Jun 08, 2018

Trump Administration Should Find Market Solutions Instead of Offering Corporate Welfare

Post by Freedom Partners

Recently, it was reported that the Trump administration instructed Department of Energy (DOE) Secretary Rick Perry to prevent the retirement of certain unprofitable coal and nuclear plants using the Department of Energy’s emergency powers under the Federal Power Act and the Federal Defense Production Act that permits it to nationalize parts of the power sector.

The administration’s proposal to prop up nuclear and coal generators through a combination of subsidies and mandates is a misguided approach to solving a complex problem.

This unprecedented government intervention into the electricity markets would control the decisions of private actors (grid operators) and would force them to buy power from a designated list of select coal and nuclear plants at above-market rates to prevent their retirement under the guise of national security.

Rather than earning based on the value they create for society, these less efficient market participants will profit as a result of the decisions made by government bureaucrats.

Implementing subsidies and mandates will shift costs to consumers as the price of electricity would likely spike. Estimates for the total cost of this plan range up to $11.8 billion per year, depending on how plants are compensated.

Market forces, like inexpensive natural gas and flat demand growth, are driving the more expensive and less efficient of these generators out of the market – a benefit of well-functioning markets.

Ultimately, these subsidies would amount to corporate welfare a practice that puts consumers and businesses on the hook while benefiting a few politically favored industries.

Instead of undertaking a self-defeating command and control approach, Freedom Partners encourages the administration to work with federal and state lawmakers and regulators to eliminate existing distortions and find market solutions that promote greater choice for consumers while at the same time, enhancing the resiliency of America’s energy grid.