Blowing Hot Air in the Energy Market Discussion

May 10, 2018

To pick a winner for clumsiest quote of last week would be tough.

Some votes might go to Elon Musk berating “bonehead” questions from analysts who were simply doing their jobs. Others might choose former Mayor Giuliani conjuring the image of himself as a knight charging to Ivanka Trump’s rescue during his news-busting interview with FOX.

But our vote goes to FERC Commissioner Rob Powelson who had this to say about those who are wisely exploring options to preserve the diversity of our grid and support our aging fleet: “What [we are] not about is creating subsidies for non-economic resources that ratepayers are going to pay for,” Powelson said at a conference organized by Duke University.

Perhaps Commissioner Powelson – who also last week modestly named himself FERC’s “historian and the guardian” of the markets – is unfamiliar with the wind industry.

For years, taxpayers dumped billions into the wind industry to make it appear affordable. At times the wind industry has received subsidies per million Btu equal to three times the cost of coal per Btu, meaning subsidies for wind can exceed the wholesale price of electricity. Talk about putting your thumb on the scale of the markets.

As the always quotable Warren Buffett said, “We get a tax credit if we build a lot of wind farms. That’s the only reason to build them… They don’t make sense without the tax credit.” So contrary to Commissioner Powelson’s assertion, for years, subsidies paid for by ratepayers have kept non-economic resources afloat or, in wind’s case, aloft.

At the same time, also for years, the government actively stacked the deck against coal, working to disincentivize upgrades to older, less efficient plants.

And just like the wind industry needed a boost, proposals to support coal and nuclear power are attempts to normalize a market that may be left in the dark when generation from low cost, reliable fuels is irretrievably lost while FERC commissioners remain locked in a seemingly interminable season of navel gazing.

Some members of congress are doing their part. Just last week, Sen. Rand Paul (R-Ky.) introduced two bills that would encourage power plant efficiency upgrades. Last month Sen. Shelley Moore Capito (R-W.Va.) introduced legislation that would provide a temporary tax credit for existing coal-fired power plants to help cover a portion of operation and maintenance costs. And, in addition to introducing legislation creating a temporary federal tax credit to support the nation’s coal fleet as well as the mining and railroad industries,
Sen. Joe Manchin (D-W.Va.) has been an outspoken supporter of the proposal to use the Defense Production Act to protect coal-fired power plants in West Virginia. And the Department of Energy seems focused on being a part of the solution, rather than a simple observer of the debate. Proposals are great; action is even better.

In his self-designated role as historian, perhaps Commissioner Powelson might heed the words of another guy who also knew a little bit about electricity, Benjamin Franklin, who said, “Life’s tragedy is that we get old too soon and wise too late.” With action, Franklin’s quote need not apply to our aging fleet.