How Republican-led states are rigging energy markets

Today in “free markets aren’t free,” I’d like to begin with a series of headlines from the past week:

Now, one of those headlines seems a bit… different, doesn’t it?

To recap, 2015 and the first two weeks of 2016 have seen the fossil fuel industry go absolutely bust, with West Texas Intermediate crude prices dipping below $30/barrel on Tuesday. Weakening demand out of China, geopolitical factors such as a Saudi Arabia being financially incapable of slowing down production and quickly scaling competition from renewable energy sources have all led to a supply glut that won’t be ending anytime soon. Even with oil and gas prices at their lowest in a decade, renewable energy investment shattered previous records.

So why did the sunny state of Nevada’s booming solar industry suddenly cave in?

The state’s Public Utilities Commission decided to allow NV Energy, a utility company, to raise rates on households that installed rooftop solar panels, and to cut the rates they paid for the solar energy those households sell back to the company to below-market prices. In effect, solar customers will now have to pay for the privilege of contributing to the electricity supply.

The decision was even made retroactive. Not only would new solar customers pay more, so would those who had already invested in rooftop energy. As per this decision, they will have assumed all of the risk of investing in renewable energy, while NV Energy will reap all of the benefits.

For retirees like Judy Treichel, who adopted solar to cut down on living costs to accommodate a fixed income, their wealth has effectively been expropriated by the state.

Nevadans are furious.

Solar operators Suncity, Vivant Solar and Sunrun have pulled out their statewide operations, laying off hundreds already and costing the state up to 5,000 jobs long-term.

So why did Nevada’s Republican Governor Brian Sandoval endorse a decision that would cost his state thousands of jobs?

He’s been mainlining too much pure Koch-cash. ALEC, the American Legislative Exchange Council — the most active and well-oiled wing of the conservative Koch brothers’ political machine — has been fighting alongside private utility companies to topple renewable energy standards adopted across 29 states.

Energy is a tightly regulated market. Before the advent of alternative energy, it wasn’t as if people could just plug their treadmill into the wall, start running, and suddenly they were making electricity. There was no market for it, and there were no laws or conception of what the market would look like. There had to be some agreed upon procedure, some contract-enforcing authority(!).

Solar panels on a house in Massachusetts, via Wikimedia Commons

Solar panels on a house in Massachusetts, via Wikimedia Commons

States enacted laws to regulate the renewable energy market. If a household installed solar panels, utility companies would agree to pay them for electricity they produced or offer a rebate on their bills when they pulled from the traditional grid. Regulation varied from state to state, but in many, public utilities commissions were to establish the rates each respective party would pay and receive in a “competitive auction process.” But since public utilities commissions are often appointed by the governor, a “competitive auction process” is an inherently political auction process.

Most state renewable energy standards were adopted over a decade ago, by 2004 on average. (Iowa developed the first alternative energy standards in 1983, bringing that average down by almost a year.) Suffice it to say, many states’ standards could use some modernization. Which will happen, in the wrong direction, if ALEC and the fossil fuel industry gets their way.

Utility companies say having to pay renewable customers for energy they produce cuts into corporate profits and limits the capital they can spend on maintaining basic electrical infrastructure. But for-profit, natural monopolies (in Nevada’s case, one owned by Warren Buffett) rarely act in the public interest.

Reporting for Slate in 2014, Justin Voorhees wrote that “the utilities believe their business model hinges on undercutting the rooftop solar industry before it matures.” So ALEC and privately-owned electric companies teamed up for an assault on the Public Utilities Commissions in Wisconsin, ColoradoUtah, OklahomaOhio, Nevada, and many other states.

ALEC’s boilerplate legislation to repeal renewable energy standards uses principles like “freedom,” “choice” and “voluntary markets” as rhetorical flourish. They argue that “renewable energy is more expensive” for consumers, ignoring that solar is adding energy capacity, and can keep going as long as there’s empty space in America.

Though their stated aim is to uphold free markets, ALEC’s real goal is to guarantee energy companies, many of which operate fossil fuel plants that compete with renewables, a profit. Both the Koch Brothers and the utility companies have a vested interest in rolling back renewable energy standards that are putting downward pressure on energy prices. Each has strong incentives to dismantle the tax credits and renewable energy standards that have nonetheless made the U.S. one of the world’s biggest clean-energy investors to date.

But that’s just how “crony capitalism” — or, um, plain old vanilla capitalism — works. The 6th wealthiest man in America may self-effacingly claim not to have much influence in the current election, he has been as good as the personal author of the Republican agenda on a state-by-state basis.

It doesn’t make political or economic sense, and it’s setting the U.S. back in its development of a cleaner, cheaper, and more efficient grid.


James Neimeister is a freelance writer from Ohio. His interests include: Russia, Ukraine, education, technology, and "cyberspace."

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