Energy Policy

There has not been a successful demonstration of a renewable plus storage grid, even with generation support from fossil, nuclear, geothermal and biomass generators. Previous commentaries (here, here and here) have described a conceptual demonstration of a renewable plus storage grid without support from fossil generation, its documentation and reporting. However, this demonstration began with installed and operational renewable generation and conceptual storage. There is growing concern that such a renewable plus storage grid, even with physical storage, would be unreliable and extremely expensive.

Recently, New York State Senator George Borrello proposed legislation in New York State which would prohibit the use of fossil fuels in the manufacturing of renewable energy equipment. This legislation would extend the conceptual demonstration discussed above one step upstream, requiring demonstration that the components of a renewable plus storage grid could be manufactured using predominantly renewable energy, without fossil fueled backup.

However, there is the potential to extend the conceptual demonstration several more steps upstream. The Administration proclaimed that the transition to renewables would result in millions of new, high-paying union jobs, presumably in the US. They also assured that this transition would result in dramatic reductions in greenhouse gas (GHG) emissions. Analyzing the success of the transition in achieving these goals requires starting at the beginning of the supply chain and expanding upon Senator Borrello’s proposed legislation.

The supply chain begins with the use of electric mining equipment to mine the raw materials required to fabricate the wind, solar and storage components of the renewable plus storage grid in US mines and the use of electric transportation to move these raw materials to the manufacturing facilities at which the components of the system would be fabricated. The fabrication of the components would occur in US plants using electric processing equipment.

The steel and cement required for installation of the system components would also be produced in US plants. In the case of the calcining of limestone to produce cement, carbon capture and storage (CCS) systems would be required to capture the CO2 released from the limestone.

Preparation of the installation sites for the wind and solar generators and the storage systems would be performed by US manufactured electric earthmoving equipment. The system components would be transported to the installation sites by US manufactured electric trucks or electrified trains and erected using US manufactured electric cranes.

The supply chain described above would be drastically different from the current supply chains for wind turbines, solar collectors and storage batteries, all of which currently require mining and processing of minerals in Asia and Africa and frequently rely on foreign manufacture, particularly of solar collectors and wind turbines. The current supply chain effectively limits US jobs to system installation and maintenance, and excludes mining, processing and manufacturing jobs. The mining and processing jobs exist mostly in Asia and Africa, while the manufacturing jobs exist in Asia and Europe.

The mining and processing jobs in Asia and Africa and the manufacturing jobs in Asia reputedly rely on child, forced and prison labor, which substantially reduces their costs.

From: Watts Up With That

By: Don Ritter

Date: August 1, 2023

Abandon Fossil Fuels, Empower China

Autocratic Producers (primarily Saudi Arabia, the Emirates, Russia, Iran, Qatar, Venezuela and China) and certain democratic (or semi-democratic) Consumers (fossil fuel-dependent nations, mostly in the Global South), are uniting over oil, gas, coal, petrochemicals, natural gas-derived fertilizers and wind-solar-battery raw materials that are essential for building and maintaining modern industrial nations.

The implications are enormous, for global commerce, and especially for America.

China straddles both worlds. It’s the world’s largest coal producer and consumer – and the second-largest fossil fuels consumer after the USA.Although the United States remains the planet’s largest oil and gas producer, government policies are restricting investment in future domestic production, forcing U.S. companies to scour the world to increase production.

The autocratic Producers clearly benefit from America’s declining production, because major Consumers (India, Brazil, Indonesia, South Africa and others) that buy oil, gas and petrochemicals must feed their people, fuel their vehicles, and sustain or grow their economies at reasonable cost.

Giant energy Producer Russia continues to sustain its economy and finance its war in Ukraine, as it waits for Western electorates to lose patience and reduce military aid. Moscow counts on continued fossil fuel sales to Consumercountries, particularly China.

China is importing record amounts of oil and gas from Russia, making it the largest financier of Russia’s Ukraine war. China’s dual-use technologies also enter indirectly into the Russian war machine. Courtesy of Saudi Arabia’s Aramco, China is building new refineries and becoming a major petrochemicals producer – even as Biden energy policies curtail U.S. refinery and petrochemical investments.

Petrochemicals fuel or provide building blocks for just about everything. They therefore add tremendous value to the crude oil China imports from Russia.

