“Hubris and corruption have compromised the energy sector and lowered the welfare of its customers (all of us). Only a small subset of people and corporations have gained from their political/lobbying formula of concentrated benefits, diffused costs.”
The current green agenda is flawed. I say this as not as a policy wonk or a political partisan but as someone with industry experience as an engineer, management consultant, and interim CTO for a solar company.
The power grid has been referred to as the world’s largest machine; a complex that has improved our quality of life dramatically. Yet today’s ‘reinvention’ is not from engineering and science from those running it. The grid is being managed by politicians under the influence of lobbyists, not to mention a supporting cast of lawyers, economists, and activists, some well-meaning.
Entrepreneurs are influenced by a “green” agenda turning on convoluted tax policy and other ‘wins’ from lobbying. Consumers are caught in the middle with unsatisfactory results.
What are the qualifications of those supposedly acting as the guardrails? A background search of those serving on committees of our elected officials will find lots of poly-sci majors, some lawyers, and a few who can objectively comprehend what is contained in lobbyist-drafted bills.
Someone who worked on the Hill once commented to me that budgets (salaries) aren’t high enough to hire staffers (experts) who are qualified to actually understand the nuances of any complex issue. So the public is reduced to decision makers who picked a team and (largely) follow the official narrative.
As the energy industry is vast and this column brief – I will present a few examples that I hope reader will objectively researcher further and draw their own conclusions.
Tax Appetite
The first time I heard this phase I had no idea what it meant, once I understood the concept my first reaction was “this is legal”. For those of you not familiar with the concept in a nutshell the government grants (gifts) tax credits to specific “investments” it deems worthy. And the companies that develop said projects are free to use those tax credits as they see fit, which equates to selling them on the open market.
Not sure how many people would be marching in the street under the banner of “Support Tax Breaks for Wall Street” … but Madison Avenue and the mainstream media have rephrased it as “saving the environment.”
My personal experience with tax appetite involved bundling tax shields for well-known finance firms who got the added (PR) bonus of investing in solar energy and “the future.” Which made for much better commercials than a public service announcement explaining how companies are purchasing hundreds of millions of dollars in tax avoidance for 70 cents on the dollar.
As an added bonus, volatile electric supply means the utility company gets to make rate cases to the public commission for additional expenditures, picked up by the ratepayer (you and me). To (mis)quote George Carlin … it’s a big club, but you ain’t in it.
Feed-in tariffs (FIT), Production Tax Credits (PTC), Investment Tax Credits (ITC) are additional mechanisms that distort not only the energy markets but grid operations. Search “frequency regulation” and other related topics for the issues involved with intermittency with a commodity that must be unfailingly reliable.
The American Recovery Reinvestment Act (ARRA) opened the flood gate on numerous billion-dollar projects under the guise that they were positive net present value projects (NPV) to ratepayers. But when those number didn’t pencil out, the guise of soft costs were used, arbitrary values drummed to make the math work.
You would think a decade later that we would force an honest dialog of why the results didn’t pan out as touted. But instead we hear calls to double down – or we didn’t do enough. The makes as much sense as being lectured on the importance of good nutrition and a healthy lifestyle but forced to eat 6,000 calories a day of processed food and with a carton of cigarettes in between. And then being told that the weight gain and health issue were caused because you didn’t exercise enough.
Political Energy
A cynic might say that this is systemic, affecting not just the energy industry but all politically charged (big dollar) industry sectors. Which is further exacerbated by the corruption of scientific research related to the field. We have allowed the scientific method to be replaced with principal investigators chasing funds (grants) demanding preconceived results.
We would be much better off if energy was much more separated from politics. Removal of federal incentives and bringing more control to the local/regional level would to make these expenditures less opaque. This is a reason why co-ops are more efficient or at least better aligned to the priorities of their members.
I vividly recall years ago an event in Washington DC, where a former Public Utility Commission (PUC) stated as a matter of fact that investor owned utilities (IOU) will do just about anything if granted rate recovery. He also added that because they (commissioners) were required to weigh in on so many different things – that they don’t have the time dig into the weeds. So as long what was presented (often by industry and lobbyist grounds) sounded persuasive enough (and was popular), they’d approve it.
He added that as political appointees and lawyers, they could not expected to understand the intricacies of technical industries.
Which reminds me of an utility executive gloating on how they used criticism (and customer advocacy) to gain PUC approval for an $600 million project, including guaranteed profit (I was impressed by that one).
For a decade you would hear speakers touted at conferences how regulation needs to catch up to technology. Which was really just a euphemism for how to force policy change to get funding for what they are selling.
The Climate Industrial Complex is real and exists solely to serve its own interests. No different than the “military-industrial” complex Eisenhower warned about over half a century ago. Big Wind … Big Solar … Big Battery … Big Carbon Offset …
Electric vehicles? The debate over building out public charging stations shows how far this farce has gone. A case where perhaps the most cost effective solution would be for existing utilities to step in. But the green choir changes their tune and promotes the need for ‘free market’ solutions. Is there no limits to the hypocrisy?
Honest comparisons between different energy generation assets require the removal of false incentives and additional tax burdens. Ancillary costs need to be taken in account upfront, for example all additional costs associated with bringing electricity to load centers. Instead, the trick is to burden ratepayers with these additional costs (via rate recovery) after the fact.
Fuel supplies in the transportation section also need to be fairly compared. Burdening one with excise taxes (fuel) while the other is provided incentives equates to more than just a finger on the scale.
Conclusion
I’m just an industry veteran who has directly participated in a lot of this and observed the rest. Hubris and corruption have compromised the energy sector and lowered the welfare of its customers (all of us). Only a small subset of people and corporations have gained from their political/lobbying formula of concentrated benefits, diffused costs.
Requiring all incremental intermittent generation to be dispatchable would be a major step in the right direction.