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Research & Commentary: Maryland Renewable Portfolio Mandate

October 13, 2014

Maryland’s renewable portfolio mandate, also known as a renewable power mandate, requires utilities in the state to procure from renewable sources 20 percent of the electricity they supply to retail customers by 2022.

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Maryland’s renewable portfolio mandate, also known as a renewable power mandate, requires utilities in the state to procure from renewable sources 20 percent of the electricity they supply to retail customers by 2022.

The law categorizes qualifying renewable sources into two tiers. Tier I sources include solar, wind, geothermal, ocean energy, qualifying biomass, fuel cells powered by methane or biomass, methane from the anaerobic decomposition of organic materials in a landfill or a wastewater treatment plant, small (less than 30 megawatts in capacity) hydroelectric plants in operation as of 2004, and poultry-litter incineration facilities. Tier II fuels are hydropower other than pump-storage generation, and waste-to-energy facilities.

Legislators have added two arbitrary quotas, or “carve-outs,” for solar power and offshore wind power. The solar carve-out requires at least 2 percent of utilities’ energy sales to be generated from solar by 2022. The offshore wind carve-out is to be determined in the “near future,” with the final number likely to be set at no more than 2.5 percent of retail electricity sales in 2017 and beyond.

Maryland’s RPM sets a graduated compliance schedule for Tier I, Tier II, and the solar carve-out. It specifies a noncompliance penalty of 2.0¢/kWh for non-solar Tier 1 shortfalls, 1.5¢/kWh for Tier 2 shortfalls, and 40¢/kWh for solar energy shortfalls (decreasing to 5¢/kWh in 2023 and thereafter).

According to the Institute for Energy Research, as of 2009 Maryland was not on track to meet the RPM of 20 percent by 2022.

An April 2014 report by the Beacon Hill Institute at Suffolk University found Maryland’s RPM will cause electricity prices to be 6 percent higher by 2022 than they otherwise would be. The RPM will cost 3,395 jobs and increase the average household electricity bill by $75 per year.

Maryland’s RPM is less effective than other states’ at reducing carbon dioxide emissions because of the carve-outs for wind and solar, which the Brookings Institution has found are the two least cost-effective low-CO2 emissions technologies available.

Rolling back the Maryland RPM would help attract business investment, create jobs, and make energy more affordable for consumers. At minimum state lawmakers should consider repealing the carve-out for solar power, which research shows produces far fewer benefits per dollar spent than other low-emissions technologies, such as hydroelectric, nuclear, and gas combined cycle technologies.

The following documents provide additional information about renewable energy and the policies that promote it.

 

Ten Principles of Energy Policy
http://heartland.org/policy-documents/ten-principles-energy-policy
Heartland Institute President Joseph Bast outlines the ten most important principles for policymakers confronting energy issues, providing guidance to help deal with ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography. 

The Economic Impact of Maryland’s Renewable Energy Standard
http://heartland.org/policy-documents/economic-impact-marylands-renewable-energy-standard
An April 2014 report from the Beacon Hill Institute at Suffolk University estimates Maryland’s renewable portfolio mandate will raise electricity prices by 6 percent by 2022, cost an average of 3,395 jobs, and increase the average household electricity bill by $75 per year.

The Status of Renewable Electricity Mandates in the States
http://heartland.org/policy-documents/status-renewable-electricity-mandates-states
The Institute for Energy Research analyzed the practical effects of renewable electricity mandates and found states with mandates have on average 40 percent higher electricity rates than those without such mandates. 

Study of the Effects on Employment of Public Aid to Renewable Energy Sources
http://heartland.org/policy-documents/study-effects-employment-public-aid-renewable-energy-sources
Researchers at King Juan Carlos University in Spain found each “green job” created in Spain cost about $750,000. Electricity rates would have to be increased by 31 percent to account for the additional costs of renewables. 

How Less Became More: Wind, Power and Unintended Consequences in the Colorado Energy Market
http://heartland.org/policy-documents/how-less-became-more-wind-power-and-unintended-consequences-colorado-energy-market
Bentek Energy, LLC, a leading energy markets information company, evaluates the “must take” provisions of Colorado’s renewable portfolio mandate, which forces coal plants to accommodate the intermittency of wind power by “cycling” generating units. The report finds the requirement creates inefficiency and produces significantly greater emissions. 

