Sacrificing Humanity on the Green Altar? (pt. 2)

Part 2 – Res Ipsa Loquitur

“Show me the incentive and I will show you the outcome.” – Charlie Munger

A single parent supporting two kids on $40,000/year with the cost of food and electricity up over 10% in a year and gas prices up 50% from early 2021 has to make difficult life choices. They do not involve the painful decision between the tiramisu and crème brulee at the French Laundry made by people like California Governor Newsom.

In the developing world, the situation for human prosperity is even worse.  Many developing nations rely on imports for food and for the fuel necessary for power generation and transportation.  Europe, in an energy crisis of its own creation but far wealthier by comparison, is outbidding developing countries from Southeast Asia to Africa to the Middle East to South America for food and energy resources.  In Part 3 of this series, we highlight a number of worrisome examples from across the globe.

We believe America and Europe wasted enormous sums of taxpayer money (and time) subsidizing wind and solar at the expense of a better alternative.  As Charlie Munger’s famous quote suggests, they got what they incentivized.

In America, according to a 2013 publication by George Mason University’s Mercatus Center, “Between fiscal years 2007 and 2010, annual wind subsidies grew from $476 million to nearly $5 billion - almost tenfold.” In 2010 we began following the rapid rise of American taxpayer subsidies for wind and solar energy.

The charts below come from U.S. Energy Information Administration (EIA) data documenting those subsidies in 2010, 2013 and 2016.  They help explain the extent to which we subsidized wind, solar and biomass at the expense of advanced nuclear energy in the present U.S. electrical system.  The metric total subsidies per megawatt hour generated ($/MWH) provides a stark comparison.

Data Source: U.S. Energy Information Association Amounts Shown in 2016 US$

The next graph shows the share of U.S. electricity generated by each source over that period.

Data Source: U.S. Energy Information Administration

Wind, solar and biomass received enormous subsidies but only generated a small portion of electricity from 2010 - 2016 compared to fossil fuels and nuclear. We leave hydroelectric generation out of our analysis because its share of generation has generally been consistently in a range of about 5.5% -6.5% since 2010. And because we do not allow environmentalists who fight against hydroelectric power to hypocritically claim it as “renewable” to boost that category’s overall share of electricity generation.

Combining wind+solar+biomass (intermittent, energy diffuse) and fossil fuels+nuclear (on-demand, energy dense) to visualize their combined share of both subsidies and actual generation over the same period provides a more dramatic comparison:

Data Source: US Energy Information Administration

Comparing wind+solar+biomass exclusively to nuclear, in 2010, wind+solar+biomass received over 5 times the amount of U.S. taxpayer subsidies nuclear received.  By 2013 the difference had grown to 9 times, and by 2016 wind+solar+biomass were receiving almost 10 times more subsidies than nuclear energy.

Environmental policy – specifically climate change and fear of nuclear energy – drove these misallocations choices of energy “investments”.

Today, after 15 years and tens of billions more in subsidies to wind+solar+biomass than fossil fuels+nuclear, the latter still supply ~80% of U.S. electricity and the former only ~13%.  Hydropower (6.1%) accounts for almost all of the remainder.  

Everywhere renewables have been forced on consumers and industry through subsidization and national or global diktat, electricity prices increase when those renewables reach a certain percentage share of electricity generation. This is the case from California to Germany and everywhere else.  Comparing Georgia to California provides a relevant if unflattering example here in the U.S.

The choice of states is intentional.  In one state, nuclear energy is hanging on for dear life (yet just saved the state from self-inflicted electricity nightmares).  In the other state, the first new nuclear reactors built in America in over 30 years are nearing completion.

When the San Onofre nuclear power station shut down in 2012, it left Diablo Canyon as the only remaining nuclear power plant in California. As a result, nuclear energy made up less than 10% of statewide electricity generation in 2021.  Diablo Canyon was scheduled for closure in 2025 but its life was extended (theoretically to 2030) in fall 2022 by the California legislature and the Governor (acting in a rare moment of energy sanity).

