Page Speed Optimization: Metrics, Tools, and How to Improve — Best of Whiteboard Friday

Posted by BritneyMuller

Page speed has always been a crucial part of SEO work, and as more companies make the shift to online operations, optimization becomes more important than ever. However, it's a complex subject that tends to be very technical. What are the most crucial things to understand about your site's page speed, and how can you begin to improve? To help you answer these questions, we're sharing this popular episode of Whiteboard Friday (originally published in February 2019) where Britney Muller goes over what you need to know to get started.

Click on the whiteboard image above to open a high resolution version in a new tab!

Video Transcription

Hey, Moz fans. Welcome to another edition of Whiteboard Friday. Today we're going over all things page speed and really getting to the bottom of why it's so important for you to be thinking about and working on as you do your work.

At the very fundamental level I'm going to briefly explain just how a web page is loaded. That way we can sort of wrap our heads around why all this matters.

How a webpage is loaded

A user goes to a browser, puts in your website, and there is a DNS request. This points at your domain name provider, so maybe GoDaddy, and this points to your server where your files are located, and this is where it gets interesting. So the DOM starts to load all of your HTML, your CSS, and your JavaScript. But very rarely does this one pull all of the needed scripts or needed code to render or load a web page.

Typically the DOM will need to request additional resources from your server to make everything happen, and this is where things start to really slow down your site. Having that sort of background knowledge I hope will help in us being able to triage some of these issues.

Issues that could be slowing down your site

What are some of the most common culprits?

1. First and foremost is images. Large images are the biggest culprit of slow loading web pages.
2. Hosting can cause issues.
3. Plugins, apps, and widgets, basically any third-party script as well can slow down load time.
4. Your theme and any large files beyond that can really slow things down as well.
5. Redirects, the number of hops needed to get to a web page will slow things down.
6. Then JavaScript, which we'll get into in a second.

But all of these things can be a culprit. So we're going to go over some resources, some of the metrics and what they mean, and then what are some of the ways that you can improve your page speed today.

Page speed tools and resources

The primary resources I have listed here are Google tools and Google suggested insights. I think what's really interesting about these is we get to see what their concerns are as far as page speed goes and really start to see the shift towards the user. We should be thinking about that anyway. But first and foremost, how is this affecting people that come to your site, and then secondly, how can we also get the dual benefit of Google perceiving it as higher quality?

We know that Google suggests a website to load anywhere between two to three seconds. The faster the better, obviously. But that's sort of where the range is. I also highly suggest you take a competitive view of that. Put your competitors into some of these tools and benchmark your speed goals against what's competitive in your industry. I think that's a cool way to kind of go into this.

Chrome User Experience Report

This is Chrome real user metrics. Unfortunately, it's only available for larger, popular websites, but you get some really good data out of it. It's housed on BigQuery*, so some basic SQL knowledge is needed.

*Editor's note: We've edited this transcript for accuracy. In the video Britney said "BigML," but intended to say BigQuery. It's hard filming an advanced-topic Whiteboard Friday in a single take! :-)

Lighthouse

Lighthouse, one of my favorites, is available right in Chrome Dev Tools. If you are on a web page and you click Inspect Element and you open up Chrome Dev Tools, to the far right tab where it says Audit, you can run a Lighthouse report right in your browser.

What I love about it is it gives you very specific examples and fixes that you can do. A fun fact to know is it will automatically be on the simulated fast 3G, and notice they're focused on mobile users on 3G. I like to switch that to applied fast 3G, because it has Lighthouse do an actual run of that load. It takes a little bit longer, but it seems to be a little bit more accurate. Good to know.

Page Speed Insights

Page Speed Insights is really interesting. They've now incorporated Chrome User Experience Report. But if you're not one of those large sites, it's not even going to measure your actual page speed. It's going to look at how your site is configured and provide feedback according to that and score it. Just something good to be aware of. It still provides good value.

Test your mobile website speed and performance

I don't know what the title of this is. If you do, please comment down below. But it's located on testmysite.thinkwithgoogle.com. This one is really cool because it tests the mobile speed of your site. If you scroll down, it directly ties it into ROI for your business or your website. We see Google leveraging real-world metrics, tying it back to what's the percentage of people you're losing because your site is this slow. It's a brilliant way to sort of get us all on board and fighting for some of these improvements.

Pingdom and GTmetrix are non-Google products or non-Google tools, but super helpful as well.

