Thirty states, including Ohio, have renewable portfolio mandates. These laws require a certain percentage of electricity to be generated from renewable sources, primarily wind and solar power.
Such laws were mostly enacted in the early 2000s. More-recent backlashes over rising electricity prices, lost jobs, and capital flight have led to proposals across the country to repeal or curtail these standards.
Last June, Ohio Gov. John Kasich became the first governor to sign a law reducing his state’s alternative-energy portfolio standard. Ohio’s leadership likely will open the door for more such policies to be proposed and passed in other states.
An executive of the Environmental Defense Fund called the Ohio bill a “step backwards.” Those who believe that renewable sources such as wind and solar energy are new, emerging technologies assert that government help is necessary to jump-start these industries. That isn’t true.
In fact, wind and solar power are old, stagnating technologies that date to the 19th century. They have benefited from lavish subsidies, tax credits, and mandates for many years.
Yet wind power provides only 1.4 percent of all energy consumed in the United States today. Solar energy provides less than one-fourth of 1 percent.
Such is the paradox of government interference in the energy sector: People turn to government to spur innovation, but government is a monopoly, shielded from the market forces that create innovation through competition and consumer choice.
That’s why wind and solar energy, propped up by governments everywhere, have stagnated instead of innovating. By contrast, technologies for hydraulic fracturing and horizontal drilling suggest what market forces can accomplish when government gets out of the way.
The boom in natural gas and oil extraction, in Ohio and other states, has created hundreds of thousands of jobs and lowered energy prices. It has led to a reduction in greenhouse-gas emissions, as power plants convert from coal-fired generation to cleaner-burning natural gas.
The Economist magazine reports that America’s natural gas boom “seems to be doing as much to reduce pollution as many of the efforts introduced over the years to restrict emissions from vehicles, power stations, and other sources.” Yet many renewable-energy supporters oppose fracking and horizontal drilling, even though lowering greenhouse-gas emissions is the main reason they say we need to force people to buy renewable-generated electricity.
The positive effects of energy breakthroughs are felt everywhere in the economy. But no one — including lawmakers and government officials — can foresee when or where the next energy breakthrough will occur. Conversely, government-created stagnation in energy has negative effects throughout the economy.
A 2011 study by the Beacon Hill Institute at Suffolk University in Boston projected that Ohio’s alternative-energy portfolio standard would cause the state to lose 9,753 jobs by 2025. It predicted Ohio consumers would face $8.6 billion in higher energy prices between 2016 and 2025, including more than $1.4 billion in 2025 alone.
Those figures might be a little lower, now that a modest reduction of the standard has been enacted. But Ohioans should continue to press for outright repeal of the mandate, to avoid these negative consequences altogether. Indeed, Ohio should eliminate all other energy mandates, subsidies, and tax preferences, to increase competition and cut energy prices.
Energy is one of the most crucial inputs of economic growth. The pricing, production, and distribution of energy are embedded in everything people and businesses do and create.
If Ohio lawmakers enact policies that promote competition and lower energy prices, households will benefit directly by having their money freed up for other purposes. They also will benefit from lower prices and more jobs, as money becomes available to businesses to redirect to hiring, investing, and increasing their payrolls.
That is, consumers benefit in both ways. It will take time for these benefits to be fully realized, but they should not be underestimated.
[Originally published at The Toledo Blade]