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Research & Commentary: Ohio Renewable Energy Mandate Freeze Deserves to be Extended

November 15, 2016

AEPS Will Elevate Ohio Electricity Costs By $1.92 Billion Through 2026

The Ohio General Assembly is expected to consider a proposal that would continue an existing freeze on the state’s renewable power mandate.

The Alternative Energy Portfolio Standard (AEPS) was passed into law in 2008 and requires utility companies in the Buckeye State to derive 25 percent of their energy from alternative sources by 2025. Half of this mandate would need to be met using renewable energy, such as wind and solar power, while the other half would come from “any new, retrofitted, refueled, or repowered generating facility located in Ohio.” In 2014, the General Assembly passed a temporary, two-year freeze on the mandate, but it is set to expire at the beginning of 2017.

The current proposal would continue the temporary freeze on AEPS through 2019, upon which the mandate’s benchmarks would be phased in gradually until they max out in 2027. A separate bill introduced in the state’s House of Representatives in May 2016 would permanently implement this freeze, although Gov. John Kasich (R) has said that he would veto any bill that eliminates AEPS.

Even a temporary freeze represents an important step in reducing prices for electricity consumers and strengthening the Ohio’s economy, because AEPS would force utility companies to purchase electricity from less-reliable and more-expensive sources, causing prices to increase throughout the economy. 

Essentially, renewable portfolio standards – often referred to as “renewable power mandates” or “renewable energy mandates” – force expensive, heavily subsidized electricity on ratepayers and taxpayers while providing few if any net environmental benefits. The wind and solar power forced upon consumers by renewable power mandates is extremely expensive. A 2014 study by the Brookings Institution found wind power is twice as expensive as the conventional power it replaces. The same study found solar power is three times as expensive as conventional power. These higher costs impose real burdens on electricity consumers: Retail electricity prices in states with renewable power mandates are rising twice as fast as the national average.

An April 2015 peer-reviewed study on AEPS from the Institute of Political Economy at Utah State University found the program would result in $1.92 billion in elevated electricity costs for Ohio consumers through 2026. These findings were reinforced by a 2011 study by the Beacon Hill Institute, which found the mandate will cause Ohio to lose 9,753 jobs by 2025 and cost Ohio energy consumers $8.6 billion in higher prices between 2016 and 2025, including more than $1.4 billion in 2025 alone.

Higher electricity prices are not limited to Ohio. A 2012 study by the Manhattan Institute found the average price of residential electricity in RPS states was 31.9 percent higher than in non-RPS states in 2010. Commercial electricity rates were 27.4 percent higher, and industrial rates were 30.7 percent higher. Higher residential electricity prices unfairly increase the cost of keeping the lights on for seniors and low-income families least able to afford higher prices, and raising the costs for job-creators results in higher unemployment and less overall economic activity.

By lowering electricity prices, repealing renewable energy mandates will raise living standards, stimulate long-term economic growth, and create a substantial increase in net jobs. These proposals represent a step toward keeping electricity costs from skyrocketing due to AEPS and show how these mandates raise consumer prices. Ultimately, however, consumers will only be able to experience real relief when these mandates are repealed. 

The following documents provide more information about renewable energy mandates.

Renewable Portfolio Standards: Ohio
https://www.heartland.org/publications-resources/publications/renewable-portfolio-standards-ohio
This peer-reviewed study from the Institute of Political Economy at Utah State University details the high costs of Ohio’s renewable energy mandates, which include lost jobs, lower incomes, and higher energy costs. The study’s authors note it will cost electric power consumers $1.92 billion by 2026.

The Cost and Economic Impact of Ohio’s Alternative Energy Portfolio Standard
http://www.atinstitute.org/the-cost-and-economic-impact-of-ohio’s-alternative-energy-portfolio-standard/
The American Tradition Institute and Beacon Hill Institute conducted an economic analysis of the effects of Ohio’s Alternative Energy Portfolio Standard, finding it will decrease real wages, increase the cost of electricity, destroy jobs, and reduce investment – all without measurably increasing environmental protection. 

Evaluating the Costs and Benefits of Renewable Portfolio Standards
https://www.heartland.org/publications-resources/publications/evaluating-the-costs-and-benefits-of-renewable-portfolio-standards?source=policybot
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.

Research & Commentary: Higher State Support for Green Energy Increases Energy Costs for Consumers
https://www.heartland.org/publications-resources/publications/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 High Cost of Renewable-Electricity Mandates
https://www.heartland.org/publications-resources/publications/the-high-cost-of-renewable--electricity-mandates-1
The Manhattan Institute conducted an economic analysis of the effects renewable portfolio standards had on the average price of electricity in states with mandates as compared to those without mandates. The study found residential and commercial electricity rates were significantly higher in states with RPS mandates than in those that did not have them.

The Status of Renewable Electricity Mandates in the States
https://www.heartland.org/publications-resources/publications/the-status-of-renewable-electricity-mandates-in-the-states?source=policybot
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? 
https://www.heartland.org/publications-resources/publications/issues-2016-what-happens-to-an-economy-when-forced-to-use-renewable-energy?source=policybot
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. 

Study of the Effects on Employment of Public Aid to Renewable Energy Sources
https://www.heartland.org/publications-resources/publications/study-of-the-effects-on-employment-of-public-aid-to-renewable-energy-sources?source=policybot
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 cost of renewables. 

 

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 website of Environment & Climate News at https://www.heartland.org/publications-resources/newsletters/environment-climate-news, The Heartland Institute’s website at http://www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.heartland.org/policybot.

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 Nathan Makla, Heartland’s state government relations manager, at nmakla@heartland.org or 312/377-4000.

Author
Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.
TBenson@heartland.org
Author
Isaac Orr is a research fellow for energy and environment policy at The Heartland Institute. Orr is a speaker, researcher, and writer specializing in hydraulic fracturing, frac sand mining, agricultural, and environmental policy issues.
iorr@heartland.org