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Research & Commentary: Pennsylvania’s Climate Action Plan is Punitive, Insignificant, and Unnecessary

May 9, 2019

A 1-4 Percent In Renewable Generation Raises Electricity Prices By 11-17 Percent

Pennsylvania Gov. Tom Wolf recently unveiled his Climate Action Plan, “a suite of strategies to reduce greenhouse gas emissions in Pennsylvania.” Among these strategies is a target goal of reducing greenhouse gas emissions 26 percent below 2005 levels by 2025 and 80 percent below 2005 levels by 2050. To achieve these goals, Wolf proposes expanding the state’s renewable energy mandate (REM) and Alternative Energy Portfolio Standard (AEPS).

Renewable mandates force expensive, heavily subsidized, and politically favored electricity sources such as wind and solar on ratepayers and taxpayers while providing few, if any, net environmental benefits. Even worse, these mandates disproportionally impact low-income households by raising their electric bills as well as the cost of all goods and services. Established in 2004, the Keystone State’s AEPS currently forces utilities to generate 18 percent of their electricity from “renewable” sources by 2021.

A 2019 working paper from the Energy Policy Institute at the University of Chicago shows REMs are dramatically increasing retail electricity prices and are a very expensive way to try to reduce carbon dioxide emissions. The authors found seven years after REMs are enacted, renewables’ share of electricity generation increases by only 1.8 percent. They also found REMs raise retail electricity prices by 11 percent. After 12 years and a 4.2 percent increase in renewables’ share of generation, these prices rise by 17 percent. Altogether, the total extra electricity costs of REMs to consumers in the states that have enacted REMs are $125.2 billion.

The study also reveals reducing carbon dioxide emissions through REMs ranges from $130 to $460 per ton of carbon dioxide abated. These increased costs are, at the low end, almost three times higher than the social cost of carbon estimated by the Interagency Working Group set up by the Obama administration, which is roughly $46 per ton for 2020. (It should be noted whether there is a “social cost” to carbon dioxide emissions at all is debatable.)

The findings of this study are not surprising and have been mirrored elsewhere. In just 12 states, the total net cost of renewable mandates was $5.76 billion in 2016 and will rise to $8.8 billion in 2030, a 2016 study revealed. A 2014 study by the left-leaning Brookings Institution found replacing conventional power with wind power raises electricity prices 50 percent and replacing conventional power with solar power triples electricity costs.

The American Action Forum estimates the costs of moving the entire country to 100 percent renewable sources would be around $5.7 trillion. Moreover, a 2019 brief from the Institute for Energy Research estimates the idea of getting to 100 percent renewable generation is “nothing more than a myth,” and attempting to do so would be a “catastrophe” for our country.

It should come as no surprise that states with these mandates had electricity prices 26 percent higher than those without. The 29 states with renewable energy mandates (plus the District of Columbia) had average retail electricity prices of 11.93 cents per kilowatt hour (cents/kWh), according to the U.S. Energy Information Administration. On the other hand, the 21 states without renewable mandates had average retail electricity prices of only 9.38 cents/kWh.

The governor’s Climate Action Plan is simply unnecessary, as greenhouse gas emissions are dropping steadily in the United States, with the main catalyst being the increased use of natural gas for energy consumption. Greenhouse gas emissions are at their lowest level since 1992 and are down 12 percent since 2005, according to the U.S. Environmental Protection Agency. This comes as oil and natural gas production, the latter of which Pennsylvania has a large stake in, has increased by 80 percent and 51 percent, respectively.

The higher energy costs guaranteed by a switch from fossil fuels to higher-cost “renewable” electricity sources, such as wind or solar, lead to slower economic growth. Affordable energy is the key to economic growth and the production of virtually all goods and services. Expansion of the Alternative Energy Portfolio Standard would make everything more expensive for working families in Pennsylvania, raise costs for businesses, and have an insignificant effect on global carbon dioxide emissions. Lawmakers should repeal it, not expand it.

The following documents provide more information about renewable energy mandates and fossil fuels.

Do Renewable Portfolio Standards Deliver?
https://bfi.uchicago.edu/working-paper/do-renewable-portfolio-standards-deliver/
This working paper from the Energy Policy Institute at the University of Chicago finds that average retail electricity prices in states after the passage of a renewable energy mandate are 11 percent higher after seven years and 17 percent higher after a dozen years, even though the increase in renewable electricity generation is a minimal 1-4 percent. Reducing carbon dioxide emissions in this fashion costs between $130 and $460 per metric ton.

The 100 Percent Renewable Energy Myth
https://www.instituteforenergyresearch.org/wp-content/uploads/2019/02/Renewable-Myth-Policy-Brief219.pdf
This Policy Brief from the Institute for Energy Research argues that a countrywide 100 percent renewable plan would put the U.S. economy in jeopardy. The brief investigates the intermittency, land requirements, capacity factors, and cost of transition and construction materials that limit the ability of the U.S. to adapt to 100 percent renewable energy.

Legislating Energy Poverty: A Case Study of How California’s and New York’s Climate Change Policies Are Increasing Energy Costs and Hurting the Economy
https://www.pacificresearch.org/wp-content/uploads/2018/12/LegislatingEnergy_F_Web.pdf
This analysis from Wayne Winegarden of the Pacific Research Institute shows the big government approach to fighting climate change taken by California and New York hits working class and minority communities the hardest. The paper reviews the impact of global warming policies adopted in California and New York, such as unrealistic renewable energy goals, strict low carbon fuel standards, and costly subsidies for buying higher-priced electric cars and installing solar panels. The report finds that, collectively, these expensive and burdensome policies are dramatically increasing the energy burdens of their respective state residents.

The U.S. Leads the World in Clean Air: The Case for Environmental Optimism
https://files.texaspolicy.com/uploads/2018/11/27165514/2018-11-RR-US-Leads-the-World-in-Clean-Air-ACEE-White.pdf
This paper from the Texas Public Policy Foundation examines how the United States achieved robust economic growth while dramatically reducing emissions of air pollutants. The paper states that these achievements should be celebrated as a public policy success story, but instead the prevailing narrative among political and environmental leaders is one of environmental decline that can only be reversed with a more stringent regulatory approach. Instead, the paper urges for the data to be considered and applied to the narrative.

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.

Ten State Solutions to Emerging Issues
https://www.heartland.org/publications-resources/publications/ten-state-solutions-to-emerging-issues-2018
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
https://www.heartland.org/publications-resources/publications/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
https://www.heartland.org/publications-resources/publications/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
https://www.heartland.org/publications-resources/publications/less-carbon-higher-prices-how-californias-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. 

 

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.

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 Arianna Wilkerson, a state government relations manager at The Heartland Institute, at awilkerson@heartland.org or 312/377-4000.