Meanwhile, America and the West pursue sweeping policies on “manmade climate change.” That means they deride and downgrade the value of fossil fuels that are the lifeblood of all industrialized nations: Producers, Consumers and those fortunate or wise enough to play both roles. (continue reading)

Abandon Fossil Fuels, Empower China

From: Watts Up With That

By: Willis Eschenbach

Date: July 7, 2023

Fossil and Non-Fossil Fuels

In my previous post, The Myth Of Replacing Fossil Fuels, I looked at the new BP global use of fossil and non-fossil fuels. In this post, I’ll take a more detailed look at individual countries, and then return to world values. To start with, here’s what I learned along the way.

Figure 1. Population by Country

Given that, let me look at the energy usage by source of the most populous countries. You may recall from my previous post that in many analyses they use what are called “input-equivalent” values for non-fossil fuels. These are the true values multiplied by 2.5 or more. Why use those? I’ll repeat BP’s explanation.

While there are indeed uses for those artificially inflated energy values, what they don’t do is show us just how much energy is actually coming from each source. So let me go through the biggest countries, showing the true energy usage by source. We’ll start with China, although by the very latest figures, India is now the most populous country. (continue reading)

Fossil and Non-Fossil Fuels

From: Watts Up With That

By: Bob Irvine

Date: July 5, 2023

Does Wind Intermittance Over Short Hourly Periods Gives a Clearer Picture?

Cheap intermittent renewables appear to be very expensive.

The current Australian Government has ruled out nuclear energy and is committed to phasing out all fossil fuel base load power with gas seen as a transition fuel to an energy grid run entirely by intermittent wind/solar with battery or pumped hydro storage, with a small contribution from direct hydroelectric base load.

Can any of the electrical engineers at this site estimate the cost to consumers of a system run in this way. Is such a system even possible?

I live in Queensland, Australia. Until 30/6/23 our power bill for general usage was 25.559 Aus cents per kwh. On the 1/7/23 it jumped to 31.724 Aus cents per kwh a rise of about 24%. This is up from about 19 cents per kwh a few years ago.

The long-term picture is not much better. The Australian power price history has a close correlation with the penetration of intermittent generation into the system. See Figure 1, below.

Figure 1, Australian Energy prices compared to intermittent wind/solar penetration into the grid.

The Australian Energy market Operator (AEMO) has been singing the praises of “low cost” wind/solar for many years now.

To counter these assertions, I decided to collate the daily wind energy input to the Main Australian Grid, referred to here as simply the “grid”. This Main Australian Grid has an enormous area but does not include the Western Australian grid which is separate and about 8% of the size of the main grid.

My data source is this great site compiled over many years by Anton Lang. Thanks Anton. (continue reading)

Does Wind Intermittance Over Short Hourly Periods Gives a Clearer Picture?

From: Watts Up With That

By: Willis Eschenbach

Date: July 3, 2023

The Myth Of Replacing Fossil Fuels

A hat tip to the commenter on one of my posts who was kind enough to give me a heads-up as follows:

Mark BLR June 30, 2023 2:23 am

BP handed over the production of their “Statistical Review of World Energy” to an outfit called the “Energy Institute” at the end of last year.

They released the new version, with annual data updated to 2022, on Monday (4 days ago).

The latest (.xlsx) spreadsheet can be downloaded from the following URL :
https://www.energyinst.org/statistical-review/resources-and-data-downloads

Since I had the new data, I thought I’d update the following graphic that I made a few years ago, which only covered up to 2019.

Figure 1. The 2019 version of energy consumption.

When I put that out, people were saying things like “You don’t understand. Solar and wind are growing exponentially! Just wait a few years and you’ll see!”

So, having now waited a few years, here’s the 2022 version. This time I’ve split out fossil fuels as a separate line. I’ve also added a line for traditional biomass. All the data is from the BP spreadsheet linked above except traditional biomass, which is from Our World In Data.

Figure 2. The 2022 version, including traditional biomass and fossil fuels as separate lines.

There are some very interesting things about this graphic. First, all the solar and wind in the world combined doesn’t provide even a third of the energy we get from wood and dung. (continue reading)

The Myth Of Replacing Fossil Fuels

Six Phases of a Project

1. Enthusiasm
2. Disillusionment
3. Panic
4. Search for the guilty
5. Punishment of the innocent
6. Praise and honors for the non-participants

This “smart joke” apparently originated in computer science in the 1970s and spread rapidly from there. It provides a humorous perspective on the history of a failing project and the fallout from its failure. It also provides a perspective from which we can analyze the current state of the “Net Zero by 2050” project.

