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Renewable energy mandates raise electricity costs

Currently, 29 states plus the District of Columbia and Puerto Rico have renewable energy mandates requiring that some electricity be produced by renewable energy sources such as solar or wind generation. California has the most stringent requirement of 33% renewable generation by 2020; Arizona has a requirement of 15% by 2025.

These mandates are costing us money and more. A new study from the Manhattan Institute for Policy Research has been examining the consequences of these energy mandates, some excerpts:.

There is growing evidence that the costs may be too high—that the price tag for purchasing renewable energy, and for building new transmission lines to deliver it, may not only outweigh any environmental benefits but may also be detrimental to the economy, costing jobs rather than adding them.

The mandates amount to a “back-end way to put a price on carbon,” says one former federal regulator. Put another way, the higher cost of electricity is essentially a de facto carbon-reduction tax, one that is putting a strain on a struggling economy and is falling most heavily, in the way that regressive taxes do, on the least well-off among residential users.

[O]ur analysis of available data has revealed a pattern of starkly higher rates in most states with RPS mandates [Renewable portfolio standards]compared with those without mandates. The gap is particularly striking in coal-dependent states—seven such states with RPS mandates saw their rates soar by an average of 54.2 percent between 2001 and 2010, more than twice the average increase experienced by seven other coal-dependent states without mandates.

Our study highlights another pattern as well, of a disconnect between the optimistic estimates by government policymakers of the impact that the mandates will have on rates and the harsh reality of the soaring rates that typically result. In some states, the implementation of mandate levels is proceeding so rapidly that residential and commercial users are being locked into exorbitant rates for many years to come. The experiences of Oregon, California, and Ontario (which is subject to a similar mandate plan) serve as case studies of how rates have spiraled.

In June 2011, the Electric Power Research Institute (EPRI), an independent science and research organization, released a report on technology innovation in electricity generation. The report examined fossil- and nuclear-based technologies, as well as four renewable technologies. EPRI found that burning natural gas was, by far, the cheapest way to generate electricity, and it predicted that gas would continue to provide the lowest-cost option through 2025.

In 2015, generating a megawatt-hour of electricity with natural gas will cost between $49 and $79, according to EPRI estimates. That same quantity of energy produced from onshore wind will cost between $75 and $138, while generating it with solar photovoltaic will cost at least $242 and as much as $455. By 2025, very little will have changed, EPRI says: gas-fired electricity production will have gone down a few dollars, to between $47 and $74 per megawatt-hour, leaving it comfortably ahead of onshore wind generation, down only marginally as well, to a range of $73 to $134 per megawatt-hour.

 

In addition to the direct cost of electricity, the Manhattan Institute notes that the increasing subsidies to renewable energy ventures (some $14.6 billion in 2010) is essentially using our tax money to raise our electricity rates. Many of these projects also receive tax breaks from the states. These mandates also increase costs to businesses which means we ultimately pay more for consumer products.

If renewable energy is such a good deal, let such ventures obtain financing privately and compete in the open market without mandates for sales. If that happened, we would see that most renewable energy ventures are not economically competitive and survive only through mandates and subsidies.

 

See the full report from the Manhattan Institute at:

http://www.manhattan-institute.org/html/eper_10.htm

 

See also:

National Renewable Energy Standard Will Mean Higher Electricity Bills

Arizona Corporation Commission May Ration Electricity

EIA says Clean Energy program will increase electricity costs 29%

Renewables receive bulk of tax preference subsidies

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