Research & Commentary: Renewables Portfolio Standard Expansion Would Disproportionally Harm Low-Income New Mexicans
State Utilities Would Be Forced To Generate 80 Percent Of Electricity From Renewable Sources By 2045
Companion legislation introduced in the New Mexico Legislature would expand the state’s renewable energy mandate (REM), officially known as the Renewables Portfolio Standard, forcing state utilities to produce 50 percent of their electricity generated by “renewable” sources by 2030 and 80 percent by 2045.
Renewable portfolio standards—better known as “renewable energy 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.
New Mexico’s Renewables Portfolio Standard, established in 2002, already forces state utilities to generate 20 percent of their electricity from “renewable” sources by 2020.
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. According to the U.S. Energy Information Administration, 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), while 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. The same study found New Mexico’s Renewables Portfolio Standard cost state taxpayers and ratepayers more than $192 million in 2016, and increased electricity prices by 6.18 percent. It also found losses in economic activity in 2016 due to the mandate were more than $405 million, and it cost the state more than 3,000 jobs. By 2020, it estimates electricity costs will rise to $206 million, with electricity prices increasing by 6.77 percent. It also estimated economic activity in 2020 will be reduced by $444 million, and almost 3,500 jobs will be eliminated. The mandate will result in 2,000 to 3,000 net jobs lost through 2040, according to the study.
“In summary, the costs of avoiding carbon dioxide emissions using renewable portfolio standards in New Mexico are higher than [Environmental Protection Agency] estimates of the social cost of carbon assuming a 5 percent discount rate but are below the social cost of capital assuming a 3 percent discount rate after 2020,” the study notes. “From the viewpoint of the New Mexico economy … renewable portfolio standards raise electricity costs that on balance result in a net reduction in the state’s value added and employment even after accounting for the economic stimulus that building and operating renewable energy facilities provide.”
In spite of the Renewables Portfolio Standard, retail electricity prices in New Mexico are roughly 8.5 percent below the national average, and a 2018 Wallet Hub study shows total energy costs in the Land of Enchantment are well below the national average. However, this has less to do with the renewable mandate as it does with the state’s bountiful natural gas, oil, and coal reserves, which have saved New Mexico residents and businesses more than $3.4 billion from 2006 to 2016.
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 New Mexico, raise costs for businesses, and have an insignificant effect on global Carbon dioxide emissions. For the good of all New Mexicans, legislators should reject any expansion of the Renewables Portfolio Standard and instead move to abolish it altogether.
The following documents provide more information about renewable energy mandates.
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
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
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
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
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
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
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
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.
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