Bombshell: Electricity Customers and Taxpayers Are the Same People

My recent piece in Washington Examiner looks at the issue of massive subsidization of certain energy sources and then pretending they’re not expensive. It also criticizes the central planning behind the government’s decision to compel people into choosing particular consumer goods, especially in this case, which involves something so vital to our lives as electricity.

I noted that, even according to the Biden administration’s official numbers, his Inflation Reduction Act would “save American families up to $38 billion on electricity bills” by adding $369 billion in incentives and tax credits.

Even if those savings were possible, and they’re not, there is an obvious flaw in this idea of “savings”:

The problem is electricity customers and taxpayers are the same people. So it’s just a raw deal, period, and it gets worse the more it’s studied. Last spring, for example, Goldman Sachs forecasted that the Inflation Reduction Act’s cost would reach $1.2 trillion. Wood MacKenzie projected that the cumulative cost of Inflation Reduction Act tax credits for utility-scale renewables and storage would fall somewhere between $2.5 trillion and $3 trillion.

Supposedly, taxpayers would underwrite so much of the costs of constructing solar and wind facilities (the “once they’re built” part) that the same people, now called ratepayers, wouldn’t have to cover as much of those costs in their electricity bills. It’s a special kind of shell game in which the patsy plays himself.

The fiction that taxpayers are separate people from electricity consumers has a companion: the fiction that fuel costs are the only costs that matter, so that since nature provides sun and wind for free (no fuel costs), they’re obviously cheaper:

It is true that solar and wind don’t have “fuel costs.” Sun and wind are provided by nature for free — when and only when nature chooses to provide them at all. But the implication that fuel costs are the only costs that matter once a plant is built is flat-out wrong. There are still costs for operations, maintenance, property taxes, and transmission, as well as costs unique to intermittent renewables: load-balancing costs, costs imposed on reliable plants, and overbuilding and curtailment costs.

Renewables demand overbuilding to compensate for their unreliability. They are land-intensive and require more transmission infrastructure. They need reliable, dispatchable backup generation (usually natural gas). They might be supplemented with expensive battery arrays that can discharge their stored power for only one to maybe four hours. All these things add to electricity bills.

Even advocates of powering electric grids 100 percent by renewables acknowledge they’re more expensive. As MIT’s Climate Portal explained, solar and wind “make the grid more complicated in ways that, today, would make electricity more expensive if we relied on them exclusively.” The U.S. Department of Energy’s recent study of Puerto Rico’s effort to reach 100 percent renewable electricity by 2050 found that it would hit electricity consumers with “significant costs” — on top of the fact that Puerto Ricans already face much higher electricity bills than people in the continental United States. Naturally, the media focus on the report was that “100 percent renewable electricity” is possible for Puerto Rico, overlooking the huge cost, reliability, and other reasons why it is practically impossible.

As a reminder, the North Carolina Utilities Commission’s initial Carbon Plan also acknowledged that more solar and wind would have disparate effects on electricity prices in North Carolina, as well as negative impacts on job creation and the regional economy. It did so first regarding the current rate disparity among Duke Energy customers:

The plan acknowledges a large rate disparity between Duke Energy Progress (DEP, which operates primarily on the eastern side of the state) and Duke Energy Carolinas (DEC, mostly western). While a DEC residential customer would be charged $106.23 for 1,000 kilowatt-hours (kWh) of electricity, a DEP customer would be billed $125.94 for the same amount. In other words, DEP customers pay 19 percent more for electricity than DEC customers. Why? That’s a good question.

DEP and DEC are “separate utilities, each possessing a unique service territory, customer base, and generation, transmission, and distribution assets.” Testimony from the Public Staff “points to the impact of the significantly greater amount of solar generation developed in DEP’s service territory, along with associated transmission and distribution system upgrades, as a likely significant driver of the current disparity” in rates between DEP and DEC. At the same time, “DEC has a higher percentage of low fuel cost nuclear generation than DEP has.”

In sum: DEC has more nuclear, less solar, and less need of rebuilding transmission and distribution systems to interconnect with solar than DEP. So DEC customers have significantly lower bills than DEP customers.

Adding even more solar and wind would affect DEP customers even more, widening this gap even more, according to the plan:

Public Staff noted that DEP’s customers would “absorb a disproportionate share of the costs to achieve statewide compliance with the Carbon Plan,” but the damage would not stop there. The resulting much higher electricity rates could make it “increasingly difficult to recruit new economic development into DEP’s service territory.” Worse, “the higher electricity costs will likely drive out existing businesses.”

North Carolina electricity customers are already having to brace for huge rate impacts from all the new solar facilities that Duke has been told to interconnect:

Duke rates are already increasing, and Duke officials explained it is mostly because of grid infrastructure improvements and new solar facilities (they opted for the “transitioning to clean energy” euphemism). The NCUC’s Public Staff has publicly warned that electricity rates could be “approximately double” by the end of the decade.

I conclude the piece by noting “the failings of command economies” throughout history and warning that taking “a command approach to energy only guarantees worse outcomes.” Instead, I counsel freedom and time, not impatience and coercion, for finding answers to our energy provision.