Renewable energy may pay price for fuel crisis

The Covid-19 pandemic has led to many unforeseen consequences, and right now we may be approaching one of the biggest: the possible neutering of the green energy movement. Prices of fossil fuels are rising sharply, and most of the world is responding by trying to get those prices back down again. Voters might end up bitterly opposed to ever seeing more expensive energy again. That poses a problem for the adoption of renewable energy, because during the transition away from fossil fuels, many forms of energy are likely to cost more.
To rewind just a bit, three events have come along at the same time. As part of a long-term structural trend due to political pressures and investment risks, the West has been cutting back its investments in fossil-fuel energy before truly significant quantities of renewables have come online. Next, the earlier stages of the pandemic blunted energy demand, leading to much lower prices and discouraging further spending on energy capacity, including in the natural gas sector. Finally, due to vaccines and activist fiscal policy, the economic recovery came more rapidly than had been expected, pushing up energy costs. In the UK, for instance, natural gas prices have shot up 700% as of late.
American elites like to argue for a carbon tax and other means of raising the price of carbon emissions. Yet higher energy prices are extremely unpopular with many voters. A recent study found that most Americans would vote against a mere $24 annual climate tax on their energy bills. Many countries now have to ask themselves if they really are ready to start paying the bills for a transition away from carbon.
The renewable energy movement has continued to grow in good and useful ways, but low prices, until recently, for energy of all types might have left consumers with too-rosy a picture of how much they will pay for fuel as refineries and coal mines are phased out before alternatives including solar and wind power become widely available. It isn’t helping matters that the Biden administration has been playing a two-sided game. Policies strongly discourage domestic producers from adding fossil-fuel capacity, and indeed those investments remain depressed. Perhaps that is how it should be. Yet when it comes to global capacity, America is talking and playing a very different hand.

—Bloomberg