Conservatives have long argued that the market is a better champion for economic prosperity than the government, and they’re right. An unburdened market is an effective administrator, harnessing the power of competition as a tool to foster an environment of low prices, consumer choice and constant innovation.
The competitive spirit of the free-market is what we have to thank for all the aspects of business we appreciate. Without it, mom and pop shops disappear and monopolies develop. Meanwhile, we see declines in innovation, increased prices and poor customer service. This is true for all industries, and the energy industry is no exception. Conservative values should be applied unvaryingly and across all markets, but when it comes to the energy sector, certain stakeholders tend to become inconsistent as their interests are put ahead of the market’s natural process.
{mosads}One such example of this is in the case of net-metering regulations and caps. Net-metering is an interesting concept which allows people to produce energy on their property and sell their excess back to energy utility companies. In theory, the companies pay market-value for the energy, and it can then be utilized by all consumers. This is a common practice by farmers, though it’s available to just about anyone who is willing to put solar on their home or land.
The idea of it illustrates a wonderful way in which capitalism can do good not only for consumers and local energy producers, but also for the environment. Outspoken Republican Rep. Matt Gaetz of Florida has vocally supported net metering, stating that it will help to unlock the potential of American innovation — and he’s right. At a time when the Republican reputation regarding the environment is poor, net-metering is a place our party can lead authentically. This can showcase how well our ideology works for society when properly applied.
Net-metering allows energy producers to bring home some extra money while lowering their own energy bills; and because it allows for investors to make money back, it further incentivizes the use of renewable energy through the marketplace rather than mandates, subsidies or regulations. Unfortunately, many states have put a cap on the percentage of energy that is eligible for compensation, including South Carolina, where the cap sits at just 2 percent.
This means that local South Carolina energy producers are compensated at market-value for just 2 percent of the energy they create, but here’s the kicker: the other 98 percent of the energy still goes to utility companies, but instead of market-value, they pay just pennies on the dollar for it. That same energy is then sold back to South Carolina residents at their regular rate. These caps force local energy producers and consumers to get the short end of the stick while energy companies make a profit off someone else’s product. Meanwhile, the market incentive that was created by net-metering is diminished by government’s meddling: local producers cannot be compensated for anything more than 2 percent of their excess energy, and so the natural reward for investing in solar is not as high as it would be without this regulation.
Several states have begun to push for raising such caps or eliminating them altogether, with conservative pushback claiming that such an action is “favoring” energy forms and picking winners and losers in the marketplace. Such accusations are unfounded, as it is quite obvious that striking the caps is simply removing a marketplace barrier and unnecessary regulation. As is typical of them, government has created a problem in the marketplace that would not exist had they not interfered to begin with. Allowing the market to function as it should is a conservative position. “Conservatives” who oppose something that makes the market more free should reflect upon whether or not they are being honest about their motives.
What’s more is that many conservatives are quick to bemoan the subsidies and favoritism toward renewable energies such as solar and wind in the last decade, but they conveniently overlook burdensome regulations meant to suppress these technologies in favor of traditional fuels such as coal and oil. As conservatives, let’s at least agree that subsides beyond basic research and development are unnecessary and a hindrance to the market — including those that favor coal, oil, and gas.
There are various tax incentives that subsidize such energies, including the expensing of exploring, developing, and drilling costs. In fact, even the most modest estimates sing to the tune of $20.5 billion annually in coal, oil and natural gas subsidies. Even with taxpayers footing the bill on a portion of the industry, some of these energies continue to struggle and die out. Coal in particular has struggled to keep up with cheaper and cleaner energy. Conservatives claim to subscribe to the ideology that the best energy forms should compete and win in the market while lesser forms can dissipate and become obsolete.
Yet, when President Trump announced a coal bailout in 2018, he was applauded and met with little resistance from his party. Trump later abandoned the topic, but the tone had already been set.
{mossecondads}This is a dangerous precedent for conservatives to follow. If we claim to favor a free-market approach, we cannot support a system in which certain forms of energy are subsidized over others. A truly free-market approach would allow consumers to be the deciding factor in an energy source’s success or failure — not the government or industry stakeholders.
Instead of creating a system of government-centric rewards, we should turn to the marketplace to create incentives that continue to encourage competition and create value. Here’s the truth: net-metering caps are an unnecessary burden in the marketplace, and it’s time for conservatives to oppose them. Any self-respecting capitalist would agree that state governments shouldn’t be interfering in the marketplace by favoring utility companies and driving up energy costs by stifling the incentive for alternative energy production.
Danielle Butcher is the chief operating officer for the American Conservation Coalition. Follow Butcher on Twitter @DaniSButcher.