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Replacing Fossil Fuel Electricity Generation with Solar Boosts Costs and Income Inequality

The following is from economist Ernie Goss

When I was a graduate research assistant at Oak Ridge National Laboratory in 1983, pursuing my PhD. in economics, I worked on a contract with the Solar Energy Research Institute in Boulder, Colorado.  

At the time, solar energy electricity production was prohibitively expensive, requiring massive government subsidies for its mere existence. However, solar energy devotees argued that solar energy was an “infant” industry that, if properly supported with tax dollars, would become cost competitive with fossil fuel electricity production before the turn of the century.

Now, 36 years later, U.S. taxpayers subsidize solar electricity production to the tune of $43.75 per billion kilowatt hours (BKWH) compared to $1.04 per BKWH for coal, and $0.46 per BKWH for nuclear. Even with these massive solar subsidies, the levelized cost of electricity (LCOE) produced by photo voltaic solar is approximately 30% above that of electricity produced by coal, while electricity produced by thermal solar is 239% greater than that of coal.

Despite colossal subsidies, coal electricity production represented 29.2% of the total while solar was only 1.2% in 2016. Replacing half of coal production with solar would cost consumers approximately $2.9 billion in generation costs, and tax subsidies per year.  

The latest data show that, as a share of income, the lowest quintile of income earners spent roughly 7 times that of the highest quintile of income earners on utilities. Thus, in addition to economically burdening all U.S. consumers, the shift away from coal to solar will exacerbate income inequality in the U.S.

Even with this compelling data, a host of Democrat presidential candidates argue for replacing coal with solar and, at the same time, for cutting income inequality. Julian Castro said he would put a “…. halt to fossil fuel exploration and fracking on federal land and would boost wind, solar and other renewable energies.” And late last week Democratic presidential hopeful Senator Warren said that, “By 2030, no more cars with carbon emissions; and by 2035, no more production of electricity that has carbon emissions.”

Thus, Democrat presidential candidates who argue for reducing income inequality at the same time as reducing the use of coal electricity generation, are being at best “disingenuous.”

John Phelan is an economist at the Center of the American Experiment. 

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