Morning Consult recently published an op-ed from GAIN spokesman Craig Stevens regarding the latest challenges facing the energy industry in light of the coronavirus pandemic. A number of potential options have been discussed to help mitigate such challenges – including industry “bail outs.” However, Stevens argues that the free market is the best arbiter for serving American consumers:
Government manipulation of the market, be it through production cuts and quotas or bailouts and subsidies, often does not have the intended results. Unexpected side effects often outweigh any anticipated benefits. Therefore, the free market – particularly when it comes to energy – is the ultimate arbiter to best serve consumers in domestic and international markets.
According to a recent Morning Consult poll, more than half of Americans support bailing out the “clean energy” industry. But before others join in clamoring to pour money into renewable companies and give the government a green light to assess and predict the companies of the future, it is important to remember:
The last large-scale cash injection for energy companies from the government came under the Obama administration as “green loan guarantees” that focused on dozens of companies believed to be on the cutting edge of renewable energy technologies. Perhaps the most infamous recipient was Solyndra, which quickly defaulted on a $535 million government loan after going bust.
Since the rollout of these loans, taxpayers are picking up the pieces of the program at a cost of $2.2 billion with little progress made by companies that received these loans. This goes to show that when the government gets in the business of picking winners and losers, it seems to miss more than hit.
Second, taxpayers must be diligent in assessing the value or benefit they receive from the deployment of tax revenues by the federal government. Should the 56 percent get their way and a bailout of the clean energy industry be deployed it would likely do little to better the large picture and, instead, may simply speak to the “warm glow effect,” or emotional satisfaction consumers and voters receive from supporting policies they deem to “do good.”
However, as Stevens points out, renewables are still cutting their teeth in energy generation. According to the Energy Information Administration (EIA), wind and solar are responsible for less than 10 percent of American electricity generation, while natural gas alone accounts for more than a third of our nation’s electricity capacity. Further, natural gas has been key to lowering carbon emissions – and is an accessible, affordable, and reliable source of domestic energy.
When considering different solutions for the challenges facing the American economy and energy sector, it is key to focus on the facts:
All said, this should be a reminder that what looks good on paper and what actually works in practice are two very different things. Fortunately, the United States benefits from a long history of investing in energy infrastructure, leading the research and development of new energy innovations, and a wide breadth of natural resources that have brought us energy security. Bailouts and energy market interventions are best reserved for paper, not practice.