People don’t like being forced to purchase things they may not want, which is why over half of us are hoping that the Supreme Court throws out the individual insurance mandate in President Barrack Obama’s health care plan. There’s also a worldwide rebellion brewing against being forced to purchase expensive electricity produced by so-called “renewable” sources, now being exacerbated by the availability of very cheap natural gas from shale formations. But, here in the U.S. there are some 30 different statewide “renewable portfolio standards” (RPSs) that also mandate pricey power, usually under the guise of fighting dreaded global warming.
RPSs command that a certain percentage of electricity has to come from wind, solar, geothermal, or biomass. Given that this power generally costs a lot more than what comes from a modern coal or gas plant, your local utility passes the cost on in the form of higher bills, which the various state utility commissions are only too happy to approve in the name of saving the planet. RPSs generally do not include hydroelectric power, which produces no carbon dioxide. It’s also much more predictable than solar or wind, and costs about the same as the average for gas and coal combined. It’s not in the portfolio standards because dams are soooo 20th century, and it isn’t a darling of the green lobby, like solar, wind and biomass. But hydro can deliver more juice than solar is ever likely to. Nor do RPSs allow for natural gas. There are massive quantities in shale formations around the country, and new horizontal drilling techniques are releasing so much of it that it is now the cheapest source of electrical power. If our environmentalist friends were at all serious about climate change, they would enthuse over it because it produces significantly less carbon dioxide than an equivalent quantity of coal when used for power generation. Instead, they are horrified that cheap gas will destroy solar and wind. Their worries are quite well-founded. In November, NextEra Energy, the country’s largest wind-energy producer, said it would develop no new wind projects this year, as utilities sell cheaper gas power.
When are governments going to learn that they ought to butt out of the energy business? RPSs that specify certain technologies are essentially picking winners and losers based more upon political pull than market logic. One needs to look no further than ethanol as a motor fuel, mandated by the feds. Sold as “renewable” and reducing pernicious carbon dioxide emissions, it actually produces more in its life cycle than simply burning an equivalent amount of gasoline. It also—unconscionably—consumes 40% of U.S. corn production, and we are the by far the world’s largest producer of this important basic food.
The popular revulsion against ethanol has succeeded in cutting its massive federal subsidy, of $0.54 per gallon, which ran out on Dec. 31. But that doesn’t stop the federal mandate. Last year it was for roughly 14 billion gallons from corn and it will be nearly 15 billion in 2012. By 2022, up to 20 billion gallons will be required — all from corn — unless there is a breakthrough in so-called “cellulosic” ethanol, which, no matter how much money the government throws at it, hasn’t happened. Indeed, the largest cellulosic plant, Range Fuels, in Camilla, Ga., just went bankrupt. The loss to American taxpayers appears to be about $120 million, or about 25% of a Solyndra.