Study: Renewable Power Mandates Drives Up Electricity Prices

Study: Renewable Power Mandates Drives Up Electricity Prices
April 9, 2012

States that have imposed renewable power mandates during recent years are seeing electricity prices rise dramatically, reports a newly published study by the nonpartisan Manhattan Institute. 

The rising electricity prices are most dramatic in seven coal-producing states that have nevertheless “diversified” their electricity with renewable power mandates. In these states, electricity prices rose 54 percent between 2001 and 2010.

‘Starkly Higher Rates’

“To be sure, the mandates aren't the only reason that electricity costs are rising—increased regulation of coal-fired power plants is also a major factor—and it is difficult to isolate the cost of the renewable mandates without rigorous cost-benefit analysis by the states,” Manhattan Institute senior fellow Robert Bryce writes in the study’s executive study. “That said, our analysis of available data has revealed a pattern of starkly higher rates in most states with RPS [renewable power standard] mandates compared with those without mandates. The gap is particularly striking in coal-dependent states—seven such states with RPS mandates saw their rates soar by an average of 54.2 percent between 2001 and 2010, more than twice the average increase experienced by seven other coal-dependent states without mandates.” 

Higher Prices Stifle Economy

The study notes proponents of renewable power mandates claim forcing consumers to purchase power from alternative sources such as wind and solar will “reduce harmful emissions and spur job growth, by stimulating investment in green technologies.” But this and other studies show just the opposite happening.  

“Renewable energy mandates force generally more expensive and less reliable energy onto the electricity grid. This is already causing electricity rates to rise. In addition, mandates are forcing the need for additional investments and thus costs on ratepayers to integrate inconsistent energy sources on the electricity grid,” said Todd Wynn, the Energy, Environment, and Agriculture Task Force Director at the American Legislative Exchange Council.

Jon Entine, a visiting fellow at the American Enterprise Institute, says there are many studies demonstrating the negative effects of renewable energy on jobs and the economy. Entine points to Germany and Spain as examples.  

“Look at Germany, which has offered solar energy subsidies since the early 1990s. As a result, Germany’s installed solar power generation capacity increased by more than 60 percent in 2009 alone—a-nd created a market disaster. The subsidy turned out to be 10 times higher than the market price for conventionally produced electricity. An independent study by RWI Essen, a nonpartisan research institute, estimated the cost per job created in the photovaltaic industry at a mindboggling $271,000,” he said.  

“Spain introduced rich subsidies in 2007, and within a year, half of global solar installations were in that country. Today, the market has collapsed, dogged by inefficiencies. Factories have been shuttered, and tens of thousands of workers are now walking the streets,” Entine added. 

California Most Restrictive

California has adopted the most stringent requirements of all states with renewable power mandates, requiring 33 percent of electricity purchased in the state to come from renewable sources by 2020. Outside New York, New Jersey, and New England, which are highly dependent on expensive nuclear power, California already has the highest electricity prices in the continental United States, the U.S. Energy Information Administration reports.

Oregon Suffering

Renewable energy mandates are affecting about two-thirds of the U.S. population’s electricity bills, according to the study. 

In Oregon, for example, after the legislature passed a bill requiring large utilities to obtain 25 percent of their electricity from non-hydro renewable projects by 2025, Pacific Power, which supplies electricity to 555,000 customers in Oregon, hiked its rates by 14.5 percent in 2011.  Costs Outweigh Benefits“Every energy source has an impact on the environment, including sources like wind and solar. The key is the balance between the benefits of affordable and reliable power and the environmental impact of that power source,” Wynn explained.

“Access to affordable and reliable energy leads to economic development, which is intricately tied to the standard of living and health of citizens. Increasing the price of electricity will have profound negative effects on the standard of living of state citizens and will affect poorer households even more as a larger percentage of their budget goes to energy costs,” said Wynn.

Alyssa Carducci (ad.carducci@gmail.com) writes from Tampa, Florida. 

Internet Info:

Robert Bryce, “The High Cost of Renewable-Electricity Mandates,” Manhattan Institute for Policy Research: http://www.manhattan-institute.org/html/eper_10.htm