Policy Documents

Research & Commentary: Michigan Renewable Energy Portfolio Mandate

August 20, 2012

A petition bearing more than 500,000 signatures has been turned in to state election officials to put the Michigan Energy Michigan Jobs initiative on the November ballot. The proposal is designed to constitutionally require 25 percent of energy produced in Michigan to come from renewable sources by 2025.

Proponents of the initiative—including environmentalists and renewable energy manufacturers—promise it will slow the depletion of conventional energy resources and hasten the development of new technologies that will provide alternatives for future consumption. They also say the mandates will lead to significant employment growth in the renewable energy sector due to the forced increase in demand.

Opponents note the proposal will cause significant increases in energy bills for families and businesses. Michigan already has the nation’s 16th highest average retail price of electricity, according to data from the Energy Information Administration. Michigan has more natural gas reserves than any other state in the Great Lakes region, and the mandate will place their development at a distinct disadvantage.

Electricity prices are based on many variables, but mandating the use of more-expensive energy sources has proven to be a significant contributor—electricity prices are 40 percent higher in states with mandates than in those without, according to the Institute for Energy Research. These government-created price increases take private capital out of the economy and give it to renewable power companies.

Government policies supporting the expansion of a particular sector of the economy can be provided only by destroying jobs in other sectors. 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. Also, current or future tax rates must be raised to finance the development of a particular sector, and those increased taxes will reduce employment. Thus any policy that combines artificial labor shifts and implicit or explicit tax increases will kill jobs.

Experiences and evidence from other states show that increasing Michigan’s renewable energy mandate will unnecessarily raise electricity prices, destroy jobs, and distort and destabilize resource allocation. Instead, Michigan should allow the private sector to develop the state’s abundant natural gas reserves and other competitively priced energy resources.

The following documents offer additional information on the effects of renewable energy portfolio mandates. 

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 withstand ongoing changes in markets, technology, and policies adopted in other states, backed up by a thorough bibliography.

Renewable Energy Mandates Raise Prices and Cost States Jobs
http://news.heartland.org/newspaper-article/2004/10/01/renewable-energy-mandates-raise-prices-and-cost-states-jobs
Heartland Institute Senior Fellow James M. Taylor reports on the destructive consequences of renewable energy mandates. In states that give customers the option of purchasing renewable energy, fewer than 2 percent of customers choose to purchase the more-expensive energy, Taylor notes.

Economic Impact of Montana’s Renewable Portfolio Standard
http://heartland.org/policy-documents/economic-impact-montanas-renewable-portfolio-standard
The Montana Policy Institute reports renewable portfolio standards would not only raise electricity prices for consumers but also undermine the state’s economic competitiveness and fail to protect the environment because the intermittent nature of solar and wind power means backup power generation is required.

Kansas Renewable Energy Mandate
http://heartland.org/policy-documents/kansas-renewable-energy-mandate
This Heartland Institute Policy Tip Sheet outlines the fundamental problems of renewable energy mandates and recommends an alternative solution. 

Research & Commentary: Ohio Alternative Energy Portfolio Standard
http://heartland.org/policy-documents/research-commentary-ohio-alternative-energy-portfolio-standard
This Heartland Institute Research & Commentary analyzes the effort to repeal Ohio’s renewable energy mandate requiring 25 percent of retail power supplies to be from renewable sources by 2025. The document recommends the state increase its development of natural gas resources. 

The Status of Renewable Electricity Mandates in the States
http://heartland.org/sites/all/modules/custom/heartland_migration/files/pdfs/29330.pdf
The Institute for Energy Research analyzed the practical effects of renewable electricity mandates. The study finds states with renewable energy mandates have on average 40 percent higher electricity rates than states that do not have such mandates.

Renewable Portfolio Standard
http://www.mackinac.org/9497
Dr. Theodore Bolema and Diane S. Katz of the Mackinac Center for Public Policy describe several problems a renewable energy mandate would create in Michigan, including the disadvantage it places on Michigan’s other rich sources of energy, including natural gas.

The False Promise of Green Energy
http://www.masterresource.org/2011/02/false-promise-green-energy-cato/
The energy blog Master Resource reviews the Cato Institute’s 2011 book The False Promise of Green Energy, which examines domestic energy production while addressing myths about the feasibility of large-scale renewable-power development.

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.

For further information on this subject, visit the Environment & Climate News Web site 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.

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or the Heartland Web site, contact Heartland Institute Policy Analyst Taylor Smith at tsmith@heartland.org or 312/377-4000.