The NCPA has argued repeatedly that the best energy policy for the economy, consumers, government revenues and the environment would be an energy neutral policy, under which no energy source received subsidies, government support or special encouragement. Under such a policy, all energy sources would compete on an equal footing, with the result that inefficient, unreliable and non-cost-effective energy sources would fade from the marketplace until such a time as they or other, as yet unthought-of or undeveloped energy technologies, can command consumer demand.
It seems lawmakers in both state and federal legislatures are finally coming to the same conclusion. At the Federal level Representative Mike Pompeo from Kansas introduced a bill HR 1569 would end all tax credits for all energy companies. It gets rid of every single tax credit in the entire Internal Revenue Code related to energy including temporary subsidies, including renewable and efficiency tax credits as well as credits available to — but rarely used by — oil and gas producers. If this becomes law, it would be a good start.
However, an even worse form of subsidy is common in many states: a Renewable Portfolio or Renewable Energy Standard. An RPS requires electric utilities to ensure that a legislatively establish amount of the energy they deliver comes from politically favored sources (usually wind and solar) energy. As I argued in a study examining the prospects of solar power becoming competitive, Renewable portfolio standards are more powerful than subsidies. Subsidies only encourage utilities, firms and individuals to adopt, develop or use renewable power, but portfolio standards require electric suppliers to purchase (and thus consumers to pay for) renewable, regardless of the cost.
Fortunately, for the sake of energy freedom, the federal government has failed to enact a national standard (thus far) and the states seem to be beginning to learn from their mistakes. For instance, in North Carolina House subcommittee passed a bill keep the state’s current Renewable Energy Portfolio Standards on the books through 2018 but cap the requirement at 6 percent of overall energy production. While not an outright repeal, it’s another good start. Several free market think tanks are working to reign in or repeal renewable portfolio standards and their efforts deserve rate payers’ thanks in those states foolish enough to enact RPS’s.