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The Renewable Debate Moves to the State Level

by | published February 15th, 2013

In this week’s State of the Union, President Obama renewed the administration’s support for wind and solar power. The move was hardly unanticipated. But in so doing, Obama intensified the debate. This is a policy approach that will have decisive political ramifications.

And that policy fracas is now having its primary impact on state legislatures, not inside the Beltway.

The two essential reasons have been intensifying for the past year.

First, renewable energy has a very limited initial market without government subsidy. Today, they are simply not competitive against traditional sources.

Yes, there may be environmental and residual cost savings considerations. But with further extensions of the federal wind power stimulus recently renewed, there is now a possible hiatus in further Congressionally sponsored renewable development.

Some earlier solar and wind generation tax advantages survive. Yet any national push for new projects is on hold pending further action (if any) by Congress.

On the other hand, the same situation does not exist on the state level.

That is the second reason for the intensifying debate. Here, a drawn out competition has emerged among energy types for state-level support and sometimes increasingly bitter cross-border battles to attract generating capacity.

On the state level, the amount of investment in wind and solar (along with a much smaller foothold for geothermal generation in selected western areas) has a more immediate impact on employment, tax base, and power generation levels.

The first two have direct political consequences for officials seeking reelection, while the third is a basic consideration in local economic development and expansion.

And as a result, one source of renewable energy is poised to do far better at the expense of its “green” rival.

High Drama in the Wind Belt

The dramas currently playing out in states like Texas, Kansas, Oklahoma, and Nebraska testifies to the intense legislative differences emerging. In all of this, especially in these four states known as the “wind belt” because of the significant volume of wind generation built, there is a genuine concern that failure to introduce or retain tax incentives will result projects moving to those adjoining states where such inducements remain.

In all of this, wind power has benefitted more than (some would say at the expense of) solar energy.

Wind generation is cheaper to construct, although both wind and solar have significant efficiency problems when it comes to transmitting (or inverting) power from harvesting to the grid. Both harvest electricity DC but must translate into AC for movement over power lines.

Advocates of solar power have been lobbying in a number of states, especially Texas, for the introduction of “non-wind” mandates in the overall power generation network. These folks are of the opinion that wind has now grown to such a volume that it no longer deserves to receive additional support, while competing renewable (like solar) or alternative (new biofuel and algae-based product flows) do.

Now regardless of the energy matrix to which they are applied, these subsidies are a net reduction in state revenues. That is because, aside from reduced water or other service fees, about the only thing states can provide is a reduction in taxes. Forbearance in income and sale taxes are certainly on this list, although the main tax advantage relied upon is actually local in nature – concessions on property taxes.

Yet in this age of the austerity-minded Tea Party and renewed demands for budget cuts, the continuing availability of such subsidies is becoming problematic.

The budget crunch is usually felt more quickly on the state level because running a deficit there is either more difficult or (usually) constitutionally prohibited. Money is printed in the building next to the White House, not in some office complex next to the governor’s residence.

The Best Investment in Renewable Energy

Then there is the other energy wildcard changing the discussion surrounding renewables.

As more extractable shale gas is discovered, and the price of the unconventional gas resulting remains low, an alternative is presented.

As alternatives go in a budget strapped environment, this is a strong one.

Unlike wind or solar, shale gas does not require tax incentives or other subsidies. While fracking and the accompanying horizontal drilling have newly accelerated on the scene (essentially over the past seven years), they are not the kind of technologies requiring government subsidy.

Neither are the companies employing them.

The resulting revolution of rising self-sufficiency in gas, at least for the next several generations, coupled with low prices has ushered in a new threat for renewables. A number of legislators now openly question why public subsidies for new power generation approaches are needed if “older” more established sourcing can provide required energy.

And cheaper.

As the political debate intensifies at the state level over the future of subsidies, the real threat to wind and solar power may not be budget cutters, environmentalists or Mother Nature.

It will come from the other largess we recently discovered.

Shale gas.

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  1. Calvin Trenholm
    February 15th, 2013 at 17:06 | #1

    Kent: The shale gas seems to be the “in thing” these days with drilling (fracking) activity all over the US and Canada. The concerns however are the huge amounts of fresh water consumed in the process and left so highly toxic that there is not conceivable way to clean it up for reuse or return to the environment. Citizens are affected by burning gases, odors, heavy truck traffic and contaminated drinking water. In the provinces of Quebec and New Brunswick there is a moratorium on Fracking which hs resulted in heavy financial losses for those in the oil industry. The citizens movement is growing stronger every day with other provinces and possibly States considering moratoriums. The oil companies will simply pass this expense onto the consumers by increasing the oil and gasoline prices. Both sides of this equation are somewhat scary for the future of our resources and our cost of living. Have we let the oil companies and developers have free rein to use this technology without understanding what it can/will do to our environmental resources?

  2. enthusceptic
    February 16th, 2013 at 09:52 | #2

    Electricity loses power if it has to travel far. Therefore generating solar power in a desert and establishing industries that use large amounts of electricity on the edge of the desert sounds like a good idea. It wasn’t I who thought of this first. In places like southern Algeria there’s the best of two worlds. Lots of sun and natgas can produce electricity both day and night.
    I can see one problem with this idea: It may be very expensive to bring raw materials to these factories.
    Does any of this make any sense to anyone? Does anyone have any ideas or info about this?

  3. Todd J. Smith
    February 16th, 2013 at 19:15 | #3

    This is true until 2014 when we begin exporting natural gas overseas at which time gas prices will start to rise and meet world prices just like oil.

    Also not mentioned is the actual cost of climate change when considering the price of fuels. Currently the damage done by burning fossil fuels, to our health, environment, climate and the acidification or our oceans (absorption of CO2 creating carbonic acid) has not been priced into fossil fuels.

    This may change very quickly with the introduction of a Carbon Fee and dividend type legislation being written this week for introduction to congress in the near future. Momentum is building for a carbon fee(tax) especially one in which the collected fee is divided up and returned to citizens in the form of a monthly check. This makes it revenue neutral and a climate solution Republicans could get behind. For more info check out Citizens Climate lobby.org

    You may want to start looking at the best run Alternative energy companies while they are cheap.

    Sincerely,

    Todd Smith

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