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Research & Commentary: Expanded Renewable Power Mandate Would Be Too Costly for Arizona

October 31, 2018

Expanded Mandate Could Cost $38 Billion In GSP Through 2060

This November, Arizona voters will consider Proposition 127, the Renewable Energy Standards Initiative. The ballot initiative, backed and funded by California billionaire and climate alarmist Tom Steyer through NextGen Climate Action and Clean Energy for a Healthy Arizona, would mandate Arizona utilities acquire 50 percent of their electricity generation from renewable sources by 2030. Arizona’s current mandate, the Renewable Energy Standard (RES), was established in 2006 and requires Grand Canyon State utilities generate 15 percent of their electricity from renewable sources by 2025.

Renewable power mandates—often referred to as “renewable portfolio standards”—force expensive, heavily subsidized, and politically favored electricity like wind and solar on ratepayers and taxpayers while providing few, if any, net environmental benefits.

How heavily subsidized are these “renewable” sources? Per unit of energy produced, the wind industry receives a $35.33 per megawatt hour (MWh) in federal subsidies. The solar industry receives a whopping $231.21/MWh. By contrast, the coal and petroleum industries receive just $0.57/MWh and $0.67/MWh, respectively. Even with these generous subsidies, the high costs of generating wind and solar power mean renewable power would comprise very little, if any, electricity sales without renewable power mandates. A study by the liberal Brookings Institution found replacing conventional power with wind power raises electricity prices 50 percent, and replacing conventional power with solar power triples electricity costs.

Unsurprisingly, in states with renewable power mandates, energy rates are rising twice as fast as the national average. In just 12 states, the total net cost of the renewable mandates was $5.76 billion in 2016 and will rise to $8.80 billion in 2030, a 2016 study revealed. Tucson Electric Power estimates the renewable mandate would raise its residential customers’ electricity bills by more than $500 per year.

An impact report from the Seidman Research Institute at Arizona State University estimates the passage of Proposition 127 would reduce Arizona’s Gross State Product by $36.8 billion through 2060. The analysis also estimates up to 305,000 job years would be lost over this timeframe, including 280,000 job years in “private, non-farm firms.” Arizona residents would also have $23 billion less in disposable income through 2060.

Environmentally, a study of Phoenix-area air quality undertaken by NERA Economic Consulting concluded that if Proposition 127 were to pass, it could not “be expected to improve reported levels of ozone pollution in areas where most Arizonans live because it targets power plant emissions that, in total, already have very little impact on the Phoenix area’s ozone levels (based on the average over all high ozone days), and which the Initiative would reduce by only a miniscule amount …The vast majority of ozone in the Phoenix area is due to uncontrollable sources …and vehicles, not the [electric generating unit] emissions that would be potentially affected by the Initiative. Thus, the Initiative has little prospect of altering the determination of Arizona’s attainment status for the national health standard for ozone, nor will it result in any measurable reduction in asthma rates.”

In the welcome event voters reject Proposition 127 this November, Arizona legislators would do well to repeal the costly and inefficient Renewable Energy Standard altogether. Eliminating RES would reduce electricity prices, raise living standards, stimulate long-term economic growth, and create jobs—which would substantially benefit all Arizonans.

The following documents provide more information about renewable mandates.

Evaluating the Costs and Benefits of Renewable Portfolio Standards
This paper by Timothy J. Considine, a distinguished professor of energy economics at the School of Energy Resources and the Department of Economics and Finance at the University of Wyoming, examines the renewable portfolio standards (RPS) of 12 different states and concludes while RPS investments stimulate economic activity, the negative economic impacts associated with higher electricity prices offset the claimed economic advantages of these RPS investments.

The Economic Impact of the Clean Energy for a Healthy Arizona Proposal on Arizona’s Economy, 2018-2060
The purpose of this summary report from the Seidman Research Institute at Arizona State University is to estimate the impact of the Clean Energy for the State of Arizona proposal, Proposition 127, on the Arizona economy. Seidman estimates the Arizona economy would lose $36,8 billion in GSP through 2060, as well as up to 305,000 job years of employment, while Arizona residents would see $23 billion less in disposable income.

Potential Impacts on Phoenix Area Ozone Air Quality from a Proposed Renewable Energy Ballot Initiative
This NERA Economic Consulting study concludes the passage of Proposition 127 cannot be expected to improve reported levels of ozone pollution in areas where most Arizonans live because it targets power plant emissions that, in total, already have very little impact on the Phoenix area’s ozone levels (based on the average over all high ozone days), and which the Initiative would reduce by only a miniscule amount.

Ten State Solutions to Emerging Issues
This Heartland Institute booklet explores solutions to the top public policy issues facing the states in 2018 and beyond in the areas of budget and taxes, education, energy and environment, health care, and constitutional reform. The solutions identified are proven reform ideas that have garnered significant support among the states and with legislators.

The Social Benefits of Fossil Fuels
This Heartland Policy Brief by Joseph Bast and Peter Ferrara documents the many benefits from the historic and still ongoing use of fossil fuels. Fossil fuels are lifting billions of people out of poverty, reducing all the negative effects of poverty on human health, and vastly improving human well-being and safety by powering labor-saving and life-protecting technologies, such as air conditioning, modern medicine, and cars and trucks. They are dramatically increasing the quantity of food humans produce and improving the reliability of the food supply, directly benefiting human health. Further, fossil fuel emissions are possibly contributing to a “Greening of the Earth,” benefiting all the plants and wildlife on the planet.

Climate Change Reconsidered II: Fossil Fuels – Summary for Policymakers
In this fifth volume of the Climate Change Reconsidered series, 117 scientists, economists, and other experts assess the costs and benefits of the use of fossil fuels by reviewing scientific and economic literature on organic chemistry, climate science, public health, economic history, human security, and theoretical studies based on integrated assessment models (IAMs) and cost-benefit analysis (CBA).

Less Carbon, Higher Prices: How California’s Climate Policies Affect Lower-Income Residents
This study from Jonathan Lesser of the Manhattan Institute argues California’s clean power regulations, including the state’s renewable power mandate, is a regressive tax that harms impoverished Californians more than any other group. 

Research & Commentary: Higher State Support for Green Energy Increases Energy Costs for Consumers
Heartland Institute Policy Analyst Tim Benson discusses an analysis by the Daily Caller News Foundation (DCNF), which found, “States which offered rebates, buy-back programs, tax exemptions and direct cash subsidies to green energy were 64 percent more likely to have higher than average electric bills. For every additional pro-green energy policy in a state, the average price of electricity rose by about .01 cents per kilowatt-hour.”

The Status of Renewable Electricity Mandates in the States
The Institute for Energy Research finds states with renewable electricity mandates have on average 40 percent higher electricity rates than those without such mandates. 

What Happens to an Economy When Forced to Use Renewable Energy?
The Manhattan Institute conducted an economic analysis of the effects renewable portfolio standards (RPS) had on the average price of electricity in states with mandates compared to those without mandates. The study found residential and commercial electricity rates were significantly higher in states with RPS mandates than in states without them. 


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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