Georgia generates ~27% of its electricity from nuclear power and has two new utility-scale nuclear reactors (Westinghouse AP-1000, ~1,117 megawatts each) nearing completion at Plant Vogtle near Waynesboro.  With the addition of the two new reactor units (3&4), Plant Vogtle will have a total generation capacity of over 4,600 megawatts.  (For reference, Diablo Canyon has capacity of ~2,250 megawatts.)

California has the nation’s largest population (about 39 million people) and highest GDP (~$3.6 trillion). Georgia ranks 8th in population (around 11 million) and in US GDP (~$760 billion).

Aliens landing on earth would be understandably confused about why the two new nuclear reactors are being built in Georgia instead of California. We recognize that explaining western civilization’s environmental and energy policies to an alien would be easier than changing them.  

California has an aggressive “Renewable Portfolio Standard” for utilities with a goal of zero emissions by 2050. Renewables made up 3.5 times more of California’s electricity in 2021 by comparison to Georgia, which has no Renewable Portfolio Standard.

So, how did the two state’s average retail electricity prices compare at the end of 2021?

Source: US Energy Information Administration: Net Generation by State by Type of Producer by Energy Source 1990 – 2021; US Electricity Profiles 2021

California’s average retail electricity prices were over 88% higher than Georgia’s at year end 2021.  According to EIA’s Electric Power Monthly report, as of October 2022, the “All Sectors” (residential, commercial, industrial, transportation) price per kilowatt hour (KWH) was 22.91 cents in California vs. 11.96 cents in Georgia, a difference of more than 91%.

As some of our attorney friends are fond of saying, res ipsa loquitur (“the thing speaks for itself”).

Georgia Power Plant Vogtle Unit 4     Photo Credit: Georgia Power Company

Americans, by virtue of domestic hydrocarbon energy production (despite every effort by environmentalists to stop it) are fortunate by comparison to Europe and the UK. According to the German Association of Energy and Water Industries (BDEW), the average cost of electricity in Germany in 2021 was around (US$) 32 cents/KWH. That was prior to the Russian invasion of Ukraine. With almost $1 trillion of energy market distortions subsidies to citizens and businesses, it’s difficult to tell what the actual price of electricity is in Europe and the UK at present.

In the UK, many small businesses are simply unable to afford electricity and natural gas and are closing in large numbers. High natural gas and electricity prices threaten an historic de-industrialization in Germany’s high value chemical, steel, automaking and other heavy industries.  Most of western Europe faces a similar situation.  

The costs of renewable energy policies - imposed on the least fortunate in society largely by the most fortunate – are taking an increasing toll.  Here are a few recent examples from western civilization. (In Part 3 of this series, we look at the impact on citizens of the developing world.)

In a November 2022 release titled “Home Heating Costs Reach Highest Level in More than 10 Years” the U.S. National Energy Assistance Directors Association (NEADA) wrote (emphasis ours):

• Home heating costs are becoming increasingly unaffordable for millions of lower income families.

• The average cost of home heating is estimated to increase by 17.2% since last winter's heating season

• Between the 2020-21 and 2022-23 winter heating seasons, the cost of home energy has increased by 35.7% ... these are the highest prices in more than 10 years.

• Of even greater concern, the total cost of home heating nationally … is estimated to increase from $128.5 billion to an estimated $151.6 billion. The additional costs will fall hardest on lower income households.

• According to Mark Wolfe, Executive Director of NEADA, the rise in home energy costs this winter will put millions of lower income families at risk of falling behind on their energy bills and having no choice but to make difficult decisions between paying for food, medicine, and rent.

The Low-Income Home Energy Assistance Program (LIHEAP) is a federally-funded program that helps low-income families pay their heating, cooling and electricity and natural gas bills. Five weeks after the NEADA release, Congress approved a record $6 billion for the LIHEAP in the omnibus spending bill.  A better testimony by Charlaticians™ in Congress as to the effect that subsidizing wind and solar energy is having on the poorest in America would be hard to find.