Site speed metrics

So what are some of the metrics?

What is first paint?

First paint is he first non-blank paint on a screen. It could be just the first pixel change. That initial change is considered first paint.

What is first contentful paint?

First contentful paint is when the first content appears. This might be part of the nav or the search bar or whatever it might be. --That's the first contentful paint.

What is first meaningful paint?

First meaningful paint is when primary content is visible. When you sort of get that reaction of, "Oh, yeah, this is what I came to this page for," that's first meaningful paint.

What is time to interactive?

Time to interactive is when it's visually usable and engage-able. So we've all gone to a web page and it looks like it's done, but we can't quite use it yet. That's where this metric comes in. So when is it usable for the user? Again, notice how user-centric even these metrics are. Really, really neat.

DOM content loaded

The DOM content loaded, this is when the HTML is completely loaded and parsed. So some really good ones to keep an eye on and just to be aware of in general.

Ways to improve your page speed

HTTP/2

HTTP/2 can definitely speed things up. As to what extent, you have to sort of research that and test.

Preconnect, prefetch, preload

Preconnect, prefetch, and preload really interesting and important in speeding up a site. We see Google doing this on their SERPs. If you inspect an element, you can see Google prefetching some of the URLs so that it has it faster for you if you were to click on some of those results. You can similarly do this on your site. It helps to load and speed up that process.

Enable caching & use a content delivery network (CDN)

Caching is so, so important. Definitely do your research and make sure that's set up properly. Same with CDNs, so valuable in speeding up a site, but you want to make sure that your CDN is set up properly.

Compress images

The easiest and probably quickest way for you to speed up your site today is really just to compress those images. It's such an easy thing to do. There are all sorts of free tools available for you to compress them. Optimizilla is one. You can even use free tools on your computer, Save for Web, and compress properly.

Minify resources

You can also minify resources. So it's really good to be aware of what minification, bundling, and compression do so you can have some of these more technical conversations with developers or with anyone else working on the site.

So this is sort of a high-level overview of page speed. There's a ton more to cover, but I would love to hear your input and your questions and comments down below in the comment section.

I really appreciate you checking out this edition of Whiteboard Friday, and I will see you all again soon. Thanks so much. See you.

Video transcription by Speechpad.com

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Scoop up more SEO insights at MozCon Virtual this July

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House Democrats Propose Costly Climate Policies

The House Democrats’ climate proposals—dubbed the Climate Crisis Action Plan—are designed to reduce the U.S. economy’s greenhouse gas emissions by 2050 through a combination of costly government mandates, tax incentives, and new infrastructure spending. The proposals would require electric utilities to be net-zero emitters of greenhouse gases by 2040 and automakers to produce only electric cars by 2035 with all new heavy-duty trucks hitting that mark by 2040. The plan also includes placing a tax on carbon dioxide emissions, imposing tighter methane limits, and increasing energy efficiency requirements for buildings. Solar and wind tax credits would be extended through 2025 and the tax credit for electric vehicles would be expanded. Even if these crippling economic proposals were to pass the Senate, they would face a likely veto from President Trump. The November election thus holds great importance for the future of the Climate Crisis Action Plan.

Setting a goal of net-zero emissions makes little sense when other countries are allowed to continue to emit greenhouse gases through their pledges to the Paris accord. China will continue to increase its greenhouse gas emissions until 2030 and is continuing to build coal plants that will operate for generations. As the consumer of over half the coal burned in the world annually, China currently has under construction enough coal plants to equal all the coal plants in the United States. Once built, China’s coal fleet will equal the entire electric generating fleet in the United States. China will use its domestic coal resources to recover economically as it did from the global recession in 2009. India is also using its domestic coal resources to continue to get electricity to its increasing population that suffers without it. In addition, Japan is constructing coal and marketing its coal plant technology to the world.

Imposing these onerous requirements on the U.S. economy would be counterproductive to the critical task of rebuilding in the wake of the pandemic recession and futile in the context of global developments.

Other Key Provisions in the Proposal

The Democrats 538-page report calls on Congress to direct the EPA to consider the cumulative pollution effects of the permits it grants to projects in poor and minority urban communities. In more rural areas, it calls for Congress to protect at least 30 percent of all U.S. land and ocean by 2030.

The package would also create a “National Climate Bank,” which would use taxpayer money to finance projects that cut emissions, and expand the Energy Department’s loan-guarantee program to leverage private investment in decarbonization and resilience projects. While these may be good business for the companies who would receive taxpayers’ cash, it would not be a good use of taxpayers’ money.

