Why America Must Let Go of Coal and Avoid Renewable Subsidies

COMMENTARY

The 2019 United Nations Climate Change Conference (COP25), held in December in Madrid, Spain, showcased politicians and activists vying for the title of the world’s climate savior. In particular, youth activist Greta Thunberg has led weekly strikes for more than a year protesting government and business inaction on climate change. Thunberg has rallied against fossil fuels, calling for an end to the use of coal, oil, and natural gas.

But climate activists like Thunberg should use caution when conflating coal and natural gas in claiming they are equally harmful, an argument that has become a familiar refrain for the low/no carbon-based energy movement. This appeal fails to recognize the divergent roles the two fuels play in the context of energy generation.

The comparative cost, efficiency, and clean nature of natural gas versus coal are far from equivalent. As electric utilities and consumers have increasingly rejected coal for electricity generation in the U.S., natural gas has consequently powered Americans’ electricity demand.

The Save Coal Crowd

As a result, coal companies have resorted to aggressive lobbying campaigns to keep coal-fired electrical power plants in operation. “Saving coal” became a tenet of then-candidate Trump’s presidential campaign in 2016, and for a good reason: he needed to entice the coal-loyal voters of Pennsylvania, Ohio, and West Virginia to his side. Fortunately for taxpayers, it was not a promise that he was able to deliver.

A proposed federal bailout for aging coal plants was firmly repudiated by industry stakeholders, renewable energy and energy efficiency providers, consumer groups, state utility regulators, and regional grid operators. More importantly, all five members (including Trump’s appointees) of the Federal Energy Regulatory Commission unanimously rejected a Department of Energy plan to use emergency powers to subsidize the industry.

In response, these generators looked to state legislatures for taxpayer support. The best example of this pivot was House Bill 6 (HB-6) in Ohio, which went into effect in late October. HB-6 introduced a monthly rate increase on consumer and residential ratepayers to prop up two Ohio nuclear plants to the tune of $150 million. Often overlooked in this legislation is the additional $20 million annual tax created to fund the Ohio Valley Electric Corp.’s coal power plants. HB-6’s stated goal—creating a “Clean Air Program”—offered subsidies for nuclear plants because of their low emissions profile. Curiously, coal was slipped in as something of a bill-rider, despite being the archetype of “dirty” fuel.

Natural Gas Is Clean and Plentiful

Ultimately, the market acceptance of natural gas has created a perfect storm for replacing coal-fired energy, building a bridge to lower-carbon-based electrical power generation. The energy renaissance we have enjoyed thanks to the discovery of shale reserves in the Permian Basin, Bakken, Marcellus, and Utica reserves, along with advances in drilling technologies, have provided trusted methods to extract previously inaccessible natural gas.

The result? Cleaner, more cost-efficient energy production. A recent report by the U.S. Energy Information Administration (EIA) found that, between 2005 and 2018, the U.S.’s shift from coal to natural gas for electricity generation resulted in 57% more carbon dioxide emissions reductions than the shift from coal to renewable energy sources.

In 2018, natural gas production grew by 10 billion cubic feet per day, which was an 11% increase from the previous year. The widespread growth in natural gas production has reduced the price of natural gas-generated electricity by 18% since 2013, passing along savings to small business, industrial, and individual consumers.

Subsidies Misguided—Let Markets Decide

But subsidies are not just a problem with coal. Half a world away, in the Western Balkans, misdirected use of feed-in tariffs has led to a proliferation of environmentally destructive hydropower plants under 10 MW. Originally designed to boost renewable energy production, the policy instead led to subsidized construction of hydropower, accounting for less than 4% of the electricity in the region.

In the UK, while the cost of offshore wind has come down, it is unclear when the subsidies necessary to build sufficient offshore wind capacity to meet the UK’s zero-carbon emissions targets can be eliminated. The risk of not addressing the intermittency power issue was highlighted during an August blackout in England and Wales.

Any energy resource that has to be subsidized routinely and extensively undermines the market forces that led to the substitution of gas for coal in electrical power generation. In addition to increasing costs to ratepayers, the taxpayer-funded special treatment of coal and renewables only hinders research and development, and diverts capital toward less-competitive, and even less environmentally friendly, energy sources.

Public officials should be informed about America’s energy future, promoting policies that stimulate competition and reduce consumer costs based on a hybrid electric power system of gas, existing nuclear, and emerging renewable (wind and solar) systems. Let the market determine the mix. ■

Richard D. Kauzlarich is a former U.S. ambassador and the co-director of the Center for Energy Science and Policy at George Mason University.