The free market can be a major boon in cleaning up America’s power sector — if the government will let it be one.
The free market can be a major boon in cleaning up America’s power sector — if the government will let it be one.
I t’s no secret that President Biden wants to spend taxpayer money on clean energy. He said as much in his State of the Union address, and his Build Back Better plan — now repurposed for fighting inflation — has hundreds of billions of dollars of climate-related spending, including massive extensions of the subsidies that wind and solar generation have benefited from for decades.
But the time for subsidies (if there ever truly was one) has passed, as technological advances have cut the cost of generating power from wind and solar plants substantially. In fact, the Energy Information Administration estimates of wind and solar generation by 2031 without Build Back Better subsidies are nearly identical to the Congressional Budget Office’s expectations with the subsidies. That these subsidies are expected to have such negligible effect should be a clue that something else is holding back clean-energy development.
The biggest obstacle to getting more clean energy on the grid isn’t federal spending. It’s regulation.
Unnecessary red tape is inflating the costs and delaying the construction of projects needed to reduce emissions everywhere you look. For example, roughly twice as many clean-energy projects are currently held up under the National Environmental Policy Act (NEPA) as fossil-fuel projects. The average project’s NEPA paperwork timeline has ballooned from one to five years, and related environmental lawsuits can delay clean-energy projects for decades. These legal obstacles badly need to be streamlined if anything close to a clean-energy build-out is going to be possible.
Numerous studies confirm the need for more transmission capacity to incorporate large amounts of wind and solar energy, but outdated procedures are holding back these developments. For example, reforming transmission-planning requirements to match grid expansion with the location of projected energy-resource development has proven successful when tried, but has yet to become standard practice. Proactively building transmission lines through areas with high renewable-energy potential helps integrate resources located far away from population centers (including non-renewable energy sources), reduces grid congestion, and builds a resilient backbone for future grid needs.
Uncoordinated interstate planning requirements can add a decade to building long-distance transmission lines. Stronger guidance from the Federal Energy Regulatory Commission can make those parties work together and shave years off the process. Incorporating competitive market forces into how utilities are paid can speed up adoption of grid-enhancing technologies (GETs) that improve transmission-line capacity, reliability, and efficiency. Payment structures should reward low-cost innovative solutions like GETs, not encourage utilities to find slow and expensive ways to solve the same problem, as they currently do.
Regulatory roadblocks extend to traditional sources of clean energy as well. Hydropower and nuclear power combined generate over two-thirds of America’s emissions-free electricity, but expanding either is challenging under present regulatory conditions. Just 3 percent of America’s 80,000 dams generate electricity, and outfitting the top 100 candidates to generate power can boost hydropower output by 10 percent. The upside is enormous, but so are the permitting delays. Outfitting a dam for first-time power generation takes five years to obtain a license, and relicensing an existing dam takes nearly eight years and costs $10 million on average. Investors are interested in developing new hydropower capacity, but this red tape is a red flag for them and a problem for clean-energy goals.
The situation is no different with nuclear power. Licensing a nuclear-power plant takes a decade on average and can cost up to $500 million, which helps explain why so little nuclear power has come online in the past generation. America’s nuclear-licensing regulations are a patchwork of standards tailored to one specific type of nuclear-reactor technology and are ill-suited to bringing new, innovative nuclear-reactor designs online. The great potential for innovation that comes with the commercial (rather than government) ownership of America’s nuclear power should be harnessed, not hindered. Developing technology-neutral safety and operating standards that don’t favor traditional nuclear-reactor designs at the expense of new ones can greatly speed up nuclear-power development and make it a more profitable enterprise.
It should be encouraging that clean-energy reforms involve regulatory changes rather than cutting checks. The president likes to cast energy goals in economic terms, so here’s an economic way to put it: Reducing regulatory barriers can cut the costs of clean energy and add more good-paying jobs, no subsidies required.
The free market can be a major boon in cleaning up America’s power sector — if the government will let it be one.