For physicists, energy is about the laws of nature; for engineers, it’s about manufacturing prowess. For citizens, however, energy is generally about money. Energy purchases are unavoidable—whether directly, by paying our electric bills or for gas in our cars, or indirectly, by paying for the energy costs embedded in food, vacations, and everything else. Politicians often use “pocketbook” language when talking to voters because they know how important lowering everyday costs are for most Americans. But does anyone believe that there won’t be a political cost from the embrace of “bold” energy policies that are sharply raising citizens’ energy bills?
To understand where current federal energy policies are taking the nation, we can look to the states, the “laboratories of democracy,” and especially to a group of them eagerly following California’s lead, putting into effect massive changes to energy policies.
Consider New Jersey. As its website brags, it has “one of the most ambitious Renewable Portfolio Standards in the country.” Earlier this summer, headlines featured news about citizens shocked at soaring electric bills, thanks to a state-approved price hike. And that’s just for starters. Early in August, PJM, the grid administrator that manages electricity for a 13-state region that includes New Jersey, reported the results of its auction for supplying next year’s wholesale power: the bids came in nearly ten times as high as last year.
Those cost hikes are a direct consequence of the fact that New Jersey, along with neighboring New York and half of PJM’s regional members, share similar goals: the aggressive pursuit of an “energy transition” to renewables. The plans reach far beyond electricity markets. The goal is to force—by mandates, regulations, and subsidies—a transition away from all uses of hydrocarbons: petroleum, natural gas, and coal.
There is rampant naïveté, at best, about the associated costs of trying to force such a transition at all, and especially doing so quickly. Start with the fact that hydrocarbons supply over 80 percent of society’s energy—in New Jersey, over 90 percent. Even this understates reality because those data relate to the statistical share of so-called primary energy. Hydrocarbons are used in at least some part of all supply chains for all products and services. But New Jersey and many other states’ declared policy is “to achieve 100 percent clean energy by 2035,” wherein “clean” is defined as “carbon free.” It’s no stretch to assert that this won’t happen. What’s more important is having some honesty about the costs of pursuing that goal.
De-industrialization is one indicator of the true costs. Again, take New Jersey’s once-mighty industrial sector, which has contracted over the past two decades. If the state’s industries had remained the same size, New Jersey’s overall hydrocarbon energy and electricity consumption would be 10 percent and 20 percent higher than today's, respectively. One sees similar data at the national level. There was a time when policymakers used tax and regulatory tools to promote industrial growth, not shrinkage. Why? Manufacturing jobs are high-paying, with big spillover effects on local economies—far more than those associated with the services and health-care sectors.
Many states are rediscovering that reality and hope to participate in the federal push to “reshore” industries. A few years ago, the New Jersey Economic Development Authority (NJEDA) expressed enthusiasm about the benefits of reshoring. But instead of pursuing policies to facilitate that, the NJEDA, for example, has announced plans to support liquor licenses for small businesses and “grant challenges” to “implement workforce training and skills programs” for the “state’s green economy.” Since China manufactures the overwhelming majority of the materials and hardware used in “green economy” projects, such training—in every state—will involve mainly installing and moving around all that imported stuff rather than manufacturing it. Meantime, New Jersey’s Energy Master Plan is antithetical to industrial growth, as are the same plans from its fellow travelers in the energy transition. The liquor initiative might be needed to help mollify those relegated to the low-paying “green economy” jobs.
The reason that China has such industrial dominance arises largely from its policy decisions, which are unapologetically designed to facilitate the licensing, construction, and financing of mines, refineries, and factories and, critically, to ensure adequate supply of low-cost, reliable energy for it all. Processing and fabrication are far more energy-intensive than assembly. Yes, China is also installing lots of solar panels, onshore wind turbines, and nuclear plants. But in China, coal alone produces nearly two-thirds of the nation’s electricity. In the U.S., it’s not just coal that’s on the transition no-go list but now natural gas as well. New Jersey, along with other northeastern states and with the support of the Biden administration, is doubling down on offshore wind as the go-to source for electricity growth.
Even proponents now concede that offshore wind is staggeringly expensive. High-cost, low-reliability energy is a toxic combination for industries. Transitionists may claim that such policies “set an example,” but citizens will weigh the costs not only in the direct personal terms of higher electricity and gas bills but also in terms of the attendant economic contraction and lost opportunities for growth.
In the context of setting an example, we note the massive quantity of extra coal power now under construction in China to expand that nation’s competitive production of goods to sell to business here—and especially to states with transition policies. The gigatons of CO2 emitted from China’s new coal power plants will outstrip all the emissions reductions that would occur if all 23 “transition” states achieved zero-emissions nirvana.
And transition plans for New Jersey and elsewhere are more ambitious than merely rendering electricity expensive and unreliable. Their goals—along with those of numerous other states, and now our federal government—also include forcing consumers into electric vehicles (EVs) by banning the sale of conventional cars and pushing electrification for heating and cooking in homes and buildings. Hype aside, it’s becoming obvious that EVs are, on average, more expensive for consumers, and building the electricity infrastructure to fuel them (which ratepayers ultimately pay for) will be fantastically expensive. During the time it will take for EV mandates to collapse under the weight of reality, billions of dollars will be squandered. Meantime, policy initiatives to transition away from natural gas stoves and water heaters are also intended to drive costs up—at least until outright bans are put into place.
Ultimately, the economic fallout becomes political. Every politician knows that polls show most citizens rank economic issues as a top, if not the top, concern. Neither creative subsidies nor flowery rhetoric can hide the economic—and eventually electoral—consequences.
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