The plan also calls for reorganizing the U.S. Energy Department—the main federal agency funding research into new energy technologies—so work done in one office, such as research on capturing carbon dioxide at power plants, can be more readily deployed elsewhere in the economy, such as in the manufacturing sector.

The plan would phase down emissions from fossil fuel extraction on public lands and waters by 2040. It would end targeted tax provisions favorable to the oil and gas industry and encourage natural carbon sequestration through the agriculture sector. It also reestablishes the Civilian Conservation Corps to build climate resilience projects.

Cost of Democrats’ Climate Policies

While the costs of the proposals have not been officially determined, it is clear that they would be enormous, since they would restrict energy production and access—the underlying ingredient in all economic activity. Under the guise of healthy environmentalism, this package seeks a restructuring of American economic life. Polls indicate a measure of support for climate change policy, but rarely do those polls quantify Americans’ willingness to pay for self-imposed hardship. Note that the Democrats in the House did not provide the cost of their proposals. Those costs will be paid by average Americans, many of whom are under economic stress right now, both in the form of taxes and higher prices across many economic sectors. Americans want abundant, affordable energy and a robust energy industry. Under President Trump’s energy dominance program both have been achieved and the United States became the number one producer of oil and natural gas in the world.

Adoption of the Climate Crisis Action Plan while other countries are ramping up their use of fossil fuel energy would weaken U.S. standing. It would invite China to become the preeminent country in the world and would encourage China to continue its expansion beyond what is currently happening in Hong Kong, the South China Sea, and Indian border region. China’s strength in producing and purchasing energy is enabling it to fuel its economy and to increase its military might. The United States needs to be cautious that we do not enable this power shift by implementing crippling policies as the House Democrats are doing with their new climate plan.

The post House Democrats Propose Costly Climate Policies appeared first on IER.

Grill with Gusto this Independence Day

This blog was originally published on July 3rd, 2019.

Fourth of July, the national celebration of combustion, presents an opportunity for atonement…. Maybe an Independence Day meal of pan-fried potatoes and grilled peaches seems un-American. But the tradition of backyard grilling isn’t exactly Jeffersonian in pedigree.

Brian Palmer, “Fire Up the Grill, Not the Atmosphere.” New York Times, June 29, 2011.

That was the New York Times then. Here is the latest:

“The barbecue season has arrived,” stated Eduardo Garcia at the Times’s Climate Fwd blogsite earlier this summer. Amid the good food and drink, he confesses, “I couldn’t help thinking about the smoke that came from my friend’s charcoal grill.”

Garcia explains in “Plan a Climate Friendly Cookout”:

Does that smoke contain high levels of greenhouse gases? …. [Expert Eric Johnson] said charcoal grills typically generate three times as much greenhouse emissions than gas for the same cooking job…. He found that a typical charcoal grilling session emits as much carbon dioxide as driving a car for roughly 26 miles.

Continuing:

That may not sound like a lot. But, consider the fact that approximately 90 million Americans own a charcoal grill. “These things add up in the end,” Mr. Johnson said.

Yes, our everyday, self-interested activities “add up.” But carbon dioxide (CO₂) is the gas of life—and a gas of pleasure when it comes to smoked meats because of superior flavor and a better sear.

Garcia has more concern:

Not all charcoal comes from renewable resources, and the accelerants that are often used to start a charcoal fire are usually made of fossil fuels.

And instruction:

Organizing an environmentally friendly barbecue is also about serving food and drinks in compostable or reusable plates and cups, reducing food waste by planning ahead and favoring grilled vegetables over meat.

Eco-Snooping

Is there anything the eco-authorities-qua-authoritarians leave alone? The NYT series promotes carbon guilt in all sorts of other ways, from how you wash your car (not by hand) to how to green your lawn (reduce it!) to how to boil water (not sure, “be vigilant”).

Drive a car? Roll down the windows even in the heat, consider driving no more than 60 on the highway, and “consider walking, biking or taking the bus when feasible.”

What are you eating in reference to climate change? “A lot of home cooks have been left paralyzed at the stove or in the marketplace,” notes Times Food editor Sam Sifton,

… choosing between the farmed salmon and the pasture-raised chicken, the organic tofu, the fair-trade coffee, the heritage carrots. Which is best or safest for the environment? Which hurts it the least? What, in general, are we supposed to buy and cook, if we want to help reduce our carbon footprints, the carbon footprints of our nation, our world?

