the investment banking firm Lazard, the price of subsidized utility-scale solar energy in 2019 was as low as 3.2 cents a kilowatt-hour, and wind was as low as 2.8 cents. In comparison, natural gas came in at 4.4 cents a kilowatt-hour on the low end, coal at 6.6 cents and nuclear power at 11.8 cents.
Shaping an energy strategy requires broader thinking about the role of wind and solar. The reason? Wind and solar generate only part-time electricity. Wind turbines generate electricity about half the time in Ohio. The sun, of course, shines less than half the time. There is no technology as of yet for large-scale electricity storage on the grid. Given the intermittency of renewables, using wind and solar as the primary sources of the energy supply in Ohio and nationally is far too risky and expensive.
After the billions already spent and substantial subsidies that continue, wind and utility-scale solar generated only 370 million megawatt-hours of electricity in 2019, or about 9% of U.S. demand. Coal and natural gas accounted for nearly 62% of demand, with nuclear power adding 19.7%. Even if it were to make sense – which it doesn’t – replacing fossil fuels by increasing solar and wind power from 9% to 62% of demand will take decades and billions of dollars.
As a petroleum engineer, I find it implausible that the government is continuing to subsidize solar and wind power at current levels. Renewable energy sounds great until one gets into the details of efficiency and reliability.
Do we really need the Production Tax Credit (PTC) and the Investment Tax Credit for wind and solar? The projected cost of the PTC alone is expected to reach more than $65 billion before it is scheduled to phase out around 2029.
Subsidies greatly distort the operation of the electricity grid and take needed investment away from other energy sources like natural gas, advanced nuclear power, and carbon capture, utilization and storage technology.
More than ever, tax breaks for renewables are resulting in the premature closings of a significant number of efficient fossil fuel and nuclear plants. In Texas, among many other places, electricity prices occasionally turn negative when the wind is blowing hard. Consequently, companies are paying customers to use the electricity they can’t sell. The same thing is happening with solar power in a number of states, California in particular.
This headlong rush to renewables undermines reliable conventional energy sources and financially harms taxpayers and energy consumers who ultimately pay the price for government subsidies.
Because the cost of renewables should continue to drop as battery storage is perfected, solar and wind power will, and must, have a central role in America’s energy future. But subsidizing renewables at current levels isn’t a sensible policy or what the country needs.
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