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Research & Commentary: Renewable Energy Mandate Would Be Too Costly for Low-Income Virginians

February 6, 2020

Bill Would Set Up A 100 Percent Mandate By 2050

Legislation in the Virginia House of Delegates would establish a renewable energy mandate (REM) in the Old Dominion. The Virginia Clean Economy Act would force state utilities to produce 14 percent of their electricity generated from “renewable” sources in 2021, gradually increasing the mandate to 41 percent in 2030 and then to 100 percent by 2050.

Renewable energy mandates, also known as renewable portfolio standards, 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.

2019 working paper from the Energy Policy Institute at the University of Chicago showed REMs are dramatically increasing retail electricity prices and are a very expensive way to try to reduce carbon dioxide emissions. According to the study, seven years after REMs are enacted, renewables’ share of electricity generation increases by only 1.8 percent. The authors 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 an REM are $125.2 billion.

The study also reveals reducing carbon dioxide emissions through an REM costs $130 - $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 that whether there is a “social cost” to carbon dioxide emissions at all is debatable.

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.

Unsurprisingly, in states with REMs, energy rates are rising twice as fast as the national average and states with renewable mandates had electricity prices 29 percent higher than those without. The 29 states with renewable energy mandates (plus the District of Columbia) had average retail electricity prices of 12.39 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 just 9.54 cents/kWh. Only two states without an REM, Alaska and Kansas, had retail prices above the U.S. average of 10.48 cents/kWh, and it should be noted that Kansas had a renewable mandate in place, which was repealed in 2015.

All this data is significant because roughly 870,000 Virginians live in poverty, and the average Virginia resident at or below the poverty line spends around a quarter of their take home pay on energy costs.

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 productivity growth and the production of virtually all goods and services. Enacting a renewable energy mandate would make everything more expensive for working families in Virginia, raise costs for businesses, and have an insignificant effect on global carbon dioxide emissions. For the good of all Virginians, legislators should reject any bill that would establish a renewable energy mandate of any size, especially one so quixotic as to require 100 percent renewable generation.

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.

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.

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.

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’s authors found 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. The paper urges for the data to be considered and applied to the narrative.

Policy Brief: The Green New Deal: A Grave Threat to the American Economy, Environment, and Freedom
https://www.heartland.org/_template-assets/documents/publications/GreenNewDealPB.pdf
The Heartland Policy Brief argues the Green New Deal is a dangerous combination of environmental extremism and socialism. The tremendously expensive proposal would devastate the U.S. economy and cause more environmental destruction than protection. The provisions of the Green New Deal pose a dangerous threat to the American values of individual freedom and limited government. 

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 and cost-benefit analysis.

 

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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