It's True, Both Parties Subsidize Energy
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A guy closing in on retirement can speak uncomfortable truths that he might not have felt as free to share before.
John Rowe, the soon-to-retire CEO of the giant utility Exelon, rolled out a few grenades about energy politics in a recent interview published in the October 22nd Wall Street Journal.
Rowe argues that market-friendly Republicans are as eager to pick technology winners as government-knows-best Democrats are.
Rowe finds himself pricking the bubbles of Republicans who call him up wanting to talk about a nuclear renaissance that he says can't happen without subsidies and lots of them. This, from the head of America's biggest nuclear utility. Same goes for carbon sequestration, he says. And offshore wind. And just about everything else except, for now, natural gas.
A related Rowe observation, as quoted in the Journal…
There is no such thing as a sort of Garden of Eden energy market in this country—never has been, and we're not going to live long enough to see one.
As I've told any reporter who's asked, every form of energy is subsidized. Oil, coal, gas, nuclear, renewables, even energy efficiency—you name it, not one stands by its lonesome in an unadulterated free market. Any politician who says his favorite technology is not subsidized is not telling the truth.
R&D didn't come up in the published interview, but some focused long-term R&D—an appropriate role for the federal government—could drive down the costs of cleaner alternatives, leading to smaller, safer nukes, practical ways to capture and store carbon, and solar technologies that could beat the price of coal. Poisonous budget politics could play havoc with energy R&D, however.
One more Rowe thought…
EPA has been knocked for churning out regulations like popcorn. Better to have regulations, however, than politicians picking favorites and reaching into taxpayers' pockets to fund them, Rowe declared.
Rowe thinks that with EPA rules in place, the market would aim toward the cleanest, most economical power plant fuel, which for the next decade or two is likely to be natural gas. Not only is there plenty of gas coming out of the ground, there are underutilized gas-fired power plants that could substitute for dirty coal plants that can't cut the pollution control mustard.
Sure, Rowe added, EPA has probably overdone it here and there. Yet in spite of righteous indignation you hear from politicians about regulations shutting down coal plants, owners of old coal clunkers have been "gaming the system," Rowe pointed out.
EPA didn’t pull the proposed regulations out of thin air. Utilities have been on notice for years that rules required by the Clean Air Act were on the way.
"Most of the utilities actually spent the money to get their plants somewhere close to compliance," the Journal quoted Rowe as saying. "We think about 60 percent of the coal fleet is. But some just decided to gamble. They just made one very big bet that these rules weren’t ever going to happen."
That tilts the playing field, Rowe added, because old beaters trying to get a pass from cutting their emissions depress market prices for the output of cleaner plants fitted out with pollution control equipment.
Rowe, however, has what he calls a better idea—levy taxes on pollutants, including carbon dioxide, and shift away from command-and-control regulations and technology-specific subsidies.
That won’t happen anytime soon, but the pollution tax issue will come up again, Rowe believes. A Republican-controlled Congress and a Republican taking office in 2013 as No. 45 would be forced by unyielding arithmetic to at least take a look at pollution taxes as part of a bigger tax and budget fix, if the numbers are to pass the laugh test.