The Problem with Renewable Energy Subsidies

Edward D Kee Thought Leadership

September 29, 2020

Edward Kee shares news on the current nuclear energy situation in the US with insights on the deregulated electricity market and the energy subsidy policy.

Government energy subsidies are standing in the way of a clean US electricity system — and US nuclear.

Nuclear power in the United States is struggling, with well-maintained plants closing early and few new projects in the works.  At the heart of these struggles lies a failed gamble: regulators and policy makers bet that market forces in de-regulated electricity markets would lead to the electricity sector that best served the needs of society.

Sadly, deregulated electricity markets have fallen well short of this target.  When markets fail, economic theory recommends prudent regulation. Instead, we have US energy subsidy policy, a poor replacement.

The Logic of Energy Subsidies

Energy subsidies are intended to steer markets away from a course considered bad for society. During the early years of a technology’s commercialization, subsidies are often used to increase investment and development, as well as to protect nascent industries from competition. Starting in the Carter administration with the creation of the Department of Energy, support for alternative fuel, and later renewable energy, often had this second goal in mind. Any technology that could diminish US reliance on imported oil had value, over and above its costs to consumers. It was in the best interests of the US to support these industries and help them develop.[1]

Points covered in this article include:

• Problems with energy subsidies
• Closing nuclear plants
• Phasing out subsidies for fossil fuels

Read the full article, Time to rethink renewable subsidies, on NuclearEconomics.com