In Europe and the UK governments are bleeding fiscally, printing and handing out money to citizens and industry to try to offset the impacts of the very energy policies they created themselves.  According to a November 29, 2022 report titled “National Fiscal Policy Responses to the Energy Crisis” from European economic think-tank Bruegel (emphasis ours):

Since the start of the energy crisis in September 2021, €705.5 billion has been allocated and earmarked across European countries to shield consumers from the rising energy costs. Here’s the breakdown:

• €600.4 billion in the EU, of which €264 billion has been earmarked by Germany alone

• €97 billion in the UK, after a U-turn by government that reduced the period of the energy price freeze from 2 years to 6 months

• €8.1 billion in Norway

Source: Bruegel https://www.bruegel.org/dataset/national-policies-shield-consumers-rising-energy-prices

With UK inflation running at 10.2% year over year in November, a report by the UK House of Commons in late December 2022 noted (emphasis ours):

“From November 2021 to November 2022, domestic gas prices increased by 129% and domestic electricity prices by 65%.

And we haven’t even begun to delve into the (predictable) effects that over-subsidizing wind and solar have had on electricity grid reliability. Space does not permit even a modest examination of those consequences here, but one recent report provides some context.

A December 15, 2022 report issued by the North American Electric Reliability Corporation (NERC) titled “2022 Long-Term Reliability Assessment” concluded over 180 million Americans live in areas under elevated or high-risk of electricity shortfalls over the period 2023-2027. The amount and pace of fossil fuel generation retirements, increasing wind and solar generation, and emerging electric vehicle (EV) issues are all highlighted as challenges. NERC identifies the “high risk” areas as California (about 40 million served by Western Electricity Coordinating Council, or WECC) and the Midcontinent Independent System Operator (MISO, which covers all or parts of 15 midwestern/central states and 45 million people). According to NERC’s report:

“Around 25% of the U.S. population lives in areas under high-risk of electricity shortfalls” 

Referring again to our earlier comparison between Georgia’s and California’s portion of electricity generation from renewables vs. nuclear and their differences in cost:

Channeling H.L. Mencken, the recent severe cold weather in the U.S. provides another “good and hard” lesson that physics never fails to pummel ideology.

The image below shows the California electricity generation mix from California Independent Service Operator (CA-ISO), the state’s electricity grid operator, on the evening of December 24, 2022:

Renewables comprised 8.2% (2,010 MW) of the state’s electricity generation. The state’s sole remaining nuclear power plant (Diablo Canyon) was providing more electricity (9.2%, 2,245 MW) than all of the installed wind and solar capacity in the state combined.

The next image shows the generation mix for PJM, grid operator for 13 states in the mid-Atlantic and Midwest serving ~65 million customers, on the afternoon of December 23, 2022:

At 2 p.m. near peak hour for solar, PJM’s generation consisted of 8.6% renewables. Natural gas, coal and nuclear made up the vast majority of the generation.

The last example comes from German utility RWE, on the morning of December 24, 2022:

Lignite coal was providing over 70% of RWE’s electricity generation in Germany that morning.  Nuclear was providing 24%. Wind was providing just under 4%.

Constraining affordable, reliable, abundant, dense, on-demand forms of primary energy and replacing them with weather-dependent, diffuse, intermittent forms like wind and solar is a bad policy for human prosperity. The link between primary energy consumption and human prosperity is inextricable, and the correlation so high as to be unmistakable.  

It’s hard for us to see how policies that make energy more scarce, expensive and harm the world’s poorest the most while jeopardizing their ability to reach western living standards are virtuous. We urge a rapid change to policies that do the opposite.    

In the finale (Part 3) of this series, we look at impacts of the present energy crisis across the world, from the wealthiest to the poorest nations. We look at some of the absurdities that have resulted, including what western “leaders” have resorted to as a result of their own ignorance. We consider some long-term domestic and geopolitical changes that could result from the misguided energy transition. And we propose a viable alternative path forward.