Economists survey: Coal subsidies no benefit to state economy

By Larry Limpf

A survey of Ohio economists indicates they are skeptical of the likelihood of coal subsidies benefiting the state economy.
Published by Scioto Analysis, the survey asked the economists if they agreed or disagreed with the statement: “Subsidies for coal plants paid for through state-mandated rate increases such as those in House Bill 6 have economic benefits that outweigh their costs.”
Of the 22 economists who responded, 21 disagreed with the statement, including 13 who said they strongly disagree.
House Bill 6 has been mired in controversy since being passed in 2019. Lawmakers have repealed portions of the bill, including subsidies for nuclear power plants in the state, but coal subsidies are still in effect.
Economists who disagreed with the statement pointed to the subsidies as distortions to the market and claimed resources would be better diverted to the renewable energy sector.
“Coal is now a more expensive source of energy than natural gas or renewable sources such as solar and wind,” said Kevin Egan, of the University of Toledo, who strongly disagreed with the statement. “And coal is the most polluting source of energy. Thus it is efficient to dramatically reduce our use of coal. Instead, Ohio is propping it up with not efficient corporate subsidies.”
Jonathan Andreas, of Bluffton University, also strongly disagreed with the statement: “Subsidies would only be justified by positive externalities, but burning coal produces the opposite. If energy prices need to rise to encourage supply, then that would allow any producer to compete for business, but instead of letting markets work, politicians picked two winning power plants to award money upon. That smells of corruption. Half of the money is going to an out-of-state plant and most of the benefits probably go to out-of-state shareholders.”
Several electric utilities share ownership of the Ohio Valley Electric Corporation which operates two coal-fired plants, including one in Indiana.
A study by the consulting firm, RunnerStone, for the Ohio Manufacturer’s Association states annual OVEC coal plant subsidies have reached $150 million per year.
“Although there has been some interest in reconsidering the subsidy, the subsidy continues to surge, doubling to $150 million per year,” the study says. “At this rate, the law would require Ohio manufacturers, other businesses, and citizens to pay Ohio electric utilities an estimated additional $1.4 billion in unearned and unneeded subsidies through 2030.”
Albert Sumell, of Youngstown State University, compared subsidizing coal plants to subsidizing the pay phone industry.
“There is no reason to invest resources to offer temporary help to a dying industry,” he said.
OVEC would not go out of business if the subsidies were terminated, the company’s vice president said when asked during a June 15 meeting of the Ohio Senate Energy & Public Utilities Committee.
However, Justin Cooper, who is also OVEC chief operating officer and chief financial officer, said the loss of the subsidies would hurt the company’s credit rating and increase its borrowing costs.
The committee was holding a hearing on Senate Bill 117 at the time, which would have ended the OVEC subsidies and refunded the charges ratepayers were paying when HB 6 OVEC provisions went into effect.
According to a federal criminal complaint, from March 2017 to March 2020, millions of dollars were paid in exchange for the assistance of then Speaker of the House of Representatives, Larry Householder, and four associates, in passing HB 6 and then working to defeat a ballot initiative that, if passed by voters, would have rescinded the legislation.
Energy Harbor has notified the Ohio Environmental Protection Agency it plans to cease operations of its coal combustion units at its Sammis Power Plant in Statton, Ohio by the end of 2028.


The Press

The Press
1550 Woodville Road
Millbury, OH 43447

(419) 836-2221

Email Us

Facebook Twitter

Ohio News Media Association