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August 26, 2015

President Obama Doesn’t Know What Free Market Means

August 26, 2015
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President Obama recently delivered a speech on energy in Las Vegas at Sen. Harry Reid’s “Clean Energy Summit.” Like much that is said in Las Vegas, President Obama’s claims don’t really stand up to inspection.

Claim #1: “[The] Clean Power Plan [is] the single most important step America has ever taken to combat climate change.”

The administration’s carbon regulation will have little to no effect on global warming; in fact, the government’s own data show the rule will only mitigate temperature increases by 0.019 degrees Celsius by 2100.

Far from “historic” as the president has claimed, this regulation is not so important after all.

Claim #2: “The Clean Power Plan is also going to accelerate the third way that we’re cutting emissions, creating jobs [and] saving folks money.”

The President’s carbon plan would scrap affordable electricity to build costly renewable generators, including wind power. A recent study published by the Institute for Energy Research found that new wind generators produce electricity that is nearly three times more expensive than existing coal-fired plants and nearly four times more expensive than existing nuclear plants.

In his speech, the president touted solar as a revolutionary energy source. However, solar remains extremely expensive. Electricity from existing coal costs $38.4 megawatt hour, electricity from existing natural gas plants costs $48.9 per megawatt hour, but according to the Energy Information Administration, new PV solar costs $125.3 per megawatt hour.

The regulation does not create jobs or save folks money. Forcing the closure of existing coal-fired power plants and installation of new wind and solar will only drive up electricity rates, harming the entire economy.

Claim #3: “[T]he world’s largest solar installation came online last year, with 9 million solar panels generating enough electricity to power more than 100,000 homes with clean, renewable energy — not in Germany, not in China, not in Saudi Arabia — right here in the United States of America.”

Increasing solar panel installations will benefit Chinese, not American, manufacturers. China supplied 35 percent of our imported solar photovoltaic (PV) modules in 2012, with Asia as a whole providing 81 percent, according to the most recent data available. Only 12 percent of PV modules were made in the U.S. in 2012. Further, the price of solar panels has fallen in recent years, in part because Chinese manufacturers have flooded the U.S. market with solar PV arrays sponsored by their government.

Claim #4: “Google is the largest corporation buyer of renewable energy in the world; companies like Apple and Costco close behind. They’re not doing this just out of altruism. They’re doing it because it means big cost savings.”

In 2007, Google launched an initiative (RE<C) to make renewable electricity cheaper than electricity created at coal-fired plants. According to the company’s own engineers, the program was shut down in 2011 because “[t]rying to combat climate change exclusively with today’s renewable energy technologies simply won’t work.”

Furthermore, it is not clear that Google actually is the largest buyer of renewable energy in the world. The reason is that Google buys electricity from the electric grid. When Google or anyone else uses electricity, there is no differentiation between electricity generated from coal or wind. Often times, when companies claim to be buying renewable power, they are actually just buying credits or offsets while they continue to consume electricity from the grid, 86 percent of which is powered by coal, natural gas, and nuclear.

Claim #5: “So we’re taking steps that allow more Americans to join this revolution with no money down.”

There is no such thing as a free lunch. President Obama could give everyone solar panels, regardless of income, but that does not mean solar is cost-competitive. Electricity produced by solar panels will remain among the most expensive forms of energy until at least 2020, according to President Obama’s Energy Information Administration. This makes it unaffordable for low-income families. Solar panels remain expensive, making solar subsidies such as net metering particularly regressive. Such policies force the poor to subsidize wealthy families’ electricity.

Additionally, the President’s carbon plan will lead to substantially higher electricity rates for American families. A study of the proposed rule by NERA Economic Consulting found that residential rates could rise by double-digit percentages in 43 states, and by as high as 21 percent in Kentucky.

Claim #6: “It’s another thing when you’re free market until it’s solar that’s working and people want to buy, and suddenly you’re not for it anymore.”

There is nothing free market about the heavily-subsidized solar industry. The federal government has supported the industry through loan guarantees, cash grants, and tax credits—costing taxpayers tens of billions of dollars over the last decade. In addition to the generous federal subsidies, there are hundreds of state and local mandates for renewable power production. California alone has nearly 200 different incentives and mandates.

In fact, corporate welfare is the lifeblood of the renewable energy industry. The summit at which Obama spoke was organized by the Clean Energy Project. This group is run by former staffers of Sen. Harry Reid, who brags about steering subsidies to green energy companies. Numerous renewable energy companies that have funneled donations to the Clean Energy Project went on to secure grants and loans from the federal government, as detailed here.

Despite what President Obama says, there is nothing free market about mandates and subsidies.

Claim #7: “But the real revolution going on here is that people are beginning to realize they can take more control over their own energy — what they use, how much, when.”

This is not a “revolution” driven by average Americans. President Obama tried and failed to pass cap-and-trade legislation through the Democrat-controlled Senate in 2009, and is now essentially forcing states into a similar system through his carbon rule. President Obama’s regulation of carbon dioxide emissions from power plants is a federal takeover of the electricity system, removing the control over electricity from individuals and states and handing it over to the executive branch.

Conclusion

President Obama’s speech was wrong on many details. He was wrong to suggest that solar (and wind) will reduce electricity rates and save people money. The most accurate thing on energy President Obama has ever said is his admission that “under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.” Cap-and-trade failed in Congress, but President Obama is back with a new plan, imposed by executive fiat, to make electricity rates skyrocket. It’s too bad the president can’t be honest about it.

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