End Subsidies - ORIGINAL CONTENT

The US government currently subsidizes utility scale wind and solar generation, transmission and electricity storage, in competition with coal, natural gas and nuclear generation. The government also subsidizes on-site residential and commercial solar generation installations in competition with the electric utility grid. In some cases, state government requires the utility and its non-generating customers to subsidize solar generating customers through net metering.

The government is planning to subsidize building efficiency improvements for residential and commercial buildings, including insulation and weatherstripping, window upgrades and appliance replacement. Subsidies for on-site solar would be expanded to include on-site storage.

Government also subsidizes light duty electric vehicles and their public charging infrastructure; and, would also subsidize on-site EV charging systems.

Subsidies – Undeniable Facts of Life

Subsidies distort markets by changing the relative transaction prices of competing options. For example, the subsidy offered for the purchase of electric vehicles reduces the transaction price of EVs relative to alternative ICE vehicles. This issue is compounded by the fact that manufacturers increase the prices of ICE vehicles to partially offset the losses incurred in the production and sale of EVs, raising the transaction price of ICE vehicle purchases.

Subsidies disadvantage competitors. In the example above, a manufacturer which does not produce EVs is forced to compete with the subsidized price of competitors EVs. Also, the subsidies available for wind and solar support installations which displace the generation output of existing coal and natural gas generation, reducing sales from those generators and increasing the prices at which their output must be sold to remain profitable.

Subsidies increase societal costs. The subsidies available for renewable generation encourage the expansion of renewable generation infrastructure, which is redundant capacity since it requires full capacity backup from dispatchable generation. This increases the total investment in generation capacity with no corresponding increase in generation output, thus increasing the cost of electricity.

Subsidies transfer costs from participants to non-participants. The subsidies available for residential and commercial on-site solar installations frequently include net metering, which transfers a portion of the utilities’ fixed costs of service to solar generators who sell surplus electricity back to the grid. This requires the utility to recover that portion of its fixed costs through increased rates which affect non-generating customers.

Subsidies encourage sub-optimal decisions by making the uncompetitive appear competitive. This has recently been demonstrated in the states which have eliminated simple net metering, which eliminates or reduces the transfer of utility fixed costs to solar generators, thus reducing the price paid to the solar generators by the utilities. The loss of this subsidy has had a dramatic negative impact on solar residential and commercial installations because the economics are no longer as attractive. This has also been demonstrated recently in Germany, where the elimination of EV incentives has caused a dramatic decrease in EV sales.

Government cannot subsidize everything forever. The grossly misnamed Inflation Reduction Act will likely result in an increase in the US national debt of approximately $1 trillion, which will be taken from others in the future.

"The government cannot give to anybody anything that the government does not first take from somebody else.", Ronald Reagan