The Net Zero Emissions by 2050 Scenario is an International Energy Agency scenario which identifies a potential path for all nations of the globe to achieve net zero annual CO2 emissions by 2050 to achieve the objectives of the Paris Accords. The almost universal agreement to the objectives of the Paris Accords by UN member nations led to great enthusiasm regarding potential future emissions reductions.

“The Net Zero Emissions by 2050 Scenario is built on the following principles:

• The uptake of all the available technologies and emissions reduction options is dictated by costs, technology maturity, policy preferences, and market and country conditions.
• All countries co-operate towards achieving net zero emissions worldwide. This involves all countries participating in efforts to meet the net zero goal, working together in an effective and mutually beneficial way, and recognising the different stages of economic development of countries and regions, and the importance of ensuring a just transition.  
• An orderly transition across the energy sector. This includes ensuring the security of fuel and electricity supplies at all times, minimising stranded assets where possible and aiming to avoid volatility in energy markets.”

Disillusionment followed enthusiasm as night follows day as the violation of the above principles developed. Issues of the cost of technologies and emissions reduction options were offset by government subsidies and incentives, technology maturity was replaced by technology forcing regulations and market and country conditions were ignored. The only unaffected component of the first principle above was policy preferences.

The all-country cooperation called for in the second principle above succumbed to economic development priorities in the developing nations and disagreements over the requirements of a just transition. China, India, Indonesia and numerous African nations prioritized economic development over net zero pursuit and chose to base much of their economic development on increased use of coal and other fossil fuels. There are also continuing concerns over development funding from the developed nations to the developing nations.

The orderly transition across the energy sector fell prey to the intermittency of renewable generation, the immaturity of the storage technologies necessary to support renewable generation during periods of low/no renewable generation, the premature closure of conventional generation capacity, the Russian war in Ukraine and the US Administration war on the fossil fuels industries. Significant volatility in the energy markets in Europe, North America, Japan and Australia has resulted.

The failure of the IEA principles has led to panic in Europe and the UK as energy supplies have decreased and energy prices have increased rapidly. Numerous European industries have shut down or reduced production as the result of energy supply shortages and rising energy prices.

The political classes in the developed nations have focused the search for the guilty on Russia, though there is plenty of guilt to go around and they will ultimately share in it.

The punishment of the innocent is focused on the citizens and industries in the developed nations exposed to rising energy prices and the possibility of major energy shortages.

So far there has been no apparent effort to provide praise and honors for the non-participants, whoever they are.

From: Watts Up With That

By: Roger Caiazza

Date: July 2, 2023

RGGI Investment Report Lessons for Cap and Invest Programs

Cap-and-invest emission reduction programs are supposed to effectively reduce emissions and generate revenues.  The Regional Greenhouse Gas Initiative (RGGI) is an electric sector cap-and-invest program in the NE United States that can provide insight into the potential of these programs.  This post reviews the latest RGGI annual Investments of Proceeds report to determine how well the investments are producing emission reductions and the lessons that should be kept in mind from the observed results.

Background

RGGI is a market-based program to reduce greenhouse gas emissions. According to RGGI:

"The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia to cap and reduce power sector CO2 emissions.

RGGI is composed of individual CO2 Budget Trading Programs in each participating state. Through independent regulations, based on the RGGI Model Rule, each state’s CO2 Budget Trading Program limits emissions of CO2 from electric power plants, issues CO2 allowances and establishes participation in regional CO2 allowance auctions. (continue reading)

RGGI Investment Report Lessons for Cap and Invest Programs

By: The Aspen Institute

The United States energy independence achieved in 2020 has been sacrificed on the altar of climate change, terminated with malice as part of an effort to “end fossil fuels”. This effort would ultimately make the entire US energy economy dependent upon intermittent renewable generation, some form of energy storage plus existing nuclear, hydro, geothermal, biomass generation and as yet undefined “Dispatchable Emission-Free Resources”.

The ”end fossil fuels” effort has proceeded faster on the supply side than on the demand side, causing the US Administration to go “hat in hand” to OPEC, Venezuela and even Iran seeking to arrange imports of foreign oil to fill the growing gap between domestic supply and demand. This Administration effort has not been well received by those potential suppliers. OPEC has recently announced a 1 million barrel per day reduction in production. US dependence, in this case, is amplified by sales of oil from the Strategic Petroleum Reserve which have left the SPR dangerously depleted.

