Energy and Economic Efficiency: The Market versus the Politicization of Our Energy Futures

By Jared Wall

In the book Green Tyranny—a fantastic history of the environmental alarmism movement—author Rupert Darwall lays responsibility for the beginning of this movement at the feet of the Germans and the Swedes.

In 1967, a Swedish scientist published the first ever “theory” on acid rain. Four years later, Bert Bolin, a Swede who would go on to chair the UN’s Intergovernmental Panel on Climate Change (IPCC), wrote the first-ever government report on acid rain. It was a typical government report. Ninety pages long, it starts out with certainty: “The emission of sulfur into the atmosphere . . . has proved to be a major environmental problem.” Fifty pages later, however, Bolin does admit to some doubt when he says, “It is very difficult to prove that damage . . . has in fact occurred.” Nevertheless, the government report concludes decisively, “A reduction in the total emissions both in Sweden and in adjacent countries is required” (emphasis added).

It was in Germany where environmentalists and antinuclear activists entered into holy matrimony. Scaling back on nuclear power, making life difficult for owners of fossil fuel power plants, and subsidizing unreliable and inefficient solar and wind farms has been Germany’s consistent policy in the decades since. The result has been skyrocketing energy prices and an increasingly unreliable electrical grid. German engineers—having designed a bit of redundancy into their system—had historically never had problems with their electrical grid. However, by 2012, the country experienced one thousand brownouts. In 2013, that number was up to twenty-five hundred, and it has continued getting worse since. As a result, Germany’s industrial base, always a world leader, has been sadly declining as businesses choose to leave the country in search of more reliable electrical pastures.

In 1988, the IPCC was established during a meeting in Geneva, presided over by many of the same characters who’d been leading Sweden and Germany’s environmentalist movements during the preceding decades.

One of the primary tasks assigned to the IPCC is to issue periodic “assessment reports” about the state of global climate change. These reports are hundreds of pages long and can be extremely technical. For attention-deficit-challenged politicians and journalists, these reports are issued with an accompanying summary. As a matter of routine, this summary mischaracterizes the substance and even the conclusions of the actual report. It is also regularly subjected to political meddling; for instance, when the IPCC issued its fifth assessment report in 2014, the German delegate to the IPCC insisted that language related to a pause or hiatus in the rise of global temperature be removed because “it would confuse German voters.”

Moreover, the leaders of the environmentalist movement have historically been wrong on just about everything. For laughs:

• 1989—the UN predicted that entire nations would be “wiped off the face of the Earth” by rising sea levels by 2000.
• 2006—Al Gore said humans may have only ten years to save the planet from “turning into a total frying pan.”
• 2018—Alexandria Ocasio-Cortez declared that the “world is going to end in twelve years if we don’t address climate change.”

Despite all this stupidity, corruption, and failure, the emotional pull of “save the world” propaganda remains powerful, and the environmentalist agenda marches on.

One of the biggest goals of this agenda has been to get us off fossil-fuel-generated electricity and onto wind-generated and solar-generated electricity. Admittedly, environmentalists have been extremely successful at installing large numbers of wind turbines and solar panels. They’ve been stunningly unsuccessful, though, in the pursuit of their primary goal of “getting us off” fossil fuels. Despite massive growth in the generating capacity of wind and solar farms, fossil-fuel-powered electric plants remain an irreplaceable component of a reliable electrical grid. Wind and solar power, as technology currently stands, cannot adequately substitute for power from fossil fuels. This is because wind and solar power suffer from the insurmountable problem of intermittency—wind turbines don’t work when it’s not windy, and solar panels don’t work when the sun’s not shining.

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Some have suggested that we could build large-scale battery storage facilities that, on sunny or windy days, could be used to bank excess electricity for later use and thus overcome this problem. Elon Musk recently even floated the idea of building a large-scale battery storage facility powered by wind and solar farms. It was going to cost $5 billion, require more lithium batteries than currently exist in the world, and be capable of storing about five minutes of United States’ electricity demand. Large-scale battery storage is simply not viable.

Another fun fact about wind and solar power and battery storage is that storing electricity in batteries is ten thousand times more expensive than storing oil in tanks or coal in piles.

Wind and solar farms have clearly added nothing of value. But it’s worse than that—they actively work to our detriment. For an electrical grid to work reliably, the supply of electricity must be constantly equalized with demand. If power plants are generating more electricity than is demanded by consumers, the electrical grid can be overloaded, and critical infrastructure can be catastrophically damaged.

On the other hand, if supply is unable to keep up with demand, the result is blackouts and brownouts. To deal with this physical constraint, power plants have historically been designed to serve two complementary purposes: baseline-load generation and variable-load generation. Given that a certain amount of electrical demand can be taken as constant, baseline generators are designed to operate reliably and inexpensively to meet that demand. Spikes in demand are handled by variable generators.

Wind and solar power function as neither. As opposed to baseline-load or variable-load generators, wind and solar farms are random and unreliable generators of electricity.

