Sneaky Trump Tax Subsidizes Coal & Nuclear Power Plant Owners

Robert Ayres & Michael Olenick

The libertarian bible is Ayn Rand’s Atlas Shrugged. There are two groups of villains in Rand’s dystopia, looters and moochers. Heroes are producers, who create products and services.

I’ll reserve judgment on my own feelings on the book other than to say it’s a perennial  favorite for conservatives. The Library of Congress ranks it as the most influential American book ever written.

Rand’s looters are government officials who rig markets to favor various constituent groups, chief among them existing industries faced with disruptive technology. For example, one of her heroes builds a new type of steel and sells it to the heroine, who runs a railroad. Existing steel companies successfully pressure the government to nationalize the processes and patents “for the common good.”

Rick Perry is Trump’s appointee to the Department of Energy, an agency Perry once vowed to eliminate. Given the excitement in Trump-land many have forgotten about Perry. Sure, Perry is a bona fide idiot but in an administration where somebody called “The Mooch,” discussed, on-the-record, being “cock-blocked” by Trump’s now former Chief of Staff, Perry begins to look almost normal.

But make no mistake, Perry is the typical parasite we’ve come to expect from Trump.

Perry has started a pre-ordained process to subsidize coal and nuclear plant operators, taxing people through artificially high electricity rates to subsidize costly coal and nuclear plants.

What’s the problem with coal and nuclear plants, besides that they’re expensive? Coal pollutes. Badly. Nuclear, when it works well, leaves radioactive waste behind that has a half-life of 24,000 years. When it does not work well, like it didn’t at Three Mile Island, Chernobyl, and Fukushima, it tends to create ecological disasters.

Besides that the two sources of power have serious environmental problems they’re more expensive than alternative energy sources that do not. The US Energy Information Administration released a report on the various costs of energy, here. Spoiler alert: nuclear power costs a fortune to generate. Coal comes next. Then solar. Then wind. Then natural gas. Hydroelectric is marked “N/A” in 2015 but, in 2013, it was cheaper than coal.

The price of wind declined 25% from 2013 to 2016 and the price of solar declined 67%. Assuming those price declines continue — and with the newfound Chinese enthusiasm for renewables that seems a given — it won’t be long before renewables cost less than any fossil fuel.

For Perry, the former Governor of Texas — who works for a guy that promised to Make Coal Great Again — this is a meltdown (I couldn’t resist).

Perry’s still-in-existence Department of Energy has asked the Federal Energy Regulatory Commission (FERC) to begin the rule-making process to subsidize both the cost and profits of coal and nuclear plants.

Perry’s puppet-master’s constituents, with their aging nuclear and coal plants, argue that renewable energy from wind and solar is variable so that backup generators are sometimes needed for days with calm winds or cloudy skies.

For now, let’s ignore the rapid pace of battery progress (which I’ll get to later) and take this assumption as true. There is an easy solution: turn on the inexpensive natural gas plants to make up the difference. In fact, right now, that is exactly how things work: energy companies constantly sell backup energy capacity to one another.

But, under Perry’s scheme, companies would be required to purchase a certain amount of this backup energy from fuel plants that store 90-days or more of fuel on-site. Why 90-days? Because it’s completely impractical to store 90-days of natural gas on-site but easy enough to store that much coal and nuclear fuel.

This is an old-school Rand-style looter giveaway from a bunch of self-described “conservatives” trying to rescue a dinosaur industry that’s choking the world.

Just to clarify: Republicans, through Rick Perry, are working to increase electric bills to subsidize and protect coal and nuclear plant owners. Trump and Perry specifically require people to pay not only for plants but guaranteed profits to the owners of filthy old generation technology. Knock knock to objectvists Rand Paul and Paul Ryan, you’ll both be introducing veto-proof legislation to block this, right?

Now let’s return to the subject of standby electrical power generation. Of course it is needed and natural gas works just fine. End of argument. But even natural gas won’t be needed indefinitely.

There is plenty of capacity that either exists or is in the works and renewables are rapidly dropping in price and being installed. Germany, on average, produces 35% of overall electricity from renewables. But much of the remaining 65% is for factories so on weekends, where fewer factories operate, the percentage is even higher. On Sunday, April 30, 2017, Germany produced 85% of electricity used from renewables.

Longer-term, the solution might come from cars. The price of electric cars is dropping quickly. Electric cars are simpler than internal combustion engines and experts agree will last far longer. More to the point, they already have enormous batteries. So cars can be charged from solar, during daylight hours, then used to power houses during evening hours, then be recharged, from wind power, during sleeping hours. Plus, the economies of scale will make batteries, for battery farms and in-home storage, both cheaper and more efficient over time.

There are other systems to store renewable power and one or more will eventually be perfected.

So the US already has plenty of back-up generation from low-cost natural gas and new technologies are likely to add more as they evolve. Perry’s alleged problem isn’t even real and his solution, subsidizing coal and nuclear plants, is a form of pure theft, a transfer from the most deserving, clean renewable and safe plants, to the least deserving, filthy and dangerous one’s.

Trump and his cronies cabinet are on-track to go down in history as the worst in US history, both individually and as a group. Thanks to Congressional dysfunction much of what they’ve done is by decree and can be expeditiously undone once sanity is returned to the White House. Until then be prepared for higher electric bills to pad the pockets of people who built filthy coal plants decades ago.

This isn’t to say the original engineers were bad — they used the technology they had — but it’s been disrupted and that’s how disruptive innovation works. Low-cost alternative technology that is not ideal is invented. It matures and eventually replaces the existing tech. This is almost always a good thing.

Channeling Gandhi, first they ignored the new tech. They they laughed. Now they’ve enlisted Rick Perry. But the fight is hopeless; it is only a question of when renewables will dominate, not if.

By the way, for anybody interested here is how Rick Perry signs his name to official correspondence.



Robert Ayres is a Professor Emeritus at INSEAD.

Author: Michael Olenick

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