Biden’s Energy Plan May Be Costly For Consumers

Biden’s Energy Plan May Be Costly For Consumers

Daniel Lacalle 09/02/2021 5
Biden’s Energy Plan May Be Costly For Consumers

Joe Biden has presented a $2 trillion clean energy plan that may be very expensive for consumers if the United States follows the mistakes of the European example.

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There are some important facts that should concern us when thinking about the US and Europe’s energy policy, supporting industry and creating jobs:

  • In the European Union, SMEs pay 20% more for electricity than in China and 65% more than in India. Between 2005 and 2012 electricity prices in Europe rose 38%, while in the United States they fell 4%. If we go to natural gas, in Europe prices rose 35%, while in the US they fell 66%. But the worst thing is that this trend has become more pronounced in recent years.

  • The “green” policy in Germany has doubled bills for households while the price of wholesale generation fell, and in 2017 it still had over 52% of its electricity mix and 88% of primary energy consumption from fossil fuels. The German “energiewende” has already cost more than 243 billion euro between taxes and “renewable subsidies” since 2000, and greenhouse gas emissions are almost flat since 2009. Even worse, the impact of net job creation in the energy sector has been negative. Between the job losses in traditional companies and the bankruptcies of local solar names, job creation has turned negative. Germany once had a goal of 500,000 green energy jobs by 2020. After peaking at just below 380,000 a few years ago, the number is now approaching 350,000 and this means that the net effect in the industry will be a 20,000 loss.

  • Up to 33% of the total costs of industrial companies come from energy expenses, which have exploded in recent years due to the impact of subsidies, fixed costs, and taxes.

It is very simple, either we look for competitiveness or the negative impact on employment and delocalization of industries will increase.

The energy sector is key in the decarbonization process, but will not achieve it through perverse incentives and accumulated costs that penalize the efficient in favor of the inefficient, subsidize the expensive, and tax the competitive ones.

The best technological tool to improve the environment is a combination of natural gas, nuclear, hydro, and renewable energy. But renewables are intermittent, while consumption is continuous. We cannot forget the billions required in grid connections and support to maintain an intermittent and volatile mix.

The energy policy of the United States must comply with the principles of safety, diversification and competitiveness. All these can only happen with higher liberalization and competition, not less.

Technology replacement and energy transition should be achieved through competition, lower costs and efficiency, the same way as crude oil ended with whale oil, not because it was decided by a committee, but because the cost was lower and the benefits for consumers evident.

Security of supply must be achieved, also, from a flexible and diversified energy mix which must be cheap and efficient, not via subsidies and higher fixed costs, but through the tax incentives that prevent “fake demand signals” and prevent overcapacity.

Energy is the cornerstone of the future of any nation. Destroying competitiveness would likely worsen the current crisis. The U.S. has the tools, using all technologies, to ensure an abundant and cheap energy supply. Anything else would bring it to repeat the mistakes that Europe made a few years ago.

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  • Pauline Killelay

    It's an expensive plan !!

  • Scott Andrews

    Excellent analysis

  • Elizabeth Chesham

    Sounds great for the environment! Best of luck to execute your plan Biden !

  • Ben Newton

    Don't make the same mistakes that have been by Europe

  • Alex W

    Biden seems to care so much about the environment

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Daniel Lacalle

Global Economy Expert

Daniel Lacalle is one the most influential economists in the world. He is Chief Economist at Tressis SV, Fund Manager at Adriza International Opportunities, Member of the advisory board of the Rafael del Pino foundation, Commissioner of the Community of Madrid in London, President of Instituto Mises Hispano and Professor at IE Business School, London School of Economics, IEB and UNED. Mr. Lacalle has presented and given keynote speeches at the most prestigious forums globally including the Federal Reserve in Houston, the Heritage Foundation in Washington, London School of EconomicsFunds Society Forum in Miami, World Economic ForumForecast Summit in Peru, Mining Show in Dubai, Our Crowd in Jerusalem, Nordea Investor Summit in Oslo, and many others. Mr Lacalle has more than 24 years of experience in the energy and finance sectors, including experience in North Africa, Latin America and the Middle East. He is currently a fund manager overseeing equities, bonds and commodities. He was voted Top 3 Generalist and Number 1 Pan-European Buyside Individual in Oil & Gas in Thomson Reuters’ Extel Survey in 2011, the leading survey among companies and financial institutions. He is also author of the best-selling books: “Life In The Financial Markets” (Wiley, 2014), translated to Portuguese and Spanish ; The Energy World Is Flat” (Wiley, 2014, with Diego Parrilla), translated to Portuguese and Chinese ; “Escape from the Central Bank Trap” (2017, BEP), translated to Spanish. Mr Lacalle also contributes at CNBCWorld Economic ForumEpoch TimesMises InstituteHedgeyeZero HedgeFocus Economics, Seeking Alpha, El EspañolThe Commentator, and The Wall Street Journal. He holds a PhD in Economics, CIIA financial analyst title, with a post graduate degree in IESE and a master’s degree in economic investigation (UCV).

   

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