by Jane Twitmyer
The South, including Virginia, has been slow to build clean, transformed utility systems. Last year, major corporations including Costco, Cox, Kroger, Sam’s Club, Target and Walmart petitioned Virginia regulators to allow them to meet their renewable energy goals by purchasing their electricity from third parties. Dominion Energy’s response was to commission a poll, according to PV magazine, asking which of two arguments was the most compelling: (1) the claim that ratepayer bills will go up $100 per month if corporations are allowed to procure their own renewables, or (2) that in the states where deregulation was introduced, that customer rates rose 39%.
The arguments are deeply questionable now that renewable technologies are cost competitive, but the “high cost” argument ignores the ongoing federal support for fossil fuel industries. A Forbes article in January warned all investors that “power sector decarbonization” is now an “imperative.” In almost all jurisdictions, utility-scale wind and solar are now the cheapest source of new electricity without subsidies. … New unsubsidized wind costs $28-54/megawatt-hour (MWh), and solar costs $32-44/MWh, while new combined cycle natural gas costs $44-68/MWh.
Comparing the real costs of generation resources is complicated. Subsidies, both direct and indirect, as well as “offloaded” costs, need to be included. Forbes said their cost comparisons were “without subsidies,” meaning without “direct subsidies” — or specific government funding meant to reduce the retail price of building or fueling a generation resource. The International Monetary Fund (IMF) describes these subsidies as “pre-tax subsidies”, which in 2017, globally amounted to roughly $500 billion a year.
Direct government subsidies are easily tallied. Indirect subsidies are more difficult, but more significant. A new IMF study shows that in fossil fuel commodities are underpriced by a “whopping $5 Trillion,” the equivalent of over 6.5% of the global GDP.
In 2016, permanent U.S. tax expenditures in the form of tax code write-offs equaled $7.4 billion. The largest single write-off was for intangible drilling costs which cost to the federal government of $2.3 billion. In 2016 the second largest was the excess cost over depletion allowance, costing the government $1.5 billion, and another, Master Limited Partnerships cost $1.6 billion.
Many tax expenditures were put in place when the industries were new. Some, still on the books in spite of climate change, actually incent the production of more fossil energy. The original subsidies ensured investments would take place when our economy needed energy to grow. The intangible drilling-costs tax deduction has been on the books for over 100 years.
At the same time, the many risks of using fossil fuel were minimized by not pricing them into the product. “Extracting fossil fuels damages and degrades the land and the oceans. Transporting coal can spread dust, pumping oil can spill, and natural gas can explode. When burned, fuels emit air pollutants like particulates and nitrogen oxides in addition to greenhouse gases.” (Roberts/ Vox)
Some indirect subsidies are basically government losses. The federal government loses $3 billion on offshore drilling leases by not charging a royalty rate equal to the 20% rate charged by Texas. In the Powder River Basin, mining leases are offered at outdated rates, costing the taxpayers almost $1 billion annually.
Additional industry supports have been instituted as the old industries have begun to fail. Coal companies are being exempted from providing promised obligations. The federal government has shouldered $330 million in shortfall payments to the Black Ling Disability Fund, and $400 million to the Abandoned Mine Land Grant Fund.
Finally, environmental drivers for clean electricity include not only reducing CO2 and methane emissions, but controlling air pollution and water scarcity. Nationwide, fossil fuel and nuclear power plants withdraw as much water as all farms, and more than four times as much as all residences.
A larger water problem occurs with fracking, where drilling requires very large volumes if water, and then degrades it to the point where it cannot be returned to the water cycle. During drilling operations, the water brought to the surface contains heavy metals, hydrocarbons and radioactive materials as well as the drilling chemicals. Researchers have tracked 353 chemicals, half of which can cause a variety of serve damages to living systems, in this “produced” water. Reinjecting ‘produced’ water deep in the earth is causing earthquakes.
The EPA has classified 53 coal ash ponds across the nation as “high hazards.” Virginia is home to 32 ponds, 8 of which are “high hazard.” Then there are the northern states who have twice sued us and our neighbor coal states under the “good neighbor” laws. The pollution we and our neighbor coal states send north on the winds puts those northern states out of compliance with clean air regulations.
This is the free market that isn’t. All of these subsidies and all of the costs that we don’t pay for in the price of using fossil fuels act as a negative price. Decisions to continue the use of fossil fuels, in spite of any danger they pose, are not free market-based decisions. They are decisions made by corporations and investors with enough market power to write the rules.
Government financial support has kept the fossil fuel industries alive much longer than an actual free market might have. It allows Dominion to claim the shift to clean energy, generated on-site or nearby, will be inordinately expensive for the customer.
Jane Twitmyer, a renewable energy advocate and former consultant, lives in the Blue Ridge Mountains.