The transition to a largely renewables plus storage energy economy increases our dependence on weather, as well as on foreign supplies of key materials required for the manufacture of wind turbines, solar collectors and storage batteries. Many of these materials are rare earth minerals, most of which are not currently available in the quantities which would be required to repower the US energy economy and some of which might not ever be available in those quantities. Many of those minerals are primarily controlled by nations which are unfriendly to the US, leaving us dependent on our enemies for our future wellbeing.

The requirement for energy storage in the renewables plus storage energy economy leaves us dependent upon technology which, for the most part, does not exist today and might never exist. The large seasonal variation in wind and solar generator output creates a requirement for long-duration storage capable of storing energy over a period of months when generation is in surplus for use during months when generation is inadequate to meet grid demand. The only established technology for such storage currently in use is pumped hydro storage. However, there has been major environmentalist resistance to the construction of pumped hydro storage facilities, particularly flow of stream facilities which require damming existing waterways.

Elimination of fossil fuel use also faces major challenges in several industries for which there is no existing electric alternative process, such as the production of iron and the calcining of coal. The impact of the “end of fossil fuels” on industrial processes which rely on fossil fuels for their process chemistry, on the synthetic fertilizer industry and on the production of the thousands of products made from derivatives of oil remains uncertain.

Our growing dependence is purportedly driven by a perceived need to avoid the adverse effects of climate change resulting from the emissions of CO2 and CH4 from fossil fuel production and use. However, numerous other nations of the world are increasing their consumption of fossil fuels in the interests of economic development and energy independence. As a result, our growing dependence on weather, renewable energy and energy storage, the increasing cost of energy in our economy and the decreasing reliability and resilience of our electric grid will have no measurable effect on future climate change, but will likely result in economic de-development.

“The urge to save humanity is almost always a false front for the urge to rule.”

H. L. Mencken

Government regulators periodically issue regulations which they are fully aware cannot be met with currently available technology; that is, the regulations force the development of the new technology needed to satisfy them within some defined time frame. In some cases, the regulation is expected, not to result in new technology development and implementation, but rather to drive non-compliant equipment and processes from the market when the technology forcing is unsuccessful or the resulting technology is uneconomic.

Government’s climate change efforts include several cases of technology forcing, some clearly intended to drive equipment and processes from the market. One very recent example is US EPA’s proposed tightening of PM 2.5 emission standards to a level which would make compliance of coal-fired generating stations either impossible or uneconomic. The Administration goal to terminate coal-fired electric generation by 2030 virtually guarantees that, even if complying technology became available, it would not be economically justified to install it in a power plant required to cease operation in 2030.

Similarly, requirements to reduce CO2 emissions from natural gas combined-cycle powerplants by applying high level Carbon Capture, Utilization and Storage (CCUS) systems would likely drive most or all such generators from the market by the administration’s 2035 goal, since design and installation cost recovery would be virtually impossible over the next 12 years. CCUS would significantly reduce power plant capacity and efficiency and increase operating costs.

The electricity generating system intended to replace coal and natural gas generation is also facing technology forcing. Wind and solar generators operate intermittently and require electricity storage to provide continuous output. There are currently batteries which can provide output smoothing for wind and solar generation for periods of approximately 4 hours. Research is underway on batteries capable of operation over approximately 8 hours. However, the only technologies capable of long-duration support for intermittent generators are pumped hydro and compressed air storage.

The largest current pumped hydro storage facility in the US, the Bath County Pumped Storage Station (BCPSS) has a generating capacity of 3 GW and a storage capacity of 24 GWh. Therefore, it could support intermittent generation with a capacity of 3 GW for a period of 8 full load hours. It would require 15 such storage facilities to replace 3 GW of wind generation with a 50% capacity factor through a 10 day “wind drought”. There has been significant resistance to the construction of such large pumped hydro storage facilities in the US.

Another example of technology forcing is EV batteries. Current light duty EVs are range limited, particularly in very hot and very cold weather. Medium duty trucks and transit buses and similar vehicles require larger batteries to permit full day operation without recharging. Long-haul, over-the-road tractors require sufficient battery capacity to haul maximum legal loads for the maximum number of miles and hours their drivers are permitted to operate. These requirements must be met by 2035 if production of ICE vehicles of those classes is to be banned then.

