Renewable Energy Via Freedom, Not Force

[Editor’s Note: We continue our new column series, which debuted with a guest piece from Greenpeace, with a view on a market driven clean energy economy from a Pacific Northwest libertarian think tank. Views presented here do not represent an editorial EarthTechling opinion, but rather of the guest author. If you’d like to be considered for a column, please drop us a line.]

Many believe the free market and renewable energy are at odds. Renewable energy advocates proclaim fossil fuels will continue to dominate the energy landscape, even if consumers perceive them to be rife with environmental issues. This belief has driven political leaders to subsidize renewable energy development, mandate utilities to provide renewable energy options, and force citizens to purchase them. The free-market stance looks at the situation differently.

red hills wind farm

Image via ACCIONA

Renewable energy can become a major player in the energy market even without the heavy hand of government. It isn’t a novel approach: Renewable energy should expand according to voluntary consumer demand. In fact, a perfect analogy already exists.

Renewable energy is to the electricity sector as organic foods are to the non-organic food sector. Consumers perceive organic food to be healthier for them and better for the environment, yet it costs more – just as renewable energy does. Yet, organic food and beverage sales continue to grow each year in the United States.

According to the Organic Trade Association, organic food sales reached $24.8 billion in 2009, up 5.1 percent from 2008. This was accomplished without restrictive government mandates or generous corporate handouts. Organic food has done fantastically in the free market, even at a price premium. Consumers value the product and are willing to pay for it.

We have the same choice with the electricity we purchase. Most utilities offer “green power” programs which allow ratepayers to pay voluntarily for renewable energy at the higher cost. This is the free-market approach to financing and expanding renewable energy without forcing unnecessary costs on the entire population. Just as with organic food, customers who value the “product” can purchase it at a premium. Those who don’t value it should not be forced to pay for a minority’s ideology or preferences. In Portland, voluntary green power program participation rates are above 10%. This is higher than the state’s mandated renewable energy goal for 2010.

The free-market path for renewable energy preserves freedom and choice while growing the industry according to real demand. It is expanded without the use of force. It thrives because ratepayers value the environmental benefits that are proclaimed to exist. Ultimately, the renewable energy market should thrive (or not) on its own through voluntary purchases. The free market has worked for organic food; it will work for renewable energy as well.

– By Todd Wynn, Cascade Policy Institute

I am the editor-in-chief and founder for EarthTechling. This site is my desire to bring the world of green technology to consumers in a timely and informative matter. Prior to this my previous ventures have included a strong freelance writing career and time spent at Silicon Valley start ups.

    • colinnwn

      This is a very weak analogy. Organic foods is relatively weakly tied to the Tragedy of the Commons, while green power is strongly tied to it.

      For the most part, the perceived benefits of eating organically accrue to the individual paying the premium (i.e. they feel they will be healthier eating organic food.) A small subset of these people do it primarily for the alleged environmental benefits (e.g. less pollution in the environment).

      Whereas for “greenies” the perceived consequences of using “dirty power” is destroying the Earth’s environment, which will probably only slightly affect the current generation, and strongly hurt future generations. There just isn’t the strong personal economic rationale to pay more for green power.

    • Dan

      I do not think it is a weak analogy at all. It is perfectly fine.

      The issue is that people need to perceive the benefits of renewable energy and be able to afford it.

      Government should not be used to force people to purchase a product.

      If renewable energy truly has the environmental benefits then the industry should compete in this manner. It should put out advertisements on why to buy wind energy over coal.

      But the industry has remained heavily subsidized for many years and now governments are forcing citizens to purchase this power. They have no incentive to compete. No incentive to educate citizens on the merits of such power.

      The reason why more people have not purchased renewable energy is because in many peoples opinions the costs outweigh the benefits. Clearly if there was a tragedy of the commons issue that was truly affecting people on a day to day basis more people would choose to opt into purchasing and supporting renewable energy. But the US has some of the cleanest air in the world and it has improved significantly since the 1950s-60s-70s etc.

      The choice of whether we should have more renewable energy should come from decentralized individuals all making choices about what is a priority in their life not from government forcing people to do something.

      besides you say that organic food isn’t a good analogy because the organic food “benefits” directly accrue to the consumer and the renewable energy “benefits” do not. Well, then why is it that organic food has less market penetration in the food market then voluntary purchases of renewable energy in the electricity market? Your logic would say otherwise.

      The truth is that when you allow people to choose for themselves and you allow industries to compete, the outcomes that are most desired and best for citizens will arise.

    • colinnwn

      “If renewable energy truly has the environmental benefits then the industry should compete in this manner. It should put out advertisements on why to buy wind energy over coal.”

      The reason it shouldn’t be left entirely to free companies and people making independent decisions is because ACME running their aluminum smelter on cheaply generated dirty coal with limited smokestack scrubbing, gives everyone else in the neighborhood asthma and cancer.

      “Clearly if there was a tragedy of the commons issue that was truly affecting people on a day to day basis more people would choose to opt into purchasing and supporting renewable energy.”

      Clearly NOT. That is the point of the “Tragedy of the Commons.” To correct the problem costs the individual more time/money/resources, but only a little of the damage done by the unremedied externalities affects the individual. Most of the results of the damage are inflicted on all the other community members.

      “But the US has some of the cleanest air in the world and it has improved significantly since the 1950s-60s-70s etc.”

      NOT because of free market policies, but because of government regulation of pollution, air, and water quality standards.