It’s true that on sunny or windy days, they can produce MASSIVE amounts of electricity. The problem is that this drives up supply regardless of demand—so when demand is not sufficiently high to account for the power generation from wind and solar farms, variable-load and even baseline-load power plants must throttle down their power generation to protect grid infrastructure from overload.

For baseline-load plants especially, which weren’t designed to operate that way, the negative effects on maintenance and equipment lifetimes are significant. In real time, we are seeing the reliable portion of our electrical grid wearing out faster than it otherwise would.

The state of Texas makes the point. Texas holds the title of being the number one wind state in the US. For years, they have been investing billions of dollars into the installation of thousands of windmills across the state. To connect these wind farms to the grid required thirty-six hundred miles of transmission lines. Just the cost of those transmission lines was greater than $6.5 billion. The reliable portion of Texas’ electrical grid was starved for funds to pay for this political misallocation of resources.

As a result, routine maintenance has increasingly been ignored, and emergency maintenance has become more and more routine. When Texas was hit by a winter storm in the winter of 2021, it caused an unexpected increase in winter electric demand. Unfortunately, at the time, a number of critical power plants were down for emergency maintenance, the grid was unable to keep up, and hundreds tragically died.

As if all that weren’t enough, there is also the corruption and crony capitalism aspect of wind and solar. During times when wind and solar farms are ramping up supply, the wholesale price of electricity naturally falls. This leads to the owners of coal and natural gas power plants making very little money or sometimes even losing money on windy and sunny days.

On the other hand, because politicians want to force wind and solar power to work regardless of market realities, wind and power farm owners earn a subsidized rate for the electricity they generate regardless of the wholesale rate. Owners of wind and solar farms are therefore insulated from the consequences that their arbitrary and politically incentivized production of electricity has on the market.

To make this point one final way, in places where solar and wind power are pervasive, both the quality of the electrical grid and the cost of electricity rank poorly against places where solar and wind are scarce. Germany has increased its wind and solar generating capacity by thirteen times from 1999–2012; they’ve also recently announced the shutdown of their last nuclear power plant, and their cost per kilowatt-hour has risen to nearly fifty cents.

In the Carolinas, we pay between six and ten cents per kilowatt-hour of electricity. Households and business owners would no doubt be hard hit if their power bills were to increase by five to eight times. Unfortunately, that seems to be the direction we’re going. In North Carolina, we pay 18 percent more for electricity than do our neighbors in South Carolina, simply because North Carolina politicians insist on increasing solar production, while South Carolina remains primarily reliant on fossil fuel and nuclear power.

Certainly, there are very real problems related to the current state of things. However, the problem is not that we’re facing fossil-fuel-induced climate change so bad that drastic action is necessary to “save the planet.” Rather, the problem we’re facing is the reaction to this fake crisis, which is leading to the degradation of the electrical grid we depend upon for our modern lifestyles.

A promising path forward in finding a solution to this problem is found in Alex Epstein’s great book Fossil Future.

His book’s overall thesis is that our strategy should be to pursue a change in rhetoric. To do this, we should frame our arguments about this issue from the standpoint of what is best for human flourishing.

On that front, he lays out three facts:

1. Fossil fuels are a uniquely cost-effective source of energy.
2. Cost-effective energy is essential to human flourishing.
3. Billions of people are suffering and dying for a lack of access to cost-effective energy.

Therefore, rather than insist on working to scale back our consumption of fossil fuels, we should actively seek to increase it—especially in the poorest parts of the world.

Beyond this brilliant thesis, Epstein’s book is a fantastic scientific and historical refutation of all things environmentalist alarmism. Perhaps the best example of that is his demolition of Al Gore’s infamous “hockey stick” curve. First, he demonstrates clearly that Gore’s graph, which shows Earth’s temperature as being constant for centuries only to spike up since the Industrial Revolution of the 1850s, is false. Second, he demonstrates that there is a hockey stick curve that is true and that people should be stupefied by—the graph of human flourishing over time.

For centuries, human flourishing had been flat in terms of life expectancy, standard of living, access to electricity, and caloric intake. Only since the 1850s, when humanity started burning fossil fuels, has all of this changed. Since then, we’ve seen human flourishing—by any measure one would choose—spike up in exactly this same “hockey stick” fashion.

In conclusion, market economics leads to business owners making informed and calculated investments in things like LED lighting technology for purposes of raising their bottom line as well. Market economics will also lead to the development of a robust and reliable electrical grid. Political economics, on the other hand, leads to corruption, cronyism, an electrical grid on the verge of failure, higher costs of energy, and a top-down “solution” to a fake crisis that is causing diminished human flourishing.

Just like everything else, in the case of energy efficiency as well as energy production, it is best to trust the market.

Source: Mises Institute

Jared Wall is currently employed as a Sales Engineer working for Southpoint Solutions based out of Fort Mill, SC.

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