Finally, while there has been some development effort regarding battery-powered railroad engines, it appears likely that electrification of freight rail will follow the development of electrified passenger rail, drawing power from overhead catenaries using pantographs.

While technology forcing can be effective, there is significant risk to the overall enterprise if the required technology does not become available on the required schedule or its capabilities do not meet the required performance parameters.

Preference :the act, fact, or principle of giving advantages to some over others
:priority in the right to demand and receive satisfaction of an obligation

The federal government, state governments and state utility regulators have established preferences for wind and solar electric generators, requiring that they be the first generators in line to supply power to the grid when weather conditions permit, while essentially freeing them from the obligation to serve since they are understood to be intermittent generators which cannot be dispatched. They are “source of opportunity” power generators, used when they are available and replaced by conventional generation when they are not available.

Wind and solar are widely acclaimed as being the lowest cost source of electricity. They are also preferred because their operation does not result in CO2 emissions which might contribute to climate change. The availability of production tax credits allows wind and solar generators to consistently bid low wholesale prices into utility, ISO (Independent System Operators) and RTO (Regional Transmission Organizations) supply bidding processes. However, their intermittency requires the grids they serve to provide smoothing services and to maintain rapid response generation capacity to compensate for longer interruptions. These services and generation resources add to the real cost of wind and solar generation.

The output of wind and solar generation facilities displaces a portion of the generating capacity of conventional generation in the generation mix. However, the intermittency of wind and solar generation require that conventional generation capacity be available to meet grid demand during periods when wind and solar are not generating, or are not generating at capacity.

Utilities, ISOs and RTOs must maintain operating conventional generation capacity to replace the output of wind and solar facilities when they are not generating, as well as capacity to replace the capacity of the largest conventional generator in operation should it experience an unscheduled outage to assure grid reliability.
 
As the generating capacity of wind and solar increase, the operating outputs of the conventional generators are decreased, though they must remain in operation, ready to satisfy grid demand if wind and/or solar generator output decrease. This increases their cost of operation per MWh generated. The wholesale electricity price is determined by the cost of the next unit of capacity required to meet grid demand. Therefore, as the cost of operation of conventional generation increases, the cost of wholesale power also increases, as does the profitability of wind and solar generation.

Most of the coal-fired conventional generation capacity is utility owned. However, much of the natural gas combined-cycle generation capacity is owned and operated by merchant generators. The utilities are generally able to negotiate rates which maintain the profitability of their coal generation assets. However, the merchant generators might require proportionally higher prices to maintain profitability, further moving them down the dispatch order and further increasing wholesale electricity prices.

The combination of these factors are the reason why intermittent wind and solar generation, while supposedly less costly than conventional generation, have not resulted in reduced electricity rates as promised.

By: PragerU

Broken Window Economics: an event that seems to be beneficial for those immediately involved can have negative economic consequences for many others.

The US and most countries have energy economies based on fossil fuels, plus contributions from nuclear, hydro, geothermal and biomass. The US and the other OECD (Organisation for Economic Co-operation and Development) countries have announced goals to replace the fossil fuel uses in their economies with renewable generated electricity across the entire spectrum of energy uses. These goals have been accompanied by mandates to eliminate specific fossil fuel end uses for electric generation, to halt the production of internal combustion engine (ICE) vehicles and to replace all fossil fuel end uses by dates certain.

These mandates require the retirement of existing electric generation, vehicle production and appliance production facilities, many before the end of their useful lives and the construction and outfitting of new, replacement facilities. The Biden Administration has argued that these efforts would result in the creation of millions of new, high paying union jobs, though they would also likely result in the elimination of a similar number of similar jobs.

The US currently has a fleet of 200 GW of coal generation capacity, 50 GW of which is scheduled to be retired by the 2030 mandated retirement goal for coal generation. The remaining 150 GW has been scheduled to be retired over the period from 2030 – 2048. Early retirement of these coal plants would strand approximately $35-40 billion of undepreciated private generation assets. It would also strand approximately $30 trillion of coal resources. It is uncertain how the owners of these assets would be compensated for their forced abandonment. Those costs would represent a societal cost of the mandate to close the generating facilities and the resulting abandonment of the coal resources.

The US currently has a fleet of 500 GW of natural gas generation capacity. Approximately 400 GW of that capacity is less than 30 years old, which is a common mid-life for natural gas generators. This suggests that more than 200 GW of natural gas generating capacity would be forced out of service by the 2035 mandated retirement goal for gas generation. Early retirement of these plants would strand another $35-40 billion of undepreciated private generation assets. Again, it is uncertain how the owners of these assets would be compensated for their forced abandonment. These costs would also represent a societal cost of the mandate to close the generating facilities and the resulting abandonment of billions of dollars of natural gas resources and underutilization of natural gas pipeline capacity.

