Rubbish and Bad Regulations

Rubbish and Bad Regulations

June 20, 2009
Originally published in The Richmond Times Dispatch

Ever since gas hit $4 a gallon on June 8 of last year, energy policy has been an all-consuming passion of America's political class. Thus, both candidates for governor of Virginia propose major new energy initiatives for the commonwealth.

Unfortunately for voters, they're not offering much of a choice. Republican Bob McDonnell's "More Energy, More Jobs" is bad. Democrat Creigh Deeds' "Smarter Energy, Better Jobs, Greener Virginia" is worse.

The only redeeming quality to Deeds' plan is his willingness to consider drilling for oil and natural gas off the coast of Virginia. Drilling offshore for hydrocarbon energy sources would create jobs and revenue for the state, while at the same time reducing energy costs for Virginia citizens by increasing the supply of natural gas and oil.

His other energy ideas, however, are rubbish. Deeds wants to pick and choose winners in the energy industry by showering green technologies, such as wind and solar, with government handouts. He even wants a mandate that would force Virginians to use an increasing percentage of renewables -- 22 percent by 2025 regardless of their market viability.

Deeds's "green jobs" agenda won't work for the same reason that socialism failed. All the government subsidies in the world can't create an industry. Case in point: The federal government has wasted billions of dollars on failed energy startups like the Clinch River Breeder Reactor and Synthetic Fuels Corp.

Bob McDonnell's plan is plagued by inconsistencies that cancel out his good ideas. On the one hand, he proposes speeding up the permitting process for new energy sources to reduce bureaucratic red tape. On the other, he boasts of having led the effort to re-regulate electricity in Virginia, which means more heavy-handed government. Which one does he want?

McDonnell says that he will protect Virginia's coal industry -- which provides almost half the state's power -- from attacks by "special interests." Yet he would "support" the industry by saddling it with expensive "clean-coal" technology. The push for clean coal is coming from the same "special interests" he admonishes.

McDonnell makes the same mistake as Deeds, by promising to use government handouts to shape the energy industry and create "green jobs." For some reason, McDonnell boasts of having added hydrogen to Virginia's energy portfolio when he served as attorney general, even though it has proved to be a dead-end technology.

Both plans ignore the one measure that would best meet the energy needs of the Old Dominion: deregulation of the electricity industry. By overhauling Virginia's outdated regulatory model for electricity distribution, either candidate would unleash new and promising technologies that could enhance energy security, protect Virginia's landscapes from eye-sore electricity transmission towers, and help the environment.

To illustrate our point, suppose that an entrepreneur invents a wind-power technology that could provide affordable, reliable electricity to 50 houses, and that a developer wants to use this technology to power a small community housing project he plans to build.

By getting his power from the wind-power merchant, the developer gets affordable, reliable energy, while environmentalists get their clean energy. This sort of localized electricity generation also eliminates the need for huge transmission towers that mar pristine landscapes. It's a win-win-win.

It's also illegal.

Since the early 20th century, Virginia has allowed only one provider of electricity for each service area. Because of this government-granted monopoly, there can be no true competition in the electricity market, which is why there hasn't been a major technological innovation in the industry in almost a century.

A truly bold energy policy would open the electricity market to real competition so that energy entrepreneurs could better accommodate the needs and wants of today's consumers.

In fact, innovative energy technologies already exist that could benefit Virginians -- but only if government gets out of the way. Small-scale natural-gas plants, for example, are economically viable. If the U.S. Navy can power a submarine safely with nuclear, why can't energy entrepreneurs develop localized nuclear plants to power neighborhoods? Imagine a solar panel on the roof of a Wal-Mart that provides electricity to a nearby strip mall. The possibilities for distributed generation are endless.

Bob McDonnell and Creigh Deeds assume that government intervention in the energy industry is the solution. Wrong, gentlemen. It's the problem.