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Research & Commentary: Renewables Energy Standard Expansion Would Cost Minnesotans Billions

March 15, 2019

Bills Would Set Up An 80 Percent Mandate By 2035

Companion legislation in the Minnesota legislature would expand the state’s renewable energy mandate (REM), officially known as the Renewables Energy Standard. The bills would force state utilities to produce 80 percent of their electricity generated by “renewable” sources by 2035, or 85 percent by 2035 if that utility “owned a nuclear generating facility” starting in 2007.

Minnesota’s Renewables Energy Standard, established in 2007, already forces Xcel Energy, the state’s largest provider, to generate 31.5 percent of its electricity from “renewable” sources by 2020. Other utilities must generate 25 percent from renewable sources by 2025.

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.

Unsurprisingly, in states with REMs, energy rates are rising twice as fast as the national average and states with renewable 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 just 9.38 cents/kWh.

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. 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. 

Closer to home, a recent in-depth study from the Center of the American Experiment found just a 50 percent REM would result in more than $24 billion in additional costs by 2030 and $80 billion in additional costs by 2050 compared to 2016 costs. Through 2050, household electricity costs would rise by $375 per year and total costs would rise by $1,200 per household. The study also estimates this mandate expansion would cost Minnesota more than 29,000 jobs by 2050 and reduce the state’s GDP by $3.1 billion. All of this just to reduce Minnesota’s share of global carbon-dioxide emissions by a miniscule 0.0006 percent by 2100.  

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. Expansion of REMs would make everything more expensive for working families in Minnesota, raise costs for businesses, and have an insignificant effect on global carbon dioxide emissions. For the good of all Minnesotans, legislators should reject any expansion of the Renewables Energy Standard and instead move to abolish it altogether.

The following documents provide more information about renewable energy mandates.

Doubling Down on Failure: How a 50 Percent by 2030 Renewable Energy Standard Would Cost Minnesota $80.2 Billion
https://www.americanexperiment.org/2019/03/american-experiment-releases-groundbreaking-new-study-high-cost-renewable-energy-mandates-minnesota/
This study from the Center of the American Experiment finds that attempting to achieve a 50 percent renewable energy mandate would cost Minnesota $80.2 billion through 2050. It argues if state lawmakers enact a 50 percent renewable energy mandate, they will be doubling down on a failed and expensive policy that imposes significant harm on Minnesota families and businesses with negligible environmental benefits.

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 Lindsey Stroud, a state government relations manager at The Heartland Institute, at lstroud@heartland.org or 312/377-4000.