State Line Geology and Renewable Energy

Over the past 20 years we have seen both a rise of renewable energy and the rise of dubious arguments to discourage its use. The arguments against renewables are usually funded by competing energy sources working to create artificial regulatory and policy barriers. The regulatory barriers are then combined with false claims about the efficiency and cost of renewable energy as the reason investment is not made. This has caused a strange phenomenon to occur in the United States. That strange phenomenon is a wide divergence of wind and solar installations in areas that have almost the exact same amount of wind and solar potential and are only a few miles apart. The only difference that exists in those areas is legal jurisdictions. This oddity harkens back to a similar phenomenon in materials extractions industries called “State Line Geology”.

State Line Geology is evidenced when on one side of a state line a large amount of either mining or oil & gas drilling exists while on the other side, there is almost nothing. This extreme difference is usually caused by different regulatory regimes in each state. Yet what makes this particular issue so fascinating is that even the members of the materials and extractions industry after years or decades convince themselves it is the geology causing these differences; not the different regulation. Obviously, to suggest that somehow the geology recognizes state boundaries is a ridiculous idea. One of the best examples of State Line Geology occurred in the early 1980’s in Indonesia. At that time, Indonesia was run by the dictator, Suharto. The intense corruption of his dictatorship created a difficult environment in which to do business in Indonesia. During this time, a US mining company called Freeport McMoran had a license to mine on the Indonesian side of the island of New Guinea. The mining license covered an ore deposit called the Ertsberg and other areas of the island. By the early 80’s, the Ertsberg deposit was near economic exhaustion and the Indonesian government offered to buy back the mineral rights. Most in the industry thought it was a good deal for Freeport McMoran to sell the mineral rights since no other major ore deposit had been found near the Ertsberg and the price was good. The CEO of Freeport McMoran disagreed. While studying a map of the island, he noticed how on the Papua side there were over 20 active mines while the Indonesia side had only one active mine; the Ertsberg. His understanding of subsurface geology informed his decision to send his geologists out to survey the entire area of their claim in Indonesia. After all, the chance of all the ore bodies being on one side of an island was pretty slim. Not only was his hunch correct, but his geologists ended up discovering the motherload; the Grasberg deposit which is arguably the greatest copper and gold deposit of all time. These same forces of State Line Geology are now occurring in renewable energy worldwide and particularly in the US.

Renewable energy, such as wind and solar, continues to gain market share from the traditional fossil fuel energy sources. This is occurring because wind and solar power are cheaper to produce than fossil fuel-based energy sources. Today, the biggest impediment to wind and solar is not cost but regulation. In many states with low levels of wind and solar investments, they argue that they are not good fits for wind and solar energy. Yet, digging deeper into the data shows regulation against renewables is more the issue rather than the geography.

Alabama and Mississippi have very little solar investment. This is perplexing when you take into account that the neighboring states of Georgia and Florida have a large amount of solar investment. As mentioned earlier, when you dig deeper you find that in Alabama for example, utility companies are allowed to charge a special fee to customers with solar panels. They claim it is to help manage the grid; a somewhat absurd assumption that a customer who wants to have some energy independence is punished for using less of the utility’s electricity. You see similar events playing out with wind where one state will have onerous setback laws or a law requiring local citizens’ approval for a project but only for wind and solar. Imagine if such laws existed for a new manufacturing plant or corporate office. Yet, despite how obvious it is that regulation is killing renewable investments, time and time again the same argument is repeated that the state is a bad candidate for wind and solar. As far as we can tell, the wind and the sun are not limited by state boundaries.

The history of State Line Geology shows that regulation, not cost, is hurting the energy transition. Those areas that engage in faulty reasoning to limit alternative energy are missing out on the motherload of energy investment which could prove beneficial to that area in the energy transition. The tragedy is that, just like State Line Geology, the local population will miss out on investments and growth. This also will exacerbate climate change which hurts us all. There is good news; wind and solar are gaining such a cost advantage that keeping these artificial impediments is becoming a greater challenge for the status quo. The energy market goes to those with the lowest cost of production and wind and solar win when it comes to cost. State Line Geology shows us that accepting the status quo can come at a great cost in missed opportunities; so, let’s not allow false assumptions and faulty reasoning cause us to miss the opportunity to lead the transition to renewable energy.

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