Wednesday, September 6, 2023

Inflation: Time To Bail-Out The Inflation Reduction Act

The inflationary effect of the green energy transition is going to surprise a lot of people but it really shouldn't: 

“Under my plan … electricity rates would necessarily skyrocket.”
—Presidential candidate, Senator Barack Obama,
Q&A with the editorial board of the San Francisco Chronicle, January 21, 2008

We ended the intro to the post immediately below, "TS Lombard: Resurging Inflation" with:

....Throw in a dozen other examples and that's my rationale for bastardizing Santayana with his "Only the dead have seen the end of war" observation: Only the dead have seen the end of inflation.

This is one of the examples. From The Wall Street Journal, September 4:

The Coming Green Energy Bailout
Renewable power operators already want rate increases for their subsidized projects.

The Inflation Reduction Act (IRA) includes hundreds of billions of dollars in subsidies for green energy, yet now renewable developers want utility rate-payers in New York and other states to bail them out. 

According to a report late last month by the New York State Energy Research and Development Authority (Nyserda), large offshore wind developers are asking for an average 48% price adjustment in their contracts to cover rising costs. The Alliance for Clean Energy NY is also requesting an average 64% price increase on 86 solar and wind projects.

The IRA includes federal tax credits that can offset 50% of a project’s costs. But renewable developers say their costs are increasing faster than inflation and that the projects will “not be economically viable and would be unable to proceed to construction and operation under their existing pricing,” says Nyserda.

Irony alert: One reason is that the government-forced green energy transition is driving up demand for equipment, material and labor.“Growing demand for renewable energy projects nationwide ‘has exacerbated inflation for renewable project cost components relative to broader inflation levels,’” Nyserda says, citing the Alliance for Clean Energy NY.

Green energy developers are blaming Russia’s invasion of Ukraine for increasing demand for renewable energy and its components. But the real culprits are government mandates and subsidies, which they lobbied for. Developers also blame rising interest rates for increasing project costs. But as Nyserda notes, “it does not appear reasonable for developers to have assumed that a low interest rate environment would persist throughout the period in which their projects were to be financed, given that the levels of interest rates witnessed today are indeed precedented.”

The climate lobby says power from wind and solar is cheaper than from fossil fuels, but that’s true only with generous subsidies and near-zero interest rates. Price adjustments that renewable developers want in New York would make solar and wind two- to five-times more expensive than natural gas power.

Another irony: The IRA’s prevailing wage and domestic content conditions for bonus tax credits, which are necessary to make projects viable, inflate costs. That means U.S. taxpayers will pay more for the green corporate welfare, and utility ratepayers will pay more for renewable power. The climate lobby hits you coming and going....


HT: Mike Shedlock at his MishTalk website

If interested see also August 18's:

The Cost Of The Inflation Reduction Act Is Rapidly Inflating


July 18:  The Cost of The Inflation Reduction Act Has Inflated To Almost $1 Trillion

April 12:  "America’s $800bn climate splurge is feeding a new lobbying ecosystem"