Incenting Green Technology: The Myth of Market-Based Commercialization of No- and Low-Carbon Electricity Sources

Abstract

As the United States attempts to increase the percentage of no- and low-carbon electricity sources in the fuel mix, one consideration is whether these sources are more expensive or are capable of being competitive in the market without subsidies. This article explores the types of subsidies that exist for nuclear, wind, solar, hydropower, and other no- and low-carbon electricity sources. No source is currently solely market driven.

After discussing how the federal regulatory and legislative treatment is varies, the article discusses the potential rationales for the disparity. While it was expected in 1962 that nuclear would become a market-based, commercial technology, subsidies to be used for “emerging” technology are still being granted to new nuclear power plants. Looking specifically at loan guarantees, the article examines how this specific subsidy is being used by different no- and low-carbon electricity sources, and how vertically-integrated utilities are using loan guarantees to further entrench their position against disruptive technologies. Finally, the treatment of no- and low-carbon sources under the EPA’s Clean Power Plan demonstrates how incentives, if not legislative or regulatory policy, may be shifting.

Keywords: subsidies, electricity, no-carbon source, low-carbon source, wind, solar, nuclear

JEL Classification: H20, K23, K32, L94, L98, Q48