Wind Farms vs. Wildlife
http://heartland.org/policy-documents/wind-farms-vs-wildlife
Clive Hambler, lecturer in biological and human sciences at Oxford University and a trained zoologist specializing in species extinction, describes the extent to which wind turbines kill wildlife. 

Five Things CEOs Are Worried About in 2014
http://blogs.wsj.com/five-things/2014/01/03/5-things-ceos-are-worried-about-in-2014/
The Wall Street Journal outlines five things CEOs are worried about that are outside their control, listing “Keeping Energy Costs Under Control” as number one. The information was polled from the Wall Street Journal CEO Council, a group of 33 CEOs, some from the country’s biggest companies. 

Why Is Renewable Energy So Expensive?
http://www.economist.com/blogs/economist-explains/2014/01/economist-explains-0
A brief but useful essay in a January 2014 blog post for The Economist explains countries with the most renewable power generation also have the highest electricity prices, and government efforts to abate this problem have been unsuccessful. The author notes high electricity prices may force many manufacturers to set up in less “green” countries, which “might mean citizens end up consuming more carbon, through imports.” Such unintended consequences make the construction of more gas-fired power stations a superior strategy for cutting greenhouse gas emissions without raising electricity prices, the author concludes.  

A Global Transition to Renewable Energy Will Take Many Decades
http://www.scientificamerican.com/article.cfm?id=a-global-transition-to-renewable-energy-will-take-many-decades
Writing for Scientific American in January 2014, scientist and policy analyst Vaclav Smil notes, “[In the] U.S. and around the world, each widespread transition from one dominant fuel to another has taken 50 to 60 years.” Smil notes there are plenty of reasons to want to reduce dependence on fossil fuels, beyond greenhouse gas emissions, but current environmental policies “have been dismal.” Smil suggests the best way to foster an energy transition is to “avoid picking energy winners,” because such policies distort all-important investment and price signals and impede economic progress. 

IER Expert Testifies on Ohio’s Alternative Energy Standard
http://heartland.org/policy-documents/ier-expert-testifies-ohios-alternative-energy-standard
Testimony prepared by Travis Fisher, an economist at the Institute for Energy Research, examines the natural physical limitations of wind and solar power, arguing they might not be the technologies of the future simply because of a lack of scalability rather than a lack of subsidies.  

How Wind and Solar Power Are Polluting the Commons
http://seekingalpha.com/article/938671-how-wind-and-solar-power-are-polluting-the-commons
Private lawyer and accountant John Petersen states our nation’s electric grid is an essential commons no less important to an industrial society than our air or water. Regarding renewable power sources, he writes, “the electric current they generate is inherently unreliable and intermittent, which makes it fundamentally destabilizing to the grid. That introduction of massive intermittency into a system that requires absolute stability is, by definition, pollution.”  

Why the Best Path to a Low-Carbon Future Is Not Wind or Solar Power
http://www.brookings.edu/blogs/planetpolicy/posts/2014/05/20-low-carbon-wind-solar-power-frank
Charles Frank, a nonresident senior fellow at the Brookings Institution, reports on his research on low-CO2 energy alternatives. Frank finds natural gas combined cycle is the cheapest low-CO2 energy alternative, even cheaper per kWh than power from coal or gas simple cycle plants. The most expensive alternatives are solar and wind. Frank says gas combined cycle, nuclear, and hydroelectric are the most cost-effective options for transitioning to a low-CO2 future.

 

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 and other topics, visit the Environment & Climate News Web site at http://news.heartland.org/energy-and-environment, The Heartland Institute’s Web site at http://www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org

The Heartland Institute can send an expert to your state to testify or brief your caucus, host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Logan Pike, Heartland’s state government relations manager, at lpike@heartland.org or 312/377-4000.

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Taylor Smith was a policy analyst for The Heartland Institute specializing in energy, climate, and environmental regulation. He is coauthor with James M.
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