This is a guest post by Jon Sanders, director of the Center for Food, Power, and Life at the John Locke Foundation in Raleigh, North Carolina.
As a previous post on this site indicated, I have written a paper for the John Locke Foundation opposing the North Carolina governor’s plan for wind power offshore. Is my opposition to wind energy construction off the shore of North Carolina an example of “NIMBY” (Not in My Backyard), or is it a principled free-market stance?
Electricity provision is so far from a free market that it is hard to disentangle free-market principles from the mass of overregulation, incentives, disincentives, and other anti-market policies and practices. I’ll try, and I hope my position will become clear.
Electricity is a Government-Controlled Monopoly
First and foremost, the North Carolina government has designated monopoly providers of electricity about which you, the consumer, have no choice. (There is some old rationale about a natural monopoly behind it.) A monopoly provider gets a guaranteed consumer base in exchange for a set rate of profit. In that sense the utility provider is indifferent toward what sources of generation are used, but in another sense it is not. Investors in utilities want to be able to build new capital and reap the benefits of depreciating it while being allowed by the government to put the capital costs onto the shoulders of consumers. So while utilities’ existing capital base, especially nuclear, is much less expensive to consumers, employing it is less lucrative to investors than building anew.
Then, as you know, different generating sources have different levels of efficiencies, operating and maintenance costs, and especially vastly different levels of reliability. It is not as simple as “unplugging” a fossil fuel source and plugging into a renewable source. The utility enters into contractual relationships (power purchase agreements) with different generating sources, and these are heavily influenced by state and federal policies. For example, North Carolina’s interpretation of the federal PURPA law (Public Utility Regulatory Policies Act of 1978) requires utilities to purchase 10-year, fixed-rate contracts for power from small-scale renewable sources whenever it is generated, regardless of whether there is a need at the moment.
While the utility is itself a significant lobbying force, it also can be pressured by the governor and other powerful politicians. And it has an escape hatch in its profitability guarantee.
For the governor to order (even granting such an order has no enforcement) eight gigawatts of offshore wind production is in no way free-market. Even assuming competition in leasing, the construction and operation of the facilities would be charged to consumers regardless of their preferences. Thus, a combination of political pressure and utility opportunism would eliminate working, low-cost, and efficient (but paid-for) plants. Consumers would again have no say in the matter, and they would also bear the brunt of the externalities. Coercion fully infests the issue, so it falls to someone—in this case me—to ask if it is at all worth it, even on its own assumptions.
Do No Further Harm
I see my position here as a step down from Hippocrates: Do no further harm. When I made my presentation before the state Energy Policy Council in June, alongside a similar presentation by David Stevenson of the Caesar Rodney Industry, both industry representatives and renewable advocates were highly dismissive. In fact, they said they were shocked to hear negative economic estimates, since all the numbers and reports they had previously been given about offshore renewables were very positive. That’s the environment we’re in, an echo chamber composed of: politicians satisfying donors and ideologues; industry representatives looking out for their own interests; and ideologues doing both. As suggested in the governor’s order, they think their duty to consumers will be satisfied by adding some rate relief for the poor, even though they correctly presume there will be rate increases for everyone else.
The complete John Locke report, “Big Blow: Offshore Wind Power’s Devastating Costs and Impacts on North Carolina,” can be found here. Mitch Rolling and Isaac Orr from the Center of the American Experiment also contributed to the report.
The windmill image above was taken by David Will for Pixabay.
5 thoughts on “The Offshore Wind Energy Problem: Government Overregulation, Disincentives, and Anti-market Policies”
Here in Oregon we have proposals for off shore wind generators, but no study nearly as carefully detailed as the Locke study of impacts on North Carolina. The Biden administration cites Oregon’s coast as prime territory and Gov. Kate Brown has signed onto the Biden goals for offshore wind generation here. The Locke study of NC’s economics should be a model for other states.
In 2020, a National Grid guy in my basement marked a disconnected pipe as leaking gas and turned off the gas to my apartment. In October, I went online to reach National Grid in England to complain about their US employee. I saw an Investor site and also logged on there. The Nationalgrid management at that site were boasting to investors about how much money they were making in the state of Rhode Island. They said the government of Rhode Island under then Governor Gina Raimondo, who is present US Commerce Secretary under Biden, had promised National Grid and their partners they could do any green project they desired without any restrictions, regulations or oversight by the state or by the Federal Government!
I then went to the website of Point Judith Capital, a money investment firm started by Gina Raimondo before she became Rhode Island’s state treasurer and governor. Point Judith’s website was boasting they had hired a technician who knew what equipment was needed & how to use it to make more money for investors off irregular ocean wind power from turbines.
And devices to store and save wind power were installed. And the regional power grid was turned up to high from its historical low power.
With this increased grid power, an electrician told me grid equipment exploded. Houses caught on fire. Pipes separated in streets, yards, and buildings. I’ve also been told that a percentage of the human population hears 22-24 hour a day noise and feel vibrations. I’ve been told that whales have died off the coast of Little Compton in Rhode Island from vibrating gas lines crossing the area from Massachusetts to Old Mill Lane in Portsmouth, RI.
The state utility departments report nothing has changed from the norm. No oversight & no regulation needed.
And Gina Raimondo is US Commerce Secretary.