Tik Root of the Times complains that “many animal products have an outsize environmental footprint.” Beef is the worst, but second, surprisingly, is dairy products, even ahead of pork and chicken. Are you prepared to try oak milk, pea milk, yellow-split-pea yogurt?

How about your morning cup of coffee? Bad news according to Root: “There’s deforestation to grow more beans, the shipping emissions that come from moving them to market and the resources that go into packaging.” So skip the pods. Don’t use a filter. “Best yet,” he adds, “try cold brew.”

How about roses for that special occasion? Bad for the climate again, according to the Times. Growing them is “a thirsty, pesticide-heavy endeavor.” This perishable requires refrigeration. Greenhouses are a big no-no for their energy use. So maybe just skip Valentine’s Day “to show the planet a little love too.”

Carbon guilt and eco-snooping is international too. In Sweden, the “flight shame” movement tries to get people to take the train or bus for long trips, as if time and convenience do not matter.

More Regulation in Waiting

What is worrisome is that the lifestyle busy-bodies would happily use government means to reach your store, pantry, and refrigerator. The Deep Decarbonization Pathways Project calculates that the average American needs to reduce his or her annual “carbon footprint” from today’s 18.3 tons to 1.9 tons by 2050 as part of the global effort to limit the estimated anthropogenic temperature rise to 2˚C or less.

In this regard, Columbia University’s Earth Institute has “the 35 easiest ways” to begin such a reduction, ranging from meatless days to buying vintage/recycled cloths to No. 35: “vote!” and “let your representative know you want them to take action to phase out fossil fuels use and decarbonize the country as fast as possible.”

Alternatively, David Roberts argues at Vox, “just don’t be rich.” He notes, “Climate change simply does not fit well in the individual-choices frame,” suggesting a personal market failure that needs more government to correct. Since the “very ones whose choices matter most seem least inclined to cut back on consumption,”

The obvious and most direct approach to addressing the role of individual choices in climate change is to tax the consumptive choices of the wealthy. For now, and for the foreseeable future, carbon emissions rise with wealth. Redistributing wealth down the income scale, ceteris paribus, reduces lifestyle emissions.

Conclusion

In a free society, personal choices are made for reasons of health, safety, convenience, quality, and affordability. Time is as important as dollars. Quality is valued over lesser substitutes. Self-sacrifice for some other person’s notion of good is not very motivating.

When grilling this special week, go for the gusto. Charcoal is fine, and don’t forget the taste from smoke using wood chips such as oak, hickory, maple, pecan, and mesquite. There is plenty of energy; and the climate will not notice and is otherwise not in peril.

The post Grill with Gusto this Independence Day appeared first on IER.

Behind the Scenes at MozCon Virtual

Posted by Dr-Pete

Re-imagining MozCon hasn't been easy. I won't lie — I'll miss seeing so many of you in person, and, yes, I'll miss the magic of the big stage. We're working hard to make this year special, including leveling up our speakers for their remote sessions. I recently shared my own set-up on Twitter:

This stirred up quite a bit of interest in our set-up and equipment list, so thanks to Cheryl on our events team for filling in the blanks for me, and thanks to our amazing A/V partners at Seamless Events for helping this all come together. Also, many thanks to our speakers who gave me permission to share their photos and let you in on some of the magic behind in front of the curtain.

MozCon Virtual equipment list

Before we get to the fun part (or maybe this is the fun part for you), here's the standard equipment list our A/V team used for MozCon Virtual (some speaker set-ups may vary):

• Logitech C920 HD Pro Webcam (more info)
• Neewer Backdrop Support System (more info)
• Neewer Gray Photography Backdrop (more info)
• UBeesize 8-inch Selfie Ring Light w/ Tripod Stand (more info)
• Z ZAFFIRO USB Lavalier Lapel Clip Microphone (more info)
• Vilcome 4-in-1 USB C Hub Adapter (more info)

Note that some of the models/sizes linked to in [more info] may not be exact matches to our kit. While Moz doesn't endorse any of these specific products, I've personally been pleasantly surprised at how affordable and accessible decent A/V equipment has become, and quarantine is making the value proposition even stronger.

