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Research & Commentary: Vermont Renewable Portfolio Mandate

February 23, 2015

Vermont is the only state in the Northeast without a renewable portfolio mandate. In his inaugural address, Gov.

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Vermont is the only state in the Northeast without a renewable portfolio mandate. In his inaugural address, Gov. Peter Shumlin (D) said enacting a permanent renewable portfolio mandate would create “1,000 additional jobs” and reduce “greenhouse gas emissions by approximately 15 million metric tons through 2032.” Vermont is considering creating a Renewable Energy Standard and Energy Transformation program that would require utilities companies to provide 75 percent of their power from renewable energy sources by 2032.

Supporters of the proposed mandate say it is necessary to reduce pollution, that it will create “green” jobs, and electricity prices will only increase marginally. However, there is little evidence the mandate will benefit the environment. Renewable sources such as wind and solar are intermittent and require fossil-fuel generators for backup. Running fossil-fuel generators as a backup power source often emits more pollutants than primary power sources that operate using fossil fuels.

According to the U.S. Energy Information Administration, Vermont already has the nation’s lowest carbon dioxide (CO2) emissions from electric power sources, which is primarily because Vermont leads the nation in net electricity generation produced by nuclear power, relative to its population. Most of the state’s remaining power generation comes from hydroelectric, a small amount from wood, and an insignificant amount from wind power.

In addition to low CO2 emissions, Vermont ranks at or near the bottom for many common energy emissions, such as nitrogen oxide and sulfur oxide. Vermont also has the fifth-highest electricity prices in the nation, at 18.09 cents/kWh. According to the Ethan Allen Institute, renewable electricity costs two to five times as much as electricity from the conventional New England power grid.

High electricity prices suppress economic growth, business investment, and job creation. Proponents of renewable energy mandates, such as Shumlin, argue renewable energy projects create jobs, but those jobs are only created by shifting economic resources from other sectors, inflicting a net cost on the overall economy. A 2009 study by King Juan Carlos University in Spain found for every “green job” created, 2.2 jobs were destroyed in the overall economy.

Research from the Brookings Institution revealed wind and solar are the two least cost-effective low-CO2 emissions technologies available, especially compared to nuclear and hydroelectric power, from which Vermont generates more than 90 percent of its electricity.

Vermont should not mandate 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 energy and the policies promoting it.

 

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

Legislature Moving to Increase Electric Rates
http://ethanallen.org/commentary-legislature-moving-to-increase-electric-rates/
Ethan Allen Institute Vice President John McClaughry examines a bill introduced by Vermont state Rep. Tony Klein (D-East Montpelier) to impose a renewable portfolio mandate. McClaughry argues the goal of Gov. Peter Shumlin (D) and many in the legislature to impose a mandate of 90 percent renewable-sourced energy by 2050 will raise electricity prices. McClaughry says such electricity price hikes are unjustified given the weakness of the man-caused global warming theory demonstrated by the recent pause in global temperatures. 

Vermont’s Renewable Energy Policy Worse than Worthless
http://ethanallen.org/commentary-vermonts-renewable-energy-policy-worse-than-worthless/
Ethan Allen Institute President Rob Roper evaluates proposals that would impose a carbon tax and a renewable portfolio mandate in Vermont. Roper says these plans are bad energy policies, citing Google’s recent research and experience with its failed renewable energy project. Roper says the plan to generate 90 percent of the state’s electricity from renewable sources would require covering “an area one quarter the size of the Green Mountain National Forest with solar panels.” 

Profile Analysis: Vermont
http://www.eia.gov/state/analysis.cfm?sid=VT
The U.S. Energy Information Administration analyzes Vermont’s economy, geography, and energy profile and finds the state is among the nation’s best for protecting the environment. However, Vermont is also ranked among the highest in the nation for electricity prices, likely due to several policies intended to encourage renewable energy development.  

Renewable Subsidies for the Rich
http://ethanallen.org/renewable-subsidies-for-the-rich/
A May 2013 essay by Ethan Allen Institute Vice President John McClaughry describes the numerous state renewable energy subsidies that supplement generous federal subsidies. McClaughry says these subsidies significantly contribute to Vermont’s high electricity prices.  

How Wind and Solar Power Are Polluting the Commons
http://seekingalpha.com/article/938671-how-wind-and-solar-power-are-polluting-the-commons
Lawyer and accountant John Petersen argues the U.S. electric grid is an essential commons no less important to an industrial society than air or water. Regarding renewable power sources, Petersen writes, “[T]he electric current they generate is inherently unreliable and intermittent, which makes it fundamentally destabilizing to the grid. That introduction of massive intermittency into a system that requires absolute stability is, by definition, pollution.” 

The Status of Renewable Electricity Mandates in the States
http://heartland.org/policy-documents/status-renewable-electricity-mandates-states
The Institute for Energy Research analyzes the practical effects of renewable electricity mandates and finds 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. 

Five Things CEOs Are Worried About in 2014
http://blogs.wsj.com/five-things/2014/01/03/5-things-ceos-are-worried-about-in-2014/
The Wall Street Journal outlines the five things CEOs were worried about that were outside their control in 2014, listing “Keeping Energy Costs Under Control” as the greatest concern. The information was polled from The Wall Street Journal CEO Council, a group of 33 CEOs from some of the nation’s biggest companies. 

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 says 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
In the January 2014 edition of Scientific American, scientist and policy analyst Vaclav Smil wrote, “[In the] U.S. and around the world, each widespread transition from one dominant fuel to another has taken 50 to 60 years.” Smil says 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 a successful energy transition is to “avoid picking energy winners,” because such policies distort all-important investment and price signals and impede economic progress. 

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 power from 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.

 

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 for Environment & Climate News at http://news.heartland.org/energy-and-environment, The Heartland Institute’s website at http://www.heartland.org and PolicyBot, Heartland’s free online research database, at www.policybot.org.

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 Logan Pike, Heartland’s state government relations manager, at lpike@heartland.org or 312/377-4000.

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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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