The US also has tens of billions of dollars of automotive manufacturing facilities which the owners would be forced to retire and replace with facilities designed to manufacture EVs and EV batteries, at the same time stranding several billion of dollars of oil resources and oil refining capacity.

Investments in ICE vehicles and natural gas appliances and equipment would be unlikely to be affected by the mandates, since they would likely have outlived their usefulness by 2050.

From: Institute for Energy Research

By: Thomas J. Pyle

Date: May 23, 2023

150 Ways the Biden Administration and Democrats Have Made it Harder to Produce Oil & Gas

President Biden and the Democrats in Congress have a plan for American energy: make it harder to produce and more expensive to purchase. Since Mr. Biden took office, his administration and its allies have taken over 150 actions deliberately designed to make it harder to produce energy here in America. A list of those actions, which includes a few high-profile actions taken in states like New York and California, appears below. A list of those actions appears below. A PDF of the full list is available to download here.

___________________________

On January 20, 2021,

1. Besides canceling the Keystone XL pipeline,
2. President Biden restricted domestic production by issuing a moratorium on all oil and natural gas leasing activities in the Arctic National Wildlife Refuge.
3. He also restored and expanded the use of the government-created social cost of carbon metric to artificially increase the regulatory costs of energy production of fossil fuels when performing analyses, as well as artificially increase the so-called “benefits” of decreasing production.
4. Biden continued to revoke Trump administration executive orders, including those related to the Waters of the United States rule and the Antiquities Act. The Trump-era actions decreased regulations on Federal land and expanded the ability to produce energy domestically.

On January 27, 2021, (continue reading)

150 Ways the Biden Administration and Democrats Have Made it Harder to Produce Oil & Gas

Subsidy: a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public.

The US federal government, several state governments and numerous local governments offer subsidies to assist various aspects of the energy system transition being undertaken in response to climate change. These subsidies are offered for wind and solar generation, electricity storage, electric vehicles, electric vehicle charging stations, and electric appliances and equipment. These subsidies reduce the individual transaction costs for the purchasers of the various devices. However, they also increase the societal cost of the transition.

Wind and solar generation facilities, whether for grid-scale applications or site-specific applications, displace some portion of the output of the existing electric power generation fleet during periods when the wind is blowing and/or the sun is shining. The existing power generation fleet provides the remainder of the grid demand when wind and solar generation are operating and all of the grid demand when wind and solar generation are not operating. Therefore, the subsidies provided for wind and solar generation facilities incentivize the installation of redundant generation facilities, increasing the total cost of the electric generation fleet and thus, the societal cost of electricity.

The cost of wind and solar facilities includes both equipment and installation costs, which are borne by the owners of the facilities. The subsidies available reduce the owners' transaction costs, but not the real cost of the facilities. The subsidies provided by government add to the societal costs of the facilities. These subsidies must be funded either by offsetting reductions in other government programs, increased taxation or incremental government borrowing.

The available subsidies for electric vehicles (EVs) function similarly. The vehicle manufacturer offers the EV to the market at a price which includes its costs and profit. The subsidies reduce the purchasers’ transaction costs, but not the cost and price of the vehicle. The subsidies add to the societal cost of the transaction. For example, an EV with a MSRP of $60,000 is sold to the purchaser at that price. The purchaser then receives a tax credit of $7,500. This reduces the purchaser’s net transaction price to $52,500,  but increases the societal cost of the transaction to $67,500. Again, these subsidies must be funded either by offsetting reductions in other government programs, increased taxation or incremental government borrowing. The same is the case for the subsidization of EV charging infrastructure.

The recent subsidies offered for the purchase of electric appliances and equipment under the “Inflation Reduction Act” are intended to incentivize the purchase of electric heat pumps, water heaters, ranges, laundry dryers and similar residential and commercial equipment. These subsidies are intended to “kick-start” the transition to “all-electric everything” intended by 2050.

Most of the government funding for subsidies to support the transition to renewable electricity generation and “all-electric everything” is coming from incremental borrowing, adding to the existing federal deficit. This borrowing injects additional money into the economy, likely increasing rather than reducing inflation.