June 3, 2010 | Commentary on Energy and Environment
President Obama keeps trying to make our electric bills skyrocket. Now he's seized on the BP fiasco as an excuse to do it. According to Obama, the Gulf of Mexico gusher proves we need billions more to subsidize green energy. That was the president's claim in his big Pittsburgh speech.
He didn't tell the audience about his previous admission that electric bills will "skyrocket" under his plan. Or that our government continues to block access to immense onshore oil and gas reserves that don't require the risks of deep-sea drilling.
Obama's exact words in 2008 were, "under my plan of a cap and trade system, electricity rates would necessarily skyrocket." Converting fossil fuel plants, he said, "will cost money; they will pass that money on to consumers."
If we were rapidly running out of oil, scarcity would drive up its price and make alternatives affordable without needing subsidies. But Obama left out the facts about our abundant untapped onshore reserves. As Heritage Foundation energy expert David Kreutzer notes,
"He also could have noted that billions of barrels of 'easily accessible' oil have been turned into 'impossible to access' oil by federal regulations and moratoria that block any access. There is still a lot of non-deep sea oil available off the coast of California that can be accessed from onshore. And, don't forget, there are the 10 billion barrels in ANWR. All of this oil has been placed completely off limits by federal regulations."
Instead, Obama's speech simultaneously condemned overspending and denounced subsidies to big oil even as he proposed spending billions more to in new subsidies for the competitors of oil and gas.
Obama wants to eliminate tax deductions that, according to his own budget plan, "distort markets by encouraging more investment in fossil fuel production than would occur under a neutral system." Yet he intends to distort markets even further by expanding subsidies and tax preferences for alternative energy. Those would heavily favor wind and solar as preferred by environmentalists who overstate the potential and affordability of those.
Nuclear power, however, has far more abundant potential and needs only the lifting of government barriers rather than subsidies. As noted by Heritage's nuclear expert, Jack Spencer, "the monthly cost of producing electricity from uranium-based fuel remains slightly less than coal and substantially less than natural gas or oil" because, "Nuclear power is the least expensive form of electricity produced in the United States."
But nuclear power is not politically correct. So another proposal is a backdoor subsidy that does not give government money directly toward alternative energy but instead dictates that utilities must generate certain levels of our electricity from sources like wind and solar (but not nuclear) – a so-called RES "renewable energy standard."
The wind and sun are free, but the expensive equipment to harness them makes these among the costliest ways to generate electricity. RES forces utilities to use this higher-priced power and pass along the rising costs to customers. One study projects that home electric bills would rise by a third and business bills by 60 percent under proposed RES plans.
But for anyone who believes we can power America solely through windmills (even though it is costlier), dream on. This would require 55,000 square miles densely packed with nothing but windmills. That's like emptying the entire state of Wisconsin and making it all windmills all the time. But our lights would still go dark when the wind wasn't blowing.
Solar power is even trickier than wind power, requiring rare elements to build solar cells, plus daylight and large surface area.
According to the U.S. Department of Energy, when subsidies are allocated according to how much electricity is generated, it costs $.44 per megawatt for coal, $.25 per megawatt for oil and gas, $1.59 for nuclear, $23.37 for wind and $24.34 for solar. (This leaves out the heftiest subsidy – ethanol – because it's not used to generate electricity.) Since DOE made that study in 2007, the non-fossil fuel subsidies have been increased; now Obama wants to raise them again.
Like them or not, fossil fuels have provided great quantities of affordable energy. Higher subsidies for alternatives will cost a lot more, but still not meet our needs.
Ernest Istook is a Senior Fellow in Government Relations
First appeared in The Orange County Register