Are state-level renewable-energy laws good policy? No!

There are two reasons why states and environmental advocates have promoted “renewable portfolio standards (RPS).” First, a concern that we would run out of natural gas. Second, a belief that CO2 emissions must be reduced to avoid adverse climate change. Neither reason withstands close scrutiny. The evidence is unmistakingly clear, renewable mandates are a back door tax on energy.

About a decade ago, it was believed that natural gas production was in serious decline and that the US would have to turn to imports to meet our electric power needs. In less than a decade, that forecast was turned on its head, thanks to technology, “fracking”, and horizontal drilling. The US now has an abundance of natural gas reserves, enough to meet our needs for a century. Scarcity is not a consideration.

Since the late 1980s, the public has been told that growing emissions of CO2 were going to cause unprecedented increases in global temperatures and those would lead to catastrophic climate
events. Over the past 25 years, the predictions of dread keep being pushed further into the future and for the past 16 years there has been no significant increase in global temperature. In spite of a erosion in the science underlying the climate orthodoxy, its supporters remain undeterred in their anti-fossil energy agenda. Indeed, as their foundation has collapsed, they have become increasingly shrill and virulent in attacks on”skeptics”.

29 states and the District of Columbia have jumped on the RPS bandwagon and sure enough the effect has been rising electricity prices. Robert Bryce of the Manhattan Institute has analyzed electricity prices in both RPS states and states without such mandates drawing on EIA price data. The Manhattan analysis “revealed a pattern of mostly higher costs in states with RPS mandates:
In 2010, the average price of residential electricity in RPS states was 31.9 percent higher than it was in non-RPS states. Commercial electricity rates were 27.4 percent higher, and industrial rates were 30.7 percent higher.

In the ten-year period between 2001and 2010—the period during which most of the states enacted their RPS mandates—residential and commercial electricity prices in RPS states increased
at faster rates than those in non-RPS states.

Of the ten states with the highest electricity prices, eight have RPS mandates.

Of the ten states with the lowest electricity prices, only two have RPS mandates.

Sixteen of the 18 states with residential rates that are higher than the 2010 U.S. average residential rate are RPS states.

Nineteen of the 21 non-RPS states have residential rates that are below the U.S. average.”

These results should not be surprising. Since the alternatives of choice– wind and solar—are intermittent as well as more expensive, base load capacity has to be maintained for times when the wind stops blowing and clouds block sunlight. Higher costs were predicted by the Congressional Budget Office in a study that concluded, renewable standards “would raise the overall cost of producing electricity in the United States”. … An RES or CES would induce them(generators) to alter that mix and produce electricity in a more costly manner… .”

Because of the importance of electricity to both industrial and residential users the impact of higher costs is significant. Analyses by groups like the Heritage Foundation and Center for Data Analysis conclude that mandates would, “Raise electricity prices by 36 percent for households and 60 percent for industry; Cut national income (GDP) by $5.2 trillion between 2012 and 2035; Cut national income by $2,400 per year for a family of four; Reduce employment by more than 1,000,000 jobs; and Add more than $10,000 to a family of four’s share of the national debt by 2035”.

While RPS proponents dismiss such analyses as being, too conservative, or bought by industry, they are borne out by EU experience. Most of the EU nations that have pursued an energy policy driven by renewable energy mandates have seen electricity prices soar—the price per Kwh in Germany is almost three time higher than the average price in the US—have seen a flight of private capital, and have remained on the brink of recession.

The US has been meddling in energy markets for 40 years and still has not learned to let markets work, that unintended consequences often far outweigh desired benefits, and that doubling down on bad policy doesn’t make good policy.

 

This article appeared on the National Journal’s Energy Insiders weblog at https://disqus.com/by/wokeefe/

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