I am currently sitting in my yard enjoying the post El Nino 75 degree weather, while typing away on my locally made (…well invented at least) MacBook which was charged from the highly subsidized solar panels on my roof. I am still reeling from the large number of Oscar worthy performances during the recent presidential debates. For the energy sector a lot is at stake with this next election.
Of the GOP front runners, only Marco Rubio has an energy or climate plan on his website. A few choice nuggets are doing away with “Obama’s carbon mandates” (whatever that means), approving Keystone XL immediately, rewriting the offshore drilling plan and creating a National Regulatory Budget to Limit the Power of Unelected Regulators. There is no plan to address climate change, because that’s not a problem in the Rubio world. I can hear my great grandchildren crying into their organic pillows across the space time continuum. I don’t even want to speculate about Trump’s energy plan. Well, maybe he will put gold plated windmills made in U.S.A. on his wall to Mexico.
On the other side of the aisle, the two front runners have spelled out their energy and climate plans pretty well on their respective sites. Hillary Clinton’s plans are an aggressive acceleration of the agenda set during the Obama administration, and it focuses (perhaps wisely) on executive actions that are feasible without new acts of Congress. The two main goals listed are:
- The United States will have more than 500,000,000 solar panels installed by the end of 2020.
- The United States will produce enough renewable energy to power every home in America by 2026.
Goal one is ambitious and smartly stated in units that the voter can visualize (what is a MW anyway?). This is equivalent to putting solar panels on 25 million homes or a seven-fold increase of current levels. I assume that a significant share of these panels will not be on residential roofs but in PV plants, but this is not spelled out.
Goal two is broader than goal one, since it pulls in the other sources of renewable energy (wind, hydro, etc.). Promising to power “every home” implies covering residential consumption, which accounts for about a third of energy consumption. This would require a doubling of renewable energy sources over a decade. I’m mildly skeptical (professional hazard), but intrigued. The “how we get there” section lists a 60 billion dollar “Clean Energy Challenge.” The plan involves cutting red tape to get panels onto roofs faster, transmission infrastructure investments, a Solar X-Prize and …..drum roll…. tax incentives. I don’t want to be Debbie Downer here, but achieving this goal in four years is going to take net metering on steroids across large swaths of the country and tax credits that are significantly higher than the 30% you get now. If you spent all 60 billion dollars on subsidies (which I don’t believe is the plan) this would amount to roughly $3000 per new solar household. While that sounds like a lot, it is not. For a $21k install, you already currently get $7k in federal tax credits.
While there is no explicit mention of market based mechanisms to fight climate change, Hillary’s plan pushes for a continuation of the Clean Power Plan as proposed, which has some market mechanisms built in. Further, a carbon tax or national cap and trade is beyond the power of the executive and lacking a tidal change in Congress, is simply politically not feasible. There is also talk of more energy efficiency, reforming leasing of public lands, ending subsidies for oil and gas and cutting methane emissions.
Bernie Sanders’ agenda is significantly more aggressive. The stated goals make this liberal heart sing. Accelerating a just transition away from fossil fuels, investment in clean energy, revolutionizing the electric and transportation infrastructure, and taking a leadership position in the international fight against climate change. How to get there? Bernie plans to charge a revenue neutral carbon tax, repeal fossil fuel subsidies and invest massively in energy efficiency and clean energy. A candidate arguing for a REVENUE NEUTRAL CARBON TAX? Sign me up! And then I read on.
“Create a Clean-Energy Workforce of 10 million good-paying jobs by creating a 100% clean energy system. Transitioning toward a completely nuclear-free clean energy system for electricity, heating, and transportation is not only possible and affordable it will create millions of good jobs, clean up our air and water, and decrease our dependence on foreign oil.”
This sounds good. Real good. Much like free Krispy Kreme donuts that don’t make you fat good. Then there is a link where for each state you can see what this 100% clean energy system for your state will look like. I clicked on California. The future mix looks like this:
This is 35% from Wind, ~55% from Solar and the remainder from a mix of sources. No nuclear, no gas, no coal. All clean. This plan will generate 315,982 forty-year jobs in construction, and 142,153 permanent operating jobs. Also, the private costs of this system are projected to be 9.7 cents per kwh, which is one cent lower than projected costs of the fossil energy. This plan will avoid 127.9 billion dollars in health damages. And the final conclusion is that because of customer-side solar and improving energy efficiency, total demand will go down by 44%. This is not fat free donuts. In my humble opinion achieving this goal is about as likely as me starting to work out today and looking like Ryan Gosling next week.
Why? California’s population is projected to grow by 28% by 2050. So in order to decrease demand by 44% over today, you will have to do that and add 11 million carbon free individuals. California is famous for its aggressive energy efficiency policies. They have contributed to keeping our per capita consumption relatively constant. But a decrease in demand of this magnitude is beyond what even the most optimistic energy efficiency advocates would consider reasonable.
I don’t even want to get started on these job creation figures. Severin has written about this. I realize that you have to promise jobs to get elected in some places, but these wildly exaggerated claims are simply not honest. And neither are the claims about the costs of renewables.
We need to craft an ambitious path forward towards this brave new energy system that will address climate change and local pollution externalities. Germany is trying the path of nuclear free renewables and it is turning out to be an expensive and not necessarily “coal reducing” one. Let’s study this case closely and learn from it. I realize that in order to get elected one has to make promises one can’t keep. But this economist dislikes it when as an adult he is promised Santa, when we know that Santa does not exist.
Maximilian Auffhammer is the George Pardee Professor of International Sustainable Development at the University of California Berkeley. His fields of expertise are environmental and energy economics, with a specific focus on the impacts and regulation of climate change and air pollution.