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DAVID BLACKMON: Biden Is Spreading Around Green Subsidies Like A Vegas Gambler

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David Blackmon David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.
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A pair of stories published this week help document a rising phenomenon on the U.S. energy landscape: Hundreds of speculative, potentially non-economic projects being pursued solely due to the existence of billions of debt-funded dollars in energy-related subsidies. In all, last year’s Inflation Reduction Act (IRA) and 2021’s infrastructure law contained over $600 billion in such subsidies designed to spur investment in new, speculative technologies and expand the scaling of more proven ones.

Reuters reported on one such project Monday, a new low-carbon ammonia manufacturing facility being built in Texas by Dutch company OCI with an initial investment of $1 billion. OCI bills the plant as the first in the world that will capture and store 95% of the emissions created from the making of the ammonia, which is mostly used to make nitrogen-based fertilizers that help feed the world, a noble goal. Company CEO Ahmed El-Hoshi also freely admits that this plant would not move forward were it not for the allure of the IRA subsidies. (RELATED: DAVID BLACKMON: A Backlash Against Net-Zero Policies Is Finally Beginning To Take Shape)

Two aspects of this billion-dollar investment show the risk at hand. First is the fact that OCI’s subsidy grab is breaking ground without having first identified a single ready customer for the ammonia the plant will produce, mainly because the cost for this specific ammonia would be far higher than other available feedstocks. Second is the admitted fact that the economics for the project depend on the assumption that governments in countries like Japan and South Korea will enact additional subsidies designed to help potential customers absorb the higher prices.

“‘Are you crazy?’ is the question, and I think it’s a good question,” El-Hoshy told Reuters, when asked why the project is moving ahead, for obvious reasons. But the subsidies are there to be grabbed, and OCI is grabbing them, hoping the rest of the necessary equation will eventually work itself out.

Another recent story, this one reported by Inside Climate News, details the challenges faced by PJM, operator of one of the nation’s largest power grids, as it struggles to integrate thousands of “green” energy projects into its grid. PJM must somehow find ways to work down a prodigious backlog of more than 3,000 active matters that sit in its service request queue, 97% of which relate to renewable energy projects. Many of the projects have either been built or broken ground as rent-seeking companies rush to take advantage of the federal and state subsidies.

Obviously, it’s a daunting problem, and one of the biggest roadblocks is the fact that PJM, whose territory spans all or parts of 13 northeastern states, must somehow find ways to permit and construct enough interstate high-capacity transmission lines to transport all this new generation to market demand centers. Achieving this goal will require permits, not just from the federal government, but from hundreds of state and local government jurisdictions. It will also involve PJM somehow acquiring and condemning untold thousands of acres of land to accommodate the rights-of-way for the transmission lines. (RELATED: KEVIN MOONEY: The Push For ‘Net Zero’ Isn’t Clean Or Green)

Those necessities are all in addition to the increasingly critical national scarcity of transformers, especially the high-capacity kind that are integral to any transmission project. As I have noted here previously, the supply chains for the transformers and the components that go into them are so backed up that sourcing them is often taking years to accomplish. Unfortunately, as it relates to this story, neither the infrastructure law nor the IRA contained programs designed to subsidize a resolution to this crucial issue.

But billions of subsidy dollars for green generation of all sorts, for battery backup capacity, for mining lithium and other needed minerals, and for purchasing electric vehicles are all in place. Thus, rent-seeking companies are going to cash in on the rents that are available, betting on the rest of the necessary equation to work itself out. 

If the government subsidizes it, in other words, the rent-seekers will come. If it all sounds to you like a gambler betting on the come in a Las Vegas casino, well, you are certainly not alone.

David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.

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