Comment on Why Rick Perry’s proposed subsidies for coal fail Economics 101

Why Rick Perry’s proposed subsidies for coal fail Economics 101

(Credit: AP) In a controversial proposal, Energy Secretary Rick Perry has asked federal regulators to effectively subsidize coal and nuclear power plants at ratepayers’ expense. Under Perry’s proposal, plants that operate in deregulated electricity markets — where generators normally compete to provide power at the lowest cost — would be guaranteed positive profits so long as they stockpile 90 days’ worth of fuel on site. To rationalize this proposal, which a former Republican member of the Federal Energy Regulatory Commission has dubbed “the antithesis of good economics,” Secretary Perry points to uncompensated benefits generated by coal and nuclear plants. As energy economists, when we think about coal-fired electricity generation, what usually comes to mind are unaccounted-for costs — not benefits.

 

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