As energy consumers, Americans benefit most when all of the nation’s energy sources play a role in supplying the grid. Subsidies, like those recently pushed for nuclear plans in New Jersey, Ohio and Connecticut create a distorted market with an uneven playing field and do a disservice to energy consumers.
While voters in key states like Pennsylvania, New Jersey, Ohio and Connecticut have made it clear in the polls that they don’t want to pay for nuclear plant bailouts, a recent IHS Markit study oddly suggests that the solution to market distorting subsidies to some energy sources is more subsidies.
The study says that:
Subsidies for specific generating technologies do not reduce, but rather shift, some of the cost of specific electric generation technologies. Federal subsidies shift some costs from consumer power bills to current or future consumer tax bills. In addition, some state subsidies shift costs from consumers with distributed generation resources to those without. Since subsidies shift costs, the result is the development of more subsidized resources than are cost-effective with a level playing field. As a result, an economic rationale exists for market interventions to offset the unintended consequences of the uneven playing field.
Allowing the market itself to choose winners and losers in energy sourcing is the best approach to electricity generation for consumers. Factors like reliability, affordability and efficiency come into play, and unbiased markets allow for the innovation and competition that results in real solutions like lower prices and a better end-product.
Natural gas was the leading energy source in the United States in 2016 with its growth attributed not to subsidies, but to the market. A recent study examined different energy sources to determine their reliability when supplying the future U.S. power grid. Study results show that “natural gas is uniquely positioned among energy sources to supply attributes – dispatchability, ramp rates, frequency response and others – that ensure the future reliability of the U.S. power grid.”
These results demonstrate how natural gas provides a reliable source of energy, without subsidies that tip the market. While the idea is not to argue against other energy sources, the market and consumers alike can see the advantages offered by natural gas. And ultimately, the advantages offered to consumers by a market free of distorting-subsidies.