SHALE Featured Website Nov Dec 2018 Porter Renewable Energy Subsidies

An Even Playing Field? A Look at Renewable Energy Subsidies

A growing healthy economy needs cheap and abundant energy to fuel growth. That is why you hear people say they are in favor of an all-of-the-above energy policy. We need all the energy we can get from which ever source we can get it. The market will sort out what energy source works best for different applications. The market will do this, if we have a fair and free market. However, we don’t have one because of mandates and subsidies for renewable energy. If oil, natural gas and other forms of energy can’t compete against renewables, it’s just too bad for those energy firms. If those firms can compete, but aren’t allowed to because of subsidies, mandates and regulations, then our economy, both state and national, are going to be hamstrung, bringing higher prices to both consumers and producers. Tax funds will be wasted on subsidies.

The Texas Public Policy Foundation recently had a panel discussing this issue. U.S. taxpayers have spent over $65 billion on wind and solar tax credits. While $65 billion won’t solve the nation’s debt crisis, it would be a step in the right direction. Wind farms have roughly half their capital building cost covered by tax credits and subsidies. In Texas, ratepayers have spent $7 billion dollars building transmission lines to move wind generated electricity. When a natural gas generating plant is built you would normally build it close to its respective market so extensive amounts of transmission lines would not have to be built. In Texas, the amount of local property tax abatements under Chapter 312 and 313 that have gone to wind farms is about $1.8 billion dollars. This tax abatement is not solely for wind farms, but they are a substantial user providing few jobs after the initial construction phase.

If you are interested in more information on this topic I would urge you to visit www.texaspolicy.com, the website of the Texas Public Policy Foundation. If you look under energy and environment in the issues area, you will find several papers on these topics.

As bad as tax subsidies are, at least they are relatively easy to see and understand their impacts. Regulations and mandates can have more effect on your pocket book and since they are not directly paid to government entities it’s much harder for individuals to add up their total cost.

Two type of mandates that I would challenge the readers to keep a look out for in the future are those that will mandate a certain percentage of electric vehicles (or zero emission vehicles (ZEV) as environmentalist like to call them) sold by car companies in a state. A hypothetical example — manufactures operating in a state would be required to sell 25 percent ZEV by 2030. Another policy being pushed are mandates requiring a certain percentage of renewable energy usage for electrical generation. This is an actual example — California is now mandating 100 percent renewable energy by 2045.

These mandates are prime examples of the type of policies that if adopted would not only cost individuals through higher prices on utility rates and other energy inputs but would be detrimental to the Texas oil and gas business — a major factor in both the state and national economy.

Subsidies, mandates and onerous regulations in favor of renewable energy are a clear and present danger to our state and national economy. Oil and gas and renewables should compete on a level playing ground.

About the author: David Porter has served as a Railroad Commissioner (2011–17) and Chairman (2015–16), as well as Vice Chairman of the Interstate Oil and Gas Compact Commission (2016). Prior to service on the Commission, Porter spent 30 years in Midland, Texas, as a CPA working with oil and gas producers, service companies and royalty owners. Since leaving the Commission, Porter works as a consultant for oil and gas companies. He also serves as Chairman of the 98th Meridian Foundation, a nonprofit concerned with water, energy and land issues.

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