Op-ed: Trump is wrong about coal subsidies

After a Dec. 6 vote in the Senate, Bernard McNamee was narrowly confirmed as the newest member of the Federal Energy Regulatory Commission (FERC). McNamee’s career includes extensive experience in energy policy through both his law career and work at the Department of Energy.

Even so, his nomination process sparked a firestorm of controversy.

The nomination fight in D.C. really isn’t just about this appointment; it’s due to the Trump administration’s attempts to throw subsidy lifelines to failing coal plants.

After a video emerged of McNamee arguing that renewable energy “screws up the whole physics of the grid,” environmental groups worried his nomination would give new life to efforts to bail out a failing coal industry.

The administration maintains that the subsidies to coal are meant to maintain the integrity of the U.S. electrical system, but fossil fuel subsidies will only hurt U.S. citizens. Playing favorites in energy markets always backfires and ends up burning consumers.

Coal use is plummeting, and that’s likely been good for your energy bills. The U.S. Energy Information Administration (EIA) recently reported that coal consumption in 2018 will likely fall to its lowest levels since 1979. They note that a major factor in this change is that new technology has made natural gas a much cheaper option than coal.

It’s true that coal plants face stringent regulations, but it’s mainly the success of cheap natural gas in energy markets that is pushing big coal out of the game. Although decreasing coal use is good news for the environment, it’s obviously bad news for coal companies. It’s no surprise, then, that the industry is now seeking help from the federal government.

Any federal programs that support coal, whether through direct bailouts or policy changes, will only cost consumers. FERC commission member Richard Glick has argued that the Trump administration’s proposal to protect existing coal producers by requiring additional payments to coal operators would have cost between $25 and $65 billion. For an average consumer, that’s about $250 to $500 more per year on their electricity bills — just to prop up a dying industry.

These costs fall hard on already-struggling consumers. EIA data shows that one in three households struggled to pay its energy bills in 2015.

Rather than force additional costs onto consumers through expensive bailouts, the Trump administration should continue letting energy markets work. After all, the low costs of natural gas are leaving more money in consumers’ wallets, and the costs of alternative energy sources like wind and solar have also been falling, too.

Even as the old foundation of the energy system — coal-fired power plants — is disappearing, the market is rife with opportunity for alternative energy sources that will lower consumers energy costs.

Of course, it’s important to engage with a good-faith interpretation of McNamee’s argument against renewables: wind and solar sources do create challenges for the electrical grid. Unlike natural gas and coal generators, renewable sources are prone to variability, since the sun and wind can’t be ramped up or down to meet energy demands. Battery storage isn’t quite economical yet, so if you want your lights to flip on at will, then you want sources that can respond as needed.

The solution, however, is not federal support for dwindling sources like coal that can increase or decrease generation at the will of the electrical grid operators.

Energy policy researchers examining the expansion of renewables in a number of countries found that their growth has largely been possible because of fast-reacting natural gas plants that can pick up the slack when the wind stops blowing or the sun stops shining. That is, as the Washington Post’s Chris Mooney put it, natural gas is wind and solar’s “secret friend.”

As McNamee takes his spot at FERC, he must consider the expense of playing favorites in the energy market for consumers — many of whom simply can’t afford the costs. The right response to the emergence of renewables is one of excitement over energy markets that are dynamic and impressive.

After all, coal’s replacement in the energy arena has so far been a boon to both the environment consumers. Most importantly, market-driven changes will make consumers better off, but policies that play favorites in energy markets won’t.

CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.