The Real Cost of Decarbonizing the Economy

One doesn’t have to look far today to find examples of a left-wing politician proposing a plan to regulate the use of carbon fuels out of existence. Earlier this month, Senator Elizabeth Warren (D-Mass.) released a plan calling for the United States to achieve 100 percent clean energy within the next 10 years by spending $3 trillion in federal money and forcing “additional trillions” in private sector spending through increased regulation and higher mandates.

Warren, who just tied Joe Biden at the top of an Economist/YouGov poll released on September 11, may as well launch a plan that demands that we all move to the moon in the next week; it would make every bit as much sense, and be just as feasible.

The real cost of “decarbonizing” our economy is far more severe than many politicians on the Left are prepared to admit. Setting financial costs aside, renewable energy sources alone simply cannot meet the U.S. electrical grid’s ongoing baseload requirements (i.e., the minimum level of demand on a given grid over 24 hours).

In essence, plans like Warren’s not only would bankrupt the country but would literally plunge us into darkness given that no energy technology exists (or is likely to exist any time soon) to meet their arbitrary deadlines and demands.

To fully understand this, responsible policymakers should first look at aggregate power generation. In 2018, the Energy Information Administration reports that the U.S. saw record electricity generation of 4,178 billion kilowatt-hours—partially driven by the demand of an economy that grew by 2.9 percent. That same year, renewable fuels accounted for only a fraction of U.S. electricity generation⁠—about 17 percent or 713 billion kilowatt-hours. Much of the growth in renewable energy production we have seen since 2007 has been fostered by government policies that subsidize the high cost of renewable power plants and mandate their use.

While exact numbers will vary by regional grids and the given day measured, baseload power generation may reasonably account for about 50 percent of total power generation over a 24-hour period. Baseload power plants must be robust, reliable, and consistent⁠—these are the plants that ensure that your lights unfailingly turn on when you flip a switch. These plants run with high, sustained output, have slow ramp-up periods, and are typically coal, nuclear, natural gas, or hydroelectric.  By their very nature, baseload plants cannot be fueled by wind or solar energy, since plants powered by those sources stop producing when the sun isn’t shining or the wind isn’t blowing.

Ultimately, regulatory hurdles put in place by the Obama Administration caused a large number of coal plants to close in 2015. Those closings, when coupled with the inexpensive nature of natural gas, led to natural gas becoming the largest source of electricity generation in the United States in 2016, and an increasingly important portion of baseload power generation.

Notably, while the increase in electricity generation from renewable sources has come as a result of political fiat, the increase in generation from natural gas has largely stemmed from the favorable economics and characteristics of that commodity, and the plants that burn it to produce electricity.

The aggregate power production numbers make it quite clear that plants burning fossil fuels and using nuclear power not only provide the vast majority of total power generation in the United States—about 83 percent in 2018⁠—they (along with a small contribution from hydropower) also provide nearly all of the critical baseload power generation. Government-subsidized and mandated alternative energy sources provide only intermittent power that can help to meet peak demand at certain times.

The obvious danger of absurd policy edicts such as Warren’s proposal is that critical and reliable baseload power-producing plants necessarily would be shuttered without technology on the horizon that could replace them. Because policymakers like Warren are rarely, if ever, forced to face the facts of power generation by reporters, they can throw out deadlines and edicts without any real fear of being called to account.

In fact, rather than face the realities of power generation, leftist politicians⁠—like Bernie Sanders and Representative Alexandria Ocasio-Cortez (D.-N.Y.)⁠—typically resort to trying to terrorize Americans by claiming that they have only 12 years to “solve” climate change before damage is catastrophic and irreversible.

In reality, a Cato Institute analysis of the climate projection models typically cited by politicians as the source of their climate fears, found that from 1998 to 2014, 97.6 percent of climate models predicted warmer temperatures than those that actually occurred, while only 2.4 percent predicted cooler temperatures than which occurred.  That is an astoundingly consistent pattern of projecting warming that never came to pass⁠—and hardly comes across as “settled science.”

So, the real question is, are you prepared to risk one of the foundational achievements of modern society⁠—the ability to generate reliable power⁠—on the basis of often faulty predictive models? Does it seem reasonable for presidential candidates to offer up arbitrary deadlines for shutting down critical power resources without having even the slightest idea of what technology might replace them?

Or, might it make more sense to pursue policies that make energy as cheap, plentiful, and clean as possible, while also investing in serious academic research that explores what may be real energy breakthroughs, like the ability to store the power of the sun?

The answer seems obvious when viewed with a clear head and a quick glance at the numbers. Members of the media may want to perk up and ask some relevant questions the next time Elizabeth Warren talks about halting the use of fossil fuels within 10 years.

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About Kevin Nicholson

Kevin Nicholson serves as the volunteer President and CEO of No Better Friend Corp., while also working as a management consultant. He previously worked at McKinsey, where he served clients in a number of industries, to include the energy sector. He is an Iraq and Afghanistan veteran of the United States Marine Corps and a former U.S. Senate candidate in Wisconsin. Kevin is a graduate of the Harvard Kennedy School and Dartmouth’s Tuck School of Business.

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