Does the Wall Street Journal Employ Anyone Who Understands Energy Markets? Three Rejoinders

Michael Giberson

In Grist, Adam Browing asks, “Does the Wall Street Journal employ anyone who understands energy markets?”  Browning’s question and his answer seem just a little off, as I’ll discuss below, but first an excerpt from Browning:

Actually, I think they do.  I think Keith Johnson knows quite a bit about energy markets.  Which makes this hit job on solar subsidies, published before the Senate considers national renewable energy legislation, so disturbing.

After chronicling the problems of the Spanish solar industry, the article goes on to say:

“Clean-energy skeptics, however, point to Spain as a cautionary tale of a government policy … with disastrous consequences.  … California and New Jersey, which lead the U.S. in solar power, are among states that have used subsidies similar to the ones in Spain to make solar power more attractive”

This is in fact incorrect.

Spain used a singular policy, a fixed price, standard offer contract known as a feed-in tariff.

California, on the other hand, has several different policy mechanisms, and each one is market-based.  They look nothing like Spain at all.

My first reaction: Browning isn’t asking about energy markets, per se, but the design of energy subsidies.  Really he complains about the WSJ‘s characterization of public policy tools.  Browning is director of The Vote Solar Initiative and a former EPA official, so I’d expect him to be aware of various environmental policy tools.  Energy markets – maybe not so much.

My second reaction: Does he really say that California’s policies look nothing at all like Spain’s feed-in tariffs, even though one of California’s policies is a feed-in tariff?  He describes it as a market-based feed-in tariff later in this very post, and in another post at Grist he says it is “kind of like a feed-in tariff, but different.”  So I guess that is it: it is “kind of like a feed-in tariff,” but nothing at all like Spain’s feed-in tariff.

Huh?

Then he trumpets the fact that “most” of the recent utility contracts signed by California utilities with solar power providers (with the aim of complying with the state’s Renewable Portfolio Standard mandate) have been “under the price of natural gas.” He repeats this claim again —  “clean energy, cheaper than natural gas” — and again — “Solar is getting cheap—cheaper than fossil fuel alternatives—and Congress has nothing to fear by getting aggressive on clean energy.”

But the contract he offers a helpful link to, between PG&E and First Solar, clearly describes that part of the project plan is to cash in on Federal subsidies for solar power projects.  In addition, the contract clearly states that the project is eligible for “above-market funds (‘AMFs’)”, which is California regulatory-speak for a pool of money available to help utilities meet RPS mandates when proposed projects are more expensive than other alternatives in the market. In fact, the reference point isn’t actual fossil fuel project proposals presented in actual market competition but rather a “Market Price Referent” established in regulatory processes.

My third reaction: This is “cheaper” only if we ignore the subsidies.

[Separately, on The Vote Solar Initiatives’ “four key buttons that must be pushed in order to make the [solar power] market work”, I’d say only “(2.) Standardized interconnection procedures” is a clear winner.  The Spain example discussed by the WSJ shows some limits of policy (1.), a kind of demand-push-assume-economies-of-scale-follow approach.  “3. Net Metering” and “4. Fair Rate Design” are just attempts at providing distributed, small subsidizes through regulated rate structures.

In my view we can’t subsidize the market into becoming more efficient.  Yes, their are problems associated with fossil fuel use.  Better to identify the externalities associated with generating technologies actually causing third-party harm, and push for policies which get the parties responsible to pay for the harm.  Wasting resources will not save the earth.]

[HT to Keith Johnson of the WSJ‘s Environmental Capital]