Another Energy Expert Criticizes Putnam's Study on Renewable Energy Subsidies

For the second time this week, a prominent energy expert is coming forward to report that an economic analysis of renewable energy subsidies presented by Florida Agriculture Commissioner Adam Putnam was severely flawed.

In April of this year, Putnam presented an “Independent Economic Analysis” of H.B. 7117, a newly passed law handing over $100 million in taxpayer funds to the renewable energy industry. Putnam said the analysis, written by John Urbanchuk of the Cardno ENTRIX consulting firm, “proves [H.B. 7117] will create jobs and result in a net gain in tax revenue.”

Daniel Simmons, director of regulatory and state affairs at the Institute for Energy Research, reviewed the Urbanchuk analysis and reported several important flaws.

First, according to Simmons, the analysis is not transparent. Important research, data, and methodology are not presented for review and analysis.

“There is no reason to believe this economic analysis for the simple reason is that there is no evidence for the central assumptions,” Simmons explained to Media Trackers Florida.

Second, says Simmons, the analysis employs the economically flawed assumption that any government spending spurs job growth and wealth creation with little or no negative consequences.

“The paper assumes that any capital spending, regardless of subsidies, results in real economic growth. This is an unsupported assumption and is likely false,” Simmons observed. “The problem is that subsidies take money out of consumers’ wallets and out of other, more productive sectors of the economy that do not require subsidies to provide desired goods and services. Any analysis that ignore this problem is fundamentally flawed and of little to no real value.”

Third, Simmons explains, the analysis wrongly asserts that giving taxpayer dollars to the renewable energy industry improves the quality of energy infrastructure and energy generation.

“There is no evidence that the investments that result from these tax exemptions increase the actual quality of the capital stock or in real output,” said Simmons. “It might provide people with the incentive to build wind turbines, for example,” but it punishes the construction of conventional energy equipment and facilities that also improve the energy infrastructure, and do so while providing more affordable, reliable energy than renewable energy alternatives.

Fourth, according to Simmons, Urbanchuk ignores the fact that federal and state taxpayers already heavily subsidize renewable energy.

“The Florida Renewable Energy Production Corporate Income Tax promotes additional renewable development such as wind and solar installations. This 1 cent per kWh tax credit is in addition to massive federal subsidies that already tilt the playing field in favor of renewable energy and against conventional energy,” Simmons explained.

Fifth, says Simmons, the Urbanchuk analysis asserts that any jobs or economic activity created by government subsidies is beneficial, even if the jobs and economic activity come at the expense of other economic sectors and accomplish nothing.

Noting that conventional energy suppliers already supply Floridians with ample electricity at a much lower cost than the renewable energy companies subsidized by H.B. 7117, Simmons observed, “The point is not merely that some economic activity has occurred, but whether that economic activity has value. Florida might pay 1 million people to dig a ditch and 1 million more people to fill the ditch in, but in this example there is no economic value to ditch digging because no product or service that people would voluntarily use is created. Sure, jobs are created and economic activity has occurred but the economic activity has no real value and the jobs that were created came at the expense of more valuable jobs that would have been created elsewhere in the economy with that money.”

“This analogy applies to H.B. 7117 because conventional energy suppliers already provide ample fuel and electricity at lower prices than renewable energy companies,” Simmons added. “The H.B. 7117 subsidies are actually a net drain on the overall economy, but the Urbanchuk analysis only measures one side of the equation – the renewable energy side – while ignoring the greater harm done to consumer finances and other sectors of the economy.”

Simmons voiced his criticisms one day after Tom Tanton, president of the energy economics consulting firm T2 & Associates, voiced his own criticisms of the Urbanchuk analysis.

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