Problem
Ohio is ranked 23rd highest in electricity prices.1 Although this is due to many reasons, a big reason is the state’s Alternative Energy Portfolio Standard (AEPS), signed into law in May 2008. The AEPS requires 25 percent of all electricity sold in the state to come from alternative energy sources by 2025, with half of the amount required to come from sources identified as “renewable,” including 0.5% specifically from solar. Other renewables include wind, biomass, and certain hydropower facilities. Non-renewable alternatives include nuclear and clean coal.
The mandate will continue to make it more expensive to build and maintain alternative energy capacity and to deliver the energy. Those costs are likely to be passed down to businesses and individuals.
A joint report by the American Tradition Institute and Beacon Hill Institute estimates the AEPS mandate will raise the cost of electricity by an average of 9.3 percent by 2025. This increased price for energy will decrease net investment by $79 million and lower employment by an average of 9,753 jobs.3
This system unfairly dictates what type of energy ratepayers must consume, forcing them to pay higher rates for more-expensive and less-reliable energy. This reduces the buying power of virtually the entire economy.
Solution
Energy consumption is not a problem, it’s a solution. Tremendous socioeconomic benefits ensue when efficient energy systems are created through market forces.
A repeal of the state renewable portfolio standard would lower costs for consumers and foster job creation. This would produce more long-term economic benefits for the state than the temporary and artificial “green jobs” created by this mandate.
Policy Message
Point 1: Renewable energy is currently more expensive per kilowatt hour (kWh) than conventional fossil fuels, and those higher costs are being passed on to ratepayers.2
Point 2: Energy costs are regressive, so increases will most directly affect seniors who primarily live on a fixed income and low-income families with the least capacity to absorb higher energy costs.
Point 3: Capital and labor is extremely mobile in today’s society, making it more important than ever for states to offer cheap energy to attract business and remain competitive.
Point 4: AEPS mandates will cause Ohio to lose 9,753 jobs by 2025 and cost Ohio energy consumers $8.6 billion in higher costs over a ten-year period between 2016 and 2025.3
Point 5: Wind and solar technologies are diffuse, which means harnessing them requires copious amounts of land, resulting in habitat reduction for wildlife and even endangerment.4
Point 6: It is impossible to know which energy technologies will be superior in the future, and policymakers should avoid pushing technologies to market before they are ready.
Point 7: “Green energy” supporters may be able to point to individual investment projects and jobs from the AEPS, but they don’t count the jobs lost to higher energy costs. Those jobs aren’t as easy to identify, but they are just as important.5
References
1. “Ohio Electricity Profile,” U.S. Energy Information Administration. http://www.eia.gov/electricity/state/Ohio
2. “Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011,” U.S. Energy Information Administration. http://205.254.135.24/oiaf/aeo/electricity_generation.html
3. “The Cost and Economic Impact of Ohio’s Alternative Energy Portfolio Standard,” American Tradition Institute. http://heartland.org/policy-documents/cost-and-economic-impact-ohios-alternative-energy-portfolio-standard
4. “Wind farm vs. wildlife,” The Spectator.http://heartland.org/policy-documents/wind-farms-vs-wildlife
5. “The Economic Impact of Wisconsin’s Renewable Portfolio Standard,” Wisconsin Policy Research Institute. http://heartland.org/policy-documents/economic-impact-wisconsins-renewable-portfolio-standard
Taylor Smith was a policy analyst for The Heartland Institute specializing in energy, climate, and environmental regulation. He is coauthor with James M.
