Mandating renewable energy

Caution: The Clinton administration can be hazardous to national energy interests.

Fresh from extending bans on oil and gas leasing off the U.S. East and West Coasts, the Clinton team now proposes to usurp the markets that, ever since deregulation, have served the nation better than any federal program ever concocted.

Competition and mandates

The energy abomination of the week ended June 26 was the Comprehensive Electricity Competition Plan, legislation sent by the Department of Energy to Congress and including a mandate for renewable fuels. What would consumers do without bureaucrats to select fuels for them?

Here's a hint: They'd have ready access to energy and no need to worry about shortage or price. In other words, they'd enjoy continuation of present conditions, which is the happy product of the government's having pulled out of energy markets.

But this administration portrays good energy fortune as environmental crisis. It formulates policy according to the extremist dogma that using fossil energy is bad and that replacing fossil energy with anything else is good. Hence the proposed requirement that a specified share of electricity come from renewable energy by a certain date.

Smothered in all this environmental presupposition are the interests of energy consumers, who don't use renewable energy in appreciable amounts now because they have cheaper and better alternatives. The issue should end there. But the administration persists. In a background statement, the DOE says, "There will be no assurances that support for renewable technologies and other important public purpose programs will continue absent a federal program." It therefore proposes to dictate that by 2010 at least 5.5% of all electricity sold at retail come from nonhydroelectric, renewable sources of energy.

In other words, since there can be no assurance that consumers will buy what the government wants them to buy because it costs more than what they buy when free to choose for themselves, the government will shove it down their throats. Does anyone remember when Bill Clinton first ran for President calling himself a "new Democrat" who favored limited government?

Hypocrisy doesn't end there. Forced fuel choice is way out of place in legislation styled a "competition plan."

Furthermore, the proposal stomps on natural gas, which the Clinton administration has until now promoted as a "clean-burning" alternative to coal and oil. There's nothing wrong with gas, of course, just as there's nothing wrong with renewable energy. What's wrong is government hucksterism in energy markets, where consumers demonstrably fare best on their own.

The administration's renewable fuel proposal would block a lot of supposedly favored gas out of its important power-generation market. Any mandated fuel backs out formerly competitive fuel with the highest marginal cost. In power generation, that's gas.

Last year, steam electric utilities paid $2.76/MMBTU for gas and only $1.273/ MMBTU for coal. It's easy to see what a power generator will cut when forced to sell something more expensive. Moreover, power supply from renewable energy will trim the need for new generation capacity fired by commercially competitive fuels. It's in the competition for new capacity that gas holds the economic advantage over coal and other fuels.

Consumers not helped

The proposed mandate thus helps nobody but makers of power generation equipment fueled by renewable energy. And the legislation gives the Energy Secretary wide scope to do favors for them-by setting annual targets for market penetration by renewable fuels until 2010, for example-at the expense of electricity users.

Congress should do energy consumers a favor and laugh this bill into oblivion for its self-contradictions. And the Clinton administration should do Americans a favor by leaving energy alone.