      “Well, then why is it that organic food has less market penetration in the food market”

      Because most people can’t or don’t want to spend the extra money for something they can’t see, taste, or smell. They’d rather have more food or more alternative resources. The actual and provable benefits to eating organic are still tenuous and hotly debated. If it was absolutely scientifically clear that organic improved health and longevity, it would have much greater penetration.

      “The truth is that when you allow people to choose for themselves and you allow industries to compete, the outcomes that are most desired and best for citizens will arise.”

      My god that is so provably false on so many levels. I feel like I am being trolled. I’m not saying governments don’t create inefficiencies, and that relatively free markets don’t (with some frequency) create close to optimal solutions. But to say free markets almost always work is to be intellectually dishonest or avoiding the real world (which doesn’t have truly free and open markets with perfectly symmetrical information exchange.)

    • First off, the article misuses the notion of “tragedy of the commons.” Where is the “commons?”

      Second, there is an issue of short term vs long term benefits. Organic food provides immediate benefits in the form of healthier food (at least the consumer believes this). Green energy’s benefits are more long term, reducing energy production’s effects on the climate and environment. Consumers don’t seem to perceive short term, immediate benefits in the same way that they perceive long term benefits. For example, eating a delicious cookie vs keeping their weight down.

      Another factor is that the fossil fuel industry receives enormous subsidies. There are many references on the web to this and a recent study showed that the true cost of gasoline, factoring in all costs, including defending foreign oil reserves, is above $40/gallon. These figures are arguable, of course, but the idea that fossil fuel energy is not subsidized is false.

      I support subsidies that will get green energy going, and are comparable to those given to the standard “dirty” energy industry.

    • Todd, I’m sure that you realize your essay is incomplete.

      First, you didn’t note that the fossil fuel industry also receives enormous subsidies from government – about $30B/yr last time I looked. Not to mention another trillion dollars or two to fight the Iraq War to ensure our continued oil supply and the industry’s profit.

      Secondly, you didn’t mention the enormous external costs of fossil fuels. They cost an estimated $120B/yr in health expenses, according to an NAS study (NY Times, 2009, http://is.gd/gsvWa). About 20,000 people/yr die early from fossil fuel pollution. And that is besides the cost of climate change.

      Where are these factored in the “free” market? It is not nearly as free as you imply.

    • dan

      David,

      Come on now…really?

      You do understand the concept of standardizing subsidies.

      44 cents per unit of energy for coal, 25 cents for natural gas versus 25 dollars for wind and solar. This is 50 to 100 times the subsidy. not that fossil fuels should be subsidized but stop lying to people.

      Next, we are talking about renewable electricity! Last time I heard we are not having a war in iraq over coal and we produce less than 1% of our electricity from petroleum.

      Get your energy facts straight!

    • Todd Wynn

      I would like to address a few points that have been brought up.

      First, the essay is incomplete. There are so many more problems with government intervening in the energy market that it would take me thousands of pages and hours to describe them all in detail. I followed a word limit given by the editor of Earthtechling.

      Second, often when I discuss subsidies, someone chimes in with a response that fossil fuels receive subsidies. This is true. I believe that fossil fuels should not receive subsidies either. Two wrongs never make a right. Let’s pull back layers of government without trying to use government to “solve” a government-created problem. Subsidies need to be understood better. They need to be standardized to understand the true level of subsidies for different energy forms. For an energy source that barely exceeds one percent of electricity output in the U.S., wind subsidies are $23 per megawatt hour (solar is on the same level). This is around 60 times that of the $0.44 per megawatt hour that go to the foundation of US electrical power output, coal. It is 100 times the $0.25 per megawatt hour that go to natural gas. Coal and natural gas account for over 70 percent of US electrical power supply.

      Third, some have stated that polls show that a majority support renewable energy. Well, if people truly support wind and solar power, then why do we need a mandate at all? If people truly value wind and solar power, then they will be willing to pay the real price, not just the subsidized price.

      Even if you assume that the majority of Americans truly value renewable energy, it does not justify forcing a minority of the population (who do not value these forms of power) to pay for it. It is no more moral to force this minority to subsidize renewable energy than it is to force environmentalists to subsidize coal and fossil fuels. Our republic was set up to protect personal freedoms of all, including the minority. So the majority should not attempt to force its views and values on everyone else, otherwise we will have another tyranny of the majority.

      Fourth, some have brought up that the perceived benefits of organic foods are local, while the perceived benefits of renewable energy are global, meaning that there is less of an incentive to purchase renewable energy. This is an interesting thought, but it fails to acknowledge that many hold deep-seated values that cause them to give directly to many causes that have little or no local impact. (Need I remind you of the millions of dollars in aid that Americans voluntarily pour out every time there is a major natural disaster in the far reaches of the world). It is also interesting to note that organic food has a smaller market penetration (around 1%) than voluntary participation in renewable energy markets. This may very well indicate that although there is a direct supposed health benefit of organic food consumption, the perceived benefit of purchasing renewable energy (solving climate change, feeling good about using wind power, etc) is as high if not higher, particularly in Portland area with a 10% participation rate for voluntary renewable energy purchases.

      Fifth, some assert that this commentary or Cascade’s views on the environment or renewable energy indicate that we do not care about environmental pollution and that everyone should be able to pollute without government intervention. Just because we at Cascade believe in choice and personal freedoms does not mean we believe in violating property rights. This is a common fallacy. The government and our Republic exist to protect property rights. This includes environmental injustices. Protection of property rights and voluntary markets are what can address almost any conceivable environmental problem. Additionally, we believe that an increase in personal freedom and de-regulation will also increase the ingenuity and entrepreneurship that has brought about other amazing inventions that solve many pollution and environmental problems.