The presenter remote on my desk is not part of the kit, but is my own Logitech R400 (more info). I've had this one for almost six years, and wish I'd bought my own remote sooner. I use it even when I'm presenting at my desk or practicing on a plane (that may say more about me than about Logitech, admittedly). The LEGOs and half-finished LaCroix were not included in the speaker kit, although LEGOs factor heavily into my MozCon presentation.

Sneak-peeks with our speakers

Just for fun, here's a sneak-peek at a few of our speakers and their set-ups.

Dana DiTomaso (@danaditomaso)

I was going to make all of the photos 16:9 like the one above, but Dana ruined that by having this amazing skylight in her loft, so all of the speakers are getting big photos now.

Dana's MozCon Virtual session:
"Red Flags: Use a discovery process to go from red flags to green lights"

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Izzi Smith (@izzionfire)

If I hadn't resorted to full-sized photos for Dana, I would've done it for Izzi's wall art.

Izzi's MozCon Virtual Session:
"How to Be Ahead of the (CTR) Curve"

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Shannon McGuirk (@ShannonMcGuirk_)

Shannon braved a trek to the office just for MozCon and wins the award for looking more professional than the rest of us. I cleaned my home office. That counts for something, right?

Shannon's MozCon Virtual Session:
"Great Expectations: The Truth About Digital PR Campaigns"

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Ross Simmonds (@TheCoolestCool)

Ross has clearly got chair game. My $79 knock-off Aeron from Costco is looking pretty sad...

Ross's MozCon Virtual Session:
"Designing a Content Engine: Going from Ideation to Creation to Distribution"

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Robin Lord (@robinlord8)

Robin went for the rare standing set-up. Robin has also delegated his copy of "Pandemic" to being a monitor stand, as it's far too depressing to play right now.

Robin's MozCon Virtual Session:
"Whatever You Do, Put Billboards in Seattle – Getting Brand Awareness Data from Google"

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Rob Ousbey (@RobOusbey)

I'm not sure if Rob is expertly offsetting his window light with two ring lights or if we just forgot to send him the instruction sheet. He's my boss, so I'll assume the former.

Rob's MozCon Virtual Session:
"A Novel Approach to Scraping Websites"

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Sarah Bird (@SarahBird)

Last, but certainly not least, our own CEO, Sarah Bird, who apparently gets to have a hammock outside her office, because she's the boss.

Sarah's MozCon Virtual Session:
"Welcome to MozCon Virtual 2020 + the State of the Industry"

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The idea for this post was a little last-minute, and I didn't want to personally annoy every speaker with photo requests, so a big thanks to all of our speakers for going the extra mile to make the shift to a virtual event with us and set up all of this equipment. Special thanks to Cheryl and Carly for all of their work pulling this plan together.

What's your home set-up?

Have you leveled up your A/V set-up and you're just itching to show it off? Let us know about your favorite equipment in the comments, or send us your home-office photos on Twitter (@Moz).

Join us for MozCon Virtual!

Hope to see you at MozCon Virtual on July 14-15. No need to book a hotel or flight, so there's still time to join us, and the $129 special price includes all speaker videos!

Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!

Carbon Tax Update, July 2020

The House Select Committee on the Climate Crisis has released its Climate Crisis Action Plan. Speaking in front of the Capitol on Tuesday, June 30, Representative Kathy Castor of Florida’s 14th congressional district declared the plan a “transformative roadmap” that would build a “100 percent clean energy economy.” The 547-page document includes a wide range of policy planks, among which is a carbon tax.

Let’s take a look at the specifics of the Climate Crisis Action Plan.

The environmental and societal costs of greenhouse gas emissions from the burning of fossil fuels are clear, including loss of life and property damage caused by wildfires, stronger hurricanes, and other extreme weather events. When a ton of carbon pollution billows from a smokestack, however, no one pays for that pollution. As a result, industry, investors, and consumers do not internalize the true cost of the choices they are making and have less incentive to choose less-polluting products or technologies. Until the market reflects the true cost of carbon pollution, the U.S. economy will remain biased toward fossil fuel combustion.

One way to correct this market failure is to put a price on each ton of pollution. Congress could design a comprehensive climate plan without a carbon price, but a carbon price “percolates through the entire economy, providing an incentive for all decision makers in the economy to look for ways to reduce emissions.”

IER’s Take

The costs of greenhouse gas emissions are decidedly unclear. Were they clear, we wouldn’t be in the midst of a societal struggle over the value of using fossil fuels. Furthermore, were the costs clear, the committee would be more explicit in its carbon tax recommendation. Instead, the committee buries the carbon pricing section 286 pages into its report.

