Renewing Clean Energy Policy, Development and Markets

Renewing Clean Energy Policy, Development and Markets  

U.S. Senator Chris Coons (D-Del.) authored a letter in The Economist on the importance of clean energy investments, good market design, and a price on carbon. Sen. Coons wrote this letter in response to a story entitled, “Clean energy’s dirty secret: Wind and solar power are disrupting electricity systems.” The story highlighted the problems of the renewable energy market -  (a) Government subsidy system (b) Intermittency of wind-solar power (c) Very low running costs. The story went on to explain how subsidies have distorted the energy market; how the vagaries of wind and sun—especially in countries without favorable weather affect continuous power flow, which in turn makes it harder to attract private investors; and how wind and solar energy take business away from providers that are more expensive to run such as coal plants. The story also underscores the possible solutions for the current market trend - redesigning the power markets to reflect the need for flexible supply and demand which would do away with the out-of-date system of electricity pricing and other approaches like digitalization, smart meters and modular power plants.   

Following is the Senator's response to the aforementioned story.

U.S. Senator Chris Coons (D-Del.)You made plain in your piece that challenges remain when it comes to renewables and the power sector. Yet all fuels and energy technologies received public support early in their development, and many have continued to benefit from favorable policies well after becoming commercially viable. The International Energy Agency has estimated that global subsidies for fossil fuel consumption in 2014 neared half a trillion dollars, more than quadruple the subsidies to renewables. Annual average subsidies to fossil fuels are still more than 13 times what is provided for renewables, and indirect subsidies are also large, though more difficult to track.

Use of renewable power has increased tremendously over the past decade, led in many cases by the private sector, while the economy has grown and emissions have fallen. Subsidies have played a role, but so have falling costs driven by advances in technology and manufacturing, new business models, and consumer demand. As you noted, further technological advances such as digitalization, storage, and more distributed energy systems can help ease the transition while providing other benefits. But as you highlighted, growing demand for new technology and services will only further strain the current system.

Additionally, leaving market design as it stands in the face of growing demand for new sources of power is the ultimate government subsidy to incumbent fuels and technologies. Existing industries will seek protection from new technologies and ways of doing business. Markets have tremendous power to direct resources efficiently, but we must design them to match new technological, political, and business realities. As this newspaper has long argued, only by pricing carbon emissions in a way that accurately reflects the impacts of traditional energy will markets effectively manage externalities in energy production and consumption.

This disruption in electricity systems is no reason for governments to stop supporting renewables. A recent National Academy of Sciences report observed that public investments can play an important role in establishing industries, but work best when they are performance- or outcome-oriented. Similarly, markets with bidirectional incentives would support further innovation and value creation without creating new market distortions. It also noted the importance of establishing appropriate pollution prices to help establish a level playing field and consistent market.

Now is the time for good policies and well-constructed markets to provide incentives to continue a transition to clean energy. Public subsidies for clean energy are addictive, just as they have been for oil and natural gas. But beating that addiction requires properly structured markets and investments that level the playing field for all sources of electricity and reflect their true environmental and public health costs. State and federal policymakers must work closely with the private sector to craft market solutions that fit this emerging reality.



U.S. Senator

Wilmington, Delaware

About the Author

Christopher Andrew "Chris" Coons is the junior United States Senator from Delaware and a member of the Democratic . Senator Coons was elected to a full term in 2014 and served on the Appropriations, Budget, Foreign Relations and Judiciary committees, chairing the Foreign Relations Subcommittee on African Affairs and the Judiciary Subcommittee on Bankruptcy and the Courts.