D. Dowd Muska


What You’re Paying for Greens’ Dreams

April 04, 2013

“[T]he universe doesn’t pay a whole lot of attention to your desires and the way you want things to be. In a battle between you and the universe, always bet on the universe.”

- Srikumar Rao

Never accuse environmentalists of having low self-esteem.

Greens are convinced of their ability to rewrite the laws of physics, chemistry, and economics. In their concoction of reality, ethanol, biodiesel, wind, and solar will supplant coal, oil, and natural gas. The process can’t happen naturally, of course. The usual suspects -- “Big Oil,” the Koch brothers, redneck voters -- are in the way. So incentives, mandates, and “public investments” are necessary to pave the path to renewable nirvana.

Yet as Professor Rao advises, the universe imposes adamantine rules that not even the Prius-driving supplicants of “sustainability” can ignore. For evidence, consider two of modern environmentalism’s most treasured energy policies.

The Renewable Fuel Standard (RFS), adopted by Congress and George W. Bush as part of the Energy Policy Act of 2005, decreed that at least 7.5 billion gallons of politically correct liquids be blended into the nation’s gasoline and diesel supplies by 2012. In 2007, fedpols hiked the requirement to 15.2 billion gallons, and by 2022, the minimum was set at a cavernous 36 billion gallons.

Corn-based ethanol meets a portion of the RFS, with biodiesel and cellulosic ethanol covering the remainder. As a Congressional Research Service report dryly observed, “by guaranteeing a market for biofuels, [the RFS] substantially reduces the risk associated with biofuels production, thus providing an indirect subsidy for capital investment in the construction of biofuels plants.” So in addition to environmentalists’ blinkered -- if well-funded -- vision of an America no longer “addicted” to “fossil fuels,” there are now jobs, profits, and votes at stake.

Little wonder, then, that the EPA is refusing to face the undesirable consequences of government meddling in the transportation-fuels market. Last summer, the American Petroleum Institute (API) petitioned for a waiver of the cellulosic-ethanol dictate, given that no U.S. firms produce the stuff. (Refiners must purchase credits and/or buy abroad.) Governors and corn-consuming industries asked for relief, too, given the hike in feed costs spawned by severe drought in many of the country’s agricultural states.

The Obama administration’s eco-bureaucrats weren’t willing to relax the RFS’s bite, and EPA intransigence is breeding a mounting biofuels backlash. That’s a good thing. Trade associations seldom have the guts to advocate for the elimination of an entrenched regulatory scheme -- it’s bad for “government relations” -- but the API, denouncing the “ineffectiveness of biofuels/ethanol mandates in advancing America’s energy security” and the “market-distorting aspects of top-down mandates,” seeks a total “scrapping” of the RFS. Own a car? Eat? The organization’s cause deserves your support.

Greens’ blunder with electricity might be pricier than the RFS boondoggle. A renewable portfolio standard (RPS) requires a portion of the power generated within a state to use fuels that politicians deem proper. The mandates began to proliferate in the late 1990s. But in the second decade of the 21st century, that nasty creature reality has struck again. Predictions of renewables’ eventual price-competitiveness were wildly optimistic. According to the latest estimates by the U.S. Energy Information Administration, the cost of a megawatthour of electricity produced in an advanced, natural-gas, combined-cycle power station in 2018 will be $66. An onshore wind turbine will produce the same amount of juice for $87. (Offshore is off the scale: $222.) A photovoltaic megawatthour will cost $144; biomass, $111. And no, these projections do not include the billions of dollars worth of grants, tax breaks, and loan guarantees that annually flow to the suppliers of fashionably generated electrons.

Last month, The Wall Street Journal reported that half of the states with RPSs are considering rollbacks. An Ohio legislator told the Journal that the Buckeye State’s standard reminded him of “Joseph Stalin’s five-year plan,” adding that his focus was on “what delivers the lowest price for electricity.” In North Carolina, a House of Representatives subcommittee recently approved a complete repeal in 2018. RPSs face strong opposition in Montana, Missouri, and Kansas. Governor Paul LePage, who wants to sign contracts for cheap Canadian hydropower, is demanding a modification of his state’s RPS, alleging that “those with powerful political connections have forced higher cost renewables onto the backs of Maine ratepayers.”

Environmentalists, who have elevated denial to a secular sacrament, won’t raise their consciousness enough to grasp the expensive side effects of energy planning. Perhaps consumers, struggling to pay household bills in a low-growth economy, will.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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