The committee’s carbon pricing principles follow.

Carbon pricing can take many forms. The majority staff for the Select Committee offers the following principles for designing an effective and equitable carbon pricing system:

1. Congress should establish a carbon pricing system designed to achieve America’s economywide greenhouse gas emissions reduction goal of net-zero by no later than 2050.

2. Congress should consider a carbon price as only one tool to complement a suite of policies to achieve deep pollution reductions and strengthen community resilience to climate impacts. Carbon pricing is not a silver bullet.

3. Congress should ensure that energy-intensive, trade-exposed domestic industries that are working to reduce pollution remain on a level playing field with foreign competitors that use dirtier technologies.

4. Congress should ensure low- and moderate-income households benefit from a national carbon price.

5. Congress should pair a carbon price with policies to achieve measurable air pollution reductions from facilities located in environmental justice (EJ) communities, which face chronic and acute health impacts from a legacy of industrial development in their neighborhoods.

6. Congress should respect states and localities that have led the nation in climate action, ensure that a national carbon price complements and builds on their programs, and apply the lessons learned from their experiences and other international approaches.

7. Congress should not offer liability relief or nullify Clean Air Act authorities or other existing statutory duties to cut pollution in exchange for a carbon price.

IER’s Take

I’ll respond to each point in order.

1. The fact that no dollar figure is presented is telling. To reach net-zero in thirty years implies a massive and climbing carbon tax. As analysis follows the release of this report, I’m sure estimates will begin to emerge. They won’t be pretty.

2. The appeal of a carbon tax is its simplicity. If we indeed have the analytical tools to calculate the degree of negative externality that using fossil fuels generates, then the resulting social cost of carbon (SCC) would enable a carbon tax to be something approximating a silver bullet, rebalancing externalized costs to the responsible actor and pegging risk appropriately. Layering a carbon tax on top of existing and new regulations reveals that our confidence in the SCC and in our implementation of the policy is lacking.

3. In other words, a tariff.

4. The ostensible benefits to which the committee alludes would not be the direct result of a carbon tax, but of the allocation of new revenue. See below.

5. Local air pollution is not the target of a carbon tax.

6. There are many positives to the mindset of federalism, but as described here it sounds like businesses and citizens would face a dizzying tangle of requirements when crossing state lines.

7. The grand bargain we’ve been promised by the Republican carbon tax advocates—trading regulations for a tax—does not appear likely.

Most, but not all, proposed federal carbon pricing mechanisms generate significant revenue that can be used to invest in communities, research and development, and more. Congress may decide to use some of the revenue to address top priorities, including investing in low-income communities, communities of color, and communities and workers in economic transition; rebuilding America’s infrastructure in a climate-resilient way to support a net-zero economy; financing clean energy and energy efficiency projects to expedite pollution reduction; supporting natural climate solutions and conservation; or funding other recommendations in this report.

IER’s Take

The thorn in the side of carbon taxers is the policy’s notorious regressivity. In recent years we’ve seen a particular revenue-recycling strategy thrust forward in an effort to align the carbon tax with concepts of “climate” or “environmental” justice. That revenue-recycling strategy is the rebate. The tax-and-rebate approach allows taxers to claim with a patina of truth that some people could be made better off if the revenue is redistributed. Since wealthier people use more carbon-intensive energy (like jet fuel), at least on paper many people could get more “back” from the rebate than they would pay in tax.

This plan does not include a rebate, which I find surprising.

Without even granting that nod to working Americans, it will be difficult for Castor’s committee to fend off claims that this new tax would hurt the people who are struggling most in this economically-fraught time.

For a thorough assessment of different revenue strategies, see this 2018 IER paper with analysis conducted by Capital Alpha Partners.

The post Carbon Tax Update, July 2020 appeared first on IER.

Germany, Like the U.S., Needs to Reform Its Renewable Power Approach

Germany heavily taxes its power consumers for the added cost of wind and solar power. Power consumers make up the difference between payments made to investors and the wholesale power price. That makes the surcharge for renewable energy variable, moving with the price of wholesale power. Since January, wholesale power prices in Germany fell 20 percent due to the coronavirus lockdowns, which resulted in an increase in the renewable surcharge. That surcharge has enabled the government to reach over 50 percent of the nation’s electricity capacity from wind and solar energy, but it will cost consumers about 26.2 billion euros ($29.4 billion) this year to support investors.

