Energy prices in Spain are soaring, and as various elements of the original Green New Deal proposal make their way stealthily into broader legislation, we have lessons to learn about what energy policy that messes with markets can inadvertently cause.
According to the New York Times, “Spanish households are paying roughly 40 percent more than what they paid for electricity a year ago as the wholesale price has more than doubled, prompting angry protests against utility companies.”
Right now, the Spanish government is taking emergency measures to deal with the country’s steep energy prices, but these actions show total disregard for free markets in energy. They plan to cap utility profits (even for their favored renewables), and to cap the price on natural gas. These measures come as spot electricity prices in the country reached an all-time high of €172.78 per megawatt-hour earlier this month.
It’s counterintuitive for a country that imposes a carbon tax to also attempt to prevent a steep rise in the price of natural gas. The policy is having its desired effect, but the country is still dependent on natural gas, and the reliable power that it produces.
Draft legislation currently working its way through the country’s approval process would only make the energy situation worse by curtailing the profits of hydropower and nuclear plants commissioned before 2005 (and even some wind generation) . What the government fails to realize is that the more unprofitable the country makes energy production, the tighter the market for energy will grow.
As Green New Deal proposals like net-zero, domestic and border-adjusted carbon taxes, and limits on new drilling and pipeline construction, just to name a few, are considered, it is important for us to be cognizant of the examples going on in Europe and elsewhere that show exactly where these policies lead.
More restrictions mean less energy, and that energy will be more costly and less reliable. If we allow ourselves to become as reliant on natural gas imported from Russia and elsewhere instead of produced domestically, we will end up in the exact same position that Spain currently finds itself in.