Arkansas Electric Energy Law : Arkansas Electric Energy Lawyer & Attorney : Eric Hughes Law Firm : Wind & Solar Power, Distributed Generation : Arkadelphia, Little Rock, Pine Bluff

We often hear statements that clean, renewable energy is just too expensive as compared to energy derived from fossil fuel.  In Arkansas, arguments are being made in the Public Service Commission's "Sustainable Energy Resources (SER)" docket (08-144-U), that fossil fuels (coal) is the cheapest form of fuel for electricity production.  However, not all of the costs of producing electricity from coal are included in your monthly utility bill.  There are external costs -- increased health care costs, damage to timber and agricultural production, among many others -- that are real costs we each pay, however they may be hidden in.

In the Wall Street Journal's Environmental Capital Blog, Keith Johnson writes:

For policymakers, these externalities represent an opportunity as much as a headache.  For all the worries that a bigger role for government in the energy business -- from cap-and-trade schemes to solar-powered subsidies -- represents a retreat from free markets, that's hardly the case.  Energy markets aren't "free" today, and the playing field is anything but level.

New energy policies that seek to redress those problems, and unleash rather than further stifle a genuine market for energy, will point the way toward a new energy future that makes sense, both environmentally and economically.  That's because, if new policies set out to tackle those externalities once and for all, the environmental answer will quite often become the economic answer.  Everything has its price -- and its cost.

We agree.  As we have previously said, the Public Service Commission docket on Sustainable Energy Resources represents an opportunity for Arkansans to propose policy alternatives.  Arkansas has a wealth of resources for the production of electricity, and should take advantage of the opportunities for the economic development of the state, especially in its rural areas.

I recently read comments by Forrest Lucas, the owner of Lucas Oil (which has its name on the stadium where the Indianapolis Colts play), opposing the construction of a biomass generating facility in Crawford County, Indiana.  The article in the Louisville Courier-Journal by Grace Schneider quotes Mr. Lucas as saying, apropos of government-sponsored grants, property tax abatements, state incentives and federal tax credits for such facilities:

If these guys come in with their own money, it's one thing.  This is about America wasting huges sums of money. . .  This is not just about Crawford County or the state of Indiana.  It's not a good thing for the country.

which made me wonder if government (public) support for those developing industries is such a good thing.  Afterall I strongly believe, as the country at large does, that free market capitalism is best way to create national wealth and raise the standards of living for the greatest number of people.  I take from his comments that Mr. Lucas believes that, too.

But after thinking about it I concluded that public programs designed to support and encourage the development of alternative and renewable energy sources is a good thing.  There are three basic reasons for this conclusion:

• Public support for new technologies and industries, whether through tax policies or direct subsidies, have been utilized from the country's beginning to create a economic growth;
• Considering the significant public subsidies to fossil fuels, alternative and renewable energy sources suffer, at least partially, from an artificially created competitive disadvantage;
• Based on our ongoing need to develop clean energy and foster energy independence, no source of energy should be eliminated from the portfolio yet.

GOVERNMENT SUBSIDIES TO NEW INDUSTRY AND INFRASTRUCTURE HAS HISTORICALLY BEEN THE CATALYST FOR ECONOMIC GROWTH

Anyone with a smidgen of knowledge about the economic history of this country knows that free markets are aided and sustained by government rules and regulations, government investments, and government tax policies.  Certainly the Father of free market capitalism as practiced in the United States, Alexander Hamilton, understood that.  Just read Hamilton's First and Second Reports on Public Credit and his Report on Manufactures.  Likewise, the tariffs of 1816 and 1828 were taxes designed to protect and spur the growth of particular economic sectors.  That has been the case throughout the country's history.  In his book Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now, the investment bankerFelix Rohatyn eloquently describes some of the government programs upon which our free market economy is built:

• The Erie Canal
• The Transcontinental Railroad
• The Rural Electrification Administration
• The Interstate Highway System

There are other, but you get the idea.

RENEWABLE ENERGY SOURCES COULD COMPETE BETTER ECONOMICALLY BUT FOR THE GOVERNMENT SUBSIDIES TO FOSSIL FUELS.

Fast forward to today and consider the debate on government tax policies and other incentives that are designed to spur the development of alternative and renewable forms of energy.  Opponents of these forms of energy often say that they are too expensive, that the generating capacity of wind, solar, biomass and other forms of renewable energy would not exist without government subsidies.  That is undoubtedly true.  But here is another truth:  those forms of generation are at a greater competitive disadvantage than they would be if not for government subsidies to fossil fuels.