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Research & Commentary: Rolling Back Colorado’s Costly Energy Mandate

February 17, 2015

In November 2004, Colorado became the first state to enact into law (by ballot initiative) a renewable portfolio standard (RPS), also referred to as a renewable power mandate.

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In November 2004, Colorado became the first state to enact into law (by ballot initiative) a renewable portfolio standard (RPS), also referred to as a renewable power mandate. The RPS requires utilities to obtain a specified percentage of their power from renewable sources by a certain date.

According to the Database of State Incentives for Renewables & Efficiency, Colorado currently requires investor-owned utilities to use designated renewables to generate 20 percent of their retail electricity sales in Colorado in the years 2015–2019, and 30 percent in 2020 and beyond. The RPS also affects municipal utilities serving more than 40,000 customers and cooperative utilities with fewer than 100,000 meters, requiring them to use renewables for 6 percent of their retail electricity sales in Colorado for the years 2015–2019, and 10 percent for 2020 and beyond. Electric cooperatives with more than 100,000 meters are subject to a 20 percent mandate by 2020.

Supporters of the RPS say the mandates are necessary to reduce pollution, will lead to the creation of “green” jobs, and will increase electricity prices only marginally. However, there is little evidence the mandate will benefit the environment. Renewable sources such as wind and solar technologies are intermittent and thus require fossil fuel generators for backup. Running fossil fuel generators in this way can emit more pollutants than when they are used as primary power sources. A report from the Colorado-based analytics company Bentek Energy found, “While meeting RPS-mandated wind generation requirements appears to have a minimal impact on CO2, it appears to appreciably increase SO2 and NOX.”

The Brookings Institution has found wind and solar are the two least cost-effective clean-energy sources and thus poor strategies for lowering carbon dioxide emissions. Natural gas combined cycle, nuclear, and hydroelectric were found to be more cost-effective.

Colorado electricity prices rose 20 percent faster than the national average since the RPS passed in 2004, according to U.S. Energy Information Administration (EIA) data. Further analyzing such data, Heartland Institute Senior Fellow James M. Taylor found the average Colorado household paid an additional $2,100 for electricity (more than $350 per household per year) beyond what it would have paid if the state’s electricity prices had risen at the national average since 2007.

Rolling back the Colorado renewable mandate, instead of increasing it, would make energy more affordable for consumers, attract more business investment, and increase job creation. It would also allow more efficient use of energy resources and minimize any dangerous emissions. Colorado should not pick economic winners and losers by mandating the use of certain types of energy. Instead, the state should encourage the development of economically competitive energy sources through non-distorting tax and regulatory policies.

The following documents provide additional information about renewable portfolio mandates.

 

Ten Principles of Energy Policy
http://heartland.org/policy-documents/ten-principles-energy-policy
Heartland Institute President Joseph Bast outlines the 10 most important principles for policymakers confronting energy issues, providing guidance to help withstand ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography.

Colorado: Incentives/Policies for Renewables & Efficiency
http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=CO24R
The online Database of State Incentives for Renewables & Efficiency describes in detail Colorado’s renewable energy mandate.

Why the Best Path to a Low-Carbon Future Is Not Wind or Solar Power
http://www.brookings.edu/blogs/planetpolicy/posts/2014/05/20-low-carbon-wind-solar-power-frank
Charles Frank, a nonresident senior fellow at the Brookings Institution, reports on his research on low-CO2 energy alternatives. Frank finds natural gas combined cycle is the cheapest low-CO2 energy alternative, even cheaper per kilowatt hour than coal or gas simple cycle plants. The most expensive alternatives are solar and wind. Frank says gas combined cycle, nuclear, and hydroelectric are the most cost-effective options for transitioning to a low-CO2 future.

Why Is Renewable Energy So Expensive?
http://www.economist.com/blogs/economist-explains/2014/01/economist-explains-0
This brief but useful essay in a January 2014 blog post for The Economist states countries with the most renewable power generation also have the highest electricity prices, and government efforts to abate this problem have been unsuccessful. The author notes high electricity prices may force many manufacturers to set up in less “green” countries, which “might mean citizens end up consuming more carbon, through imports.” Such unintended consequences make the construction of more gas-fired power stations a superior strategy for cutting greenhouse gas emissions without raising electricity prices, the author concludes.

A Global Transition to Renewable Energy Will Take Many Decades
http://www.scientificamerican.com/article.cfm?id=a-global-transition-to-renewable-energy-will-take-many-decades
Writing for Scientific American in January 2014, scientist and policy analyst Vaclav Smil notes, “[In the] U.S. and around the world, each widespread transition from one dominant fuel to another has taken 50 to 60 years.” Smil states there are plenty of reasons to want to reduce dependence on fossil fuels, beyond greenhouse gas emissions, but current environmental policies “have been dismal.” He suggests the best way to foster an energy transition is to “avoid picking energy winners,” because such policies distort all-important investment and price signals and impede economic progress.

The Status of Renewable Electricity Mandates in the States
http://heartland.org/policy-documents/status-renewable-electricity-mandates-states
The Institute for Energy Research analyzed the practical effects of renewable electricity mandates and found states with mandates have on average 40 percent higher electricity rates than those without such mandates.

Study of the Effects on Employment of Public Aid to Renewable Energy Sources
http://heartland.org/policy-documents/study-effects-employment-public-aid-renewable-energy-sources
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 costs of renewables.

How Less Became More: Wind Power and Unintended Consequences in the Colorado Energy Market
http://heartland.org/policy-documents/how-less-became-more-wind-power-and-unintended-consequences-colorado-energy-marke-0
Bentek Energy, LLC, a leading energy markets information company, evaluates the “must take” provisions of Colorado’s Renewable Portfolio Standard, which forces coal plants to accommodate the intermittency of wind power by “cycling” generating units. The study found the requirement causes inefficiency and produces significantly greater emissions.

Wind Farms vs. Wildlife
http://heartland.org/policy-documents/wind-farms-vs-wildlife
Clive Hambler, lecturer in biological and human sciences at Oxford University and a trained zoologist specializing in species extinction, describes how wind turbines wreak havoc on wildlife.

U.K. Study: Renewable Fuels Kill Jobs
http://news.heartland.org/newspaper-article/2011/03/14/uk-study-renewable-fuels-kill-jobs
In a 2011 study, Verso Economics, a U.K.-based economic consultancy, found renewable power killed 3.7 jobs in Great Britain for every “green job” created. The U.K.’s “renewable obligation” cost the country an additional $2.3 billion in 2009–10 when all economic costs, including electricity prices, were considered.

The Economic Impact of Colorado’s Renewable Portfolio Standard
http://heartland.org/policy-documents/economic-impact-colorados-renewable-portfolio-standard
The American Tradition Institute quantifies the economic harm caused by renewable energy subsidies and mandates.

 

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 http://news.heartland.org/energy-and-environment, The Heartland Institute’s Web site at http://www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.

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Taylor Smith was a policy analyst for The Heartland Institute specializing in energy, climate, and environmental regulation. He is coauthor with James M.
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