“Are you sure you don’t want to just go ahead and say the PTC is bad policy? (It is.) … I’m asking why you’d leave it for another day when the downsides are so painfully clear.” – Fisher to Kiesling (below)
“Because I’m tired after two hard days of riding in advance of a gravel bike race next weekend and it’s a holiday weekend.” – Kiesling to Fisher (below)
And the great dodge continues where the coverup is worse than the crime. The ‘crime’ is pretending to be free market or classical liberal in electricity policy when you are not. Mandatory open access with all the trimmings (renewables favoritism in particularly) is an obvious regulatory, interventionist model. Period.
The cover-up is ‘woman of system‘ Lynne Kiesling (and Michael Giberson of R Street) refusing to define, much less advocate, a free market/classical liberalism policy program for electricity. I have been in public policy since the 1970s and have never seen an intellectual ruse quite like this.
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Here is how the latest Kiesling dodge evolved. Commenting about negative power prices, Ingmar Schlecht stated:
Remember they are just an artefact [sic] of subsidy policies. If we would expose renewables to wholesale price incentives, they would not be there. If exposed to wholesale prices, wind and solar would economically curtail at zero prices already.
Some people argue negative prices are desirable transitorily to incentivize demand flex. But they fail to see negative prices cause economic costs: costly and resource-intensive re-starts of thermal plants, causing wear and tear; & greater financial risks to demand-sided hedging.
People might also get the impression that too much RES is problematic, yet curtailment is actually efficient and a desirable feature of renewable energy systems. We should expose RES to wholesale prices, so negative prices will no longer occur. Our proposal for future RES support schemes: Financial CfDs
Kiesling commented:
This raises a useful question: is there a way to isolate wholesale power market price formation from the pernicious effects of subsidies? Part of the argument for the PTC is to only earn the subsidy if they produce, and if they truly are lower MC resources then the market rules should induce them to bid that accurately. But the PTC induces them to bid negative prices to get dispatched.
I don’t know what Schlecht means by “expose them to wholesale prices” when they are/should be essential resources in the price discovery process, not external to it. But the research on contracts for differences and forward contracts may give us some insights on how to compartmentalize the subsidies to minimize their negative effects. [The normative question of whether we should have those subsidies at all I’ll reserve for another day.]
Lynne’s parsed conclusion–gee, we need to look into alternatives to this (within the context of a centrally planed wholesale power grid)–was hardly reassuring. And decades late.
Reaction
Well, after all these years, a bit of concern about the Economics 101 laugher about negative pricing for an essential product. A real classical liberal, Travis Fisher, asked:
Are you sure you don’t want to just go ahead and say the PTC is bad policy? (It is.)
Which received this response from Kiesling: “Did you see my parenthetical at the end?” To which Fisher responded: “Sure did. I’m asking why you’d leave it for another day when the downsides are so painfully clear.”
Then came the rather bizarre response:
Because I’m tired after two hard days of riding in advance of a gravel bike race next weekend and it’s a holiday weekend.
Fisher responded:
Fair enough. My only point is that I’d love to see you or Michael Giberson or any of my favorite economists affiliated with R Street (or otherwise in the free market space) to speak out against subsidies and mandates. You guys always seem to be too busy to do it!
Then came a strange response from Michael Giberson, policy-wise: “My view is that repeal isn’t on the table, but I’ll take potshots at the policy from time to time [Twitter].
Fisher pressed:
I like to see this! As you know, electricity markets are about to get hit with something like a trillion dollars in “resource neutral” PTC payments under the IRA, so the wind/solar distinction won’t matter at that point. The PTC will be there, ruining markets, unless/until we unravel it. Market-friendly folks should be united behind immediate and full repeal. It’s a no brainer.
And:
Michael Giberson and Lynne Kiesling are you with me? We could save taxpayers a trillion dollars and rescue organized markets in the process. What do you say?!
Issac Orr (fairly) commented: “It’s R Street. They’re going to pretend to be free market while using crappy analysis to carry water for wind and solar.” To which Kiesling responded: “Please keep this kind of non-constructive commentary verging on ad hominem off of my wall. If you have substantive criticism of specific analyses, please cite them.”
Fisher jumped back in after Lynne’s comment:
Here’s my main criticism, for whatever it’s worth. I haven’t been able to get anyone at R Street Institute to admit that the IRA subsidy window, under current law, may never close. Admitting the problem is the first step toward solving it!
I responded:
The horse is well out of the barn on this, Lynne. A decade and more of cumulative damage. Do you have some writings from, say, a decade +/- ago, criticizing the PTC and the ITC for solar? Any complaints or warnings?
So here we are. The ruse, the coverup, continues. More on this next week in regard to Lynne’s partner-in-cover-up, Michael Giberson.