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WSJ Editorial Response: LS Power CEO Paul Segal Explains Risks of Government Intervention in Energy Markets

WSJ Editorial Response: LS Power CEO Paul Segal Explains Risks of Government Intervention in Energy Markets

June 14, 2018

https://www.wsj.com/articles/government-is-bad-at-picking-energy-winners-1528913411

Government intervention in the energy markets, as contemplated, will lead to an energy grid that is less reliable and resilient than the one we have today.

June 13, 2018 – Your editorial “Rick Perry’s Obama Imitation” (June 6) is largely on point. However, it is important for the public to understand the ultimate consequence of policies like those proposed by Energy Secretary Rick Perry. Government intervention in the energy markets, as contemplated, will lead to an energy grid that is less reliable and resilient than the one we have today. Subsidizing only certain plants leads to a greater supply of power generation than would otherwise be available based on undistorted market prices. While the existence of the subsidies creates greater overall costs for consumers, this generation oversupply will result in lower revenues for the plants that don’t enjoy a subsidy. Lower revenues mean less capital available for investment and maintenance. Investment in new plants and technology will be hampered and the existing stock of plants will become less reliable and suffer increased outage rates, ultimately leading to an outdated grid that is significantly less secure than it should be.

Even those plants that receive subsidies are unlikely to make material investment in support of reliability. The very mandate that keeps them operational is the result of administrative fiat. Those supports can be withdrawn just as easily as they were implemented. Many voices are coming out in opposition to Secretary Perry’s initiative. However, this is simply the latest and broadest effort to use out-of-market subsidies to support a particular form of energy production. If they continue, these efforts—whether intended to favor renewables or bail out uneconomic coal and nuclear power plants—will ultimately lead to the demise of competitive markets. Politicians and regulators should be looking for market-based solutions.

Paul Segal

CEO, LS Power  

About LS Power:

LS Power is a development, investment, and operating company focused on the North American power and energy infrastructure sector. Since its inception in 1990, LS Power has developed, constructed, managed, or acquired more than 46,000 MW of power generation, including utility-scale solar, wind, hydro, natural gas-fired, and battery energy storage projects, of which ~17,000 MW are currently operating. LS Power’s Energy Transition Platforms include CPower Energy Management, Endurant Energy, EVgo, Rise Light & Power, and REV Renewables, as well as Waste-to-Energy initiatives. In addition, LS Power developed and operates over 680 miles of high-voltage transmission, with an additional 100+ miles and multiple substations under construction. Across these efforts, LS Power has raised $50 billion in debt and equity financing to support North American infrastructure. Through 2021, assets under LS Power control avoided 80.67 million metric tons of CO2e, equivalent to nearly 187 million barrels of oil not consumed or over 17.5 million cars taken off the road for one year. For more information, please visit www.LSPower.com.