Chancellor Angela Merkel decided to aid power consumers by using government funds to cut the renewable surcharge fee by two cents per kilowatt hour next year that will cost about €11 billion, which is part of the country’s €100 billion economic recovery package.

The residential sector in Germany is suffering under the weight of the renewable surcharges, which is making residential electricity prices three times higher than those in the United States. While many advocates of renewable power want everyone to believe that renewable energy is economic, Germany’s electricity bills and methodology for covering the higher cost of renewable energy is proof that that is not the case.

U.S. Subsidization of Renewable Energy

In the United States, wind and solar power are subsidized by federal and state tax credits and mandates that over half the states have enacted which force wind and solar power into their generating systems. While the tax credits were supposed to be temporary to allow for a young industry to get off its feet, they have now been in place for 30 years—more than enough time for the industry to reach adulthood. The wind production tax credit has been extended a dozen times since 1999 and the Democrats in the House of Representatives want to extend it again under the guise of coronavirus. Only this time, they want to allow for the option of direct payments rather than a credit on investors’ taxes, which they believe will encourage investment. The U.S. Treasury estimates that the existing form of the Production Tax Credit will cost taxpayers $40.12 billion from 2018 to 2027, making it the most expensive energy subsidy under current tax law.

House of Representatives Proposal

House Speaker Nancy Pelosi and other Democratic leaders included extensions of tax breaks for the renewable energy industry as part of a $1.5 trillion infrastructure package. The infrastructure bill, called the Moving Forward Act, extends a tax break for onshore wind developers for five years and one for solar developers for six years. It would also allow those renewable energy companies to receive the credits as direct cash payments, rather than only being able to use them to lower their tax burden. The current subsidy system for wind and solar power is much better than the tax deductions which are familiar to most Americans who have mortgages and other deductible expenses. However, the proposal for direct payments would be even better, in that even companies that do not make any profit could get paid by taxpayers for their wind and solar investments.

The House proposal would extend the renewable production tax credit (PTC) in most cases for facilities that begin construction by the end of 2025. The PTC for onshore wind energy would remain at the current phase-out levels for 2019 and 2020—60 percent and 40 percent. The bill would extend a break for offshore wind facilities, which would be allowed to elect into the investment tax credit (ITC) and be exempt from the value reductions under the PTC that onshore wind projects face. This is probably because offshore wind is much more expensive than onshore wind, and is, in fact, one of the costliest forms of electrical generation.

The bill, H.R. 2, would also extend the ITC, which is phasing out of the code under a 2015 tax deal, similar to the phase out of the PTC. The ITC, which allows a tax credit of up to 30 percent of the cost of a project, is basically extended at full value for projects that break ground by the end of 2025, when it phases down over two years. For solar projects, the value would decrease to 26 percent in 2026, 22 percent in 2027 and 10 percent thereafter. The bill would also extend ITC eligibility to energy storage projects, which are needed as back-up for intermittent solar and wind projects if fossil fuels are no longer available to back them up. Storage systems are currently very expensive due to extensive use of advanced batteries and other electronics.

Conclusion

Wind and solar technologies are part of the generating system landscape due to government subsidization as described above. Further, politicians in both the United States and Germany are using the coronavirus pandemic as a means to prop up these industries more, by putting additional burden on taxpayers. Rather than propping up an expensive system, the system should be reformed to stand on its own, particularly given that the solar and wind industries and their advocates argue that they are now competitive with traditional generating technologies including fossil fuels, hydroelectric, and nuclear power. Hiding the costs of renewable technologies through consumer- and taxpayer-funded subsidies is not sustainable, and extending those subsidies to technologies made necessary by renewable energy’s inherent intermittency (storage technologies) is simply throwing good money after bad.

The post Germany, Like the U.S., Needs to Reform Its Renewable Power Approach appeared first on IER.

The Energy Update – Week of June 29, 2020

This week the team highlights new articles focusing on what is happening to America’s many oil & gas wells that have gone dormant due to the economic downturn, and issues with public transit usage during a global pandemic.

Links

• ARTICLE Does America Have an Orphan Well Problem on Its Hands?

• ARTICLE Public Transit Makes Me Sick

• BLOG IER’s latest analysis of COVID-19’s impacts on world energy

 

Institute for Energy Research · The Energy Update – Week of June 29, 2020

The post The Energy Update – Week of June 29, 2020 appeared first on IER.