Exelon has threatened to shut down three of its six Illinois nuclear power plants because they are unprofitable without government assistance. In May 2014, The Illinois House of Representatives passed a resolution asking the Illinois Commerce Commission, Illinois Power Agency, Illinois Environmental Protection Agency, and Illinois Department of Commerce and Economic Opportunity to study and prepare a report on these potential closings.
The policy option Exelon and some lawmakers support is establishment of a “low-carbon portfolio standard” (LCPS) that would require 70 percent of the electricity distributed to Illinois consumers by utilities companies is of a qualified low-carbon variety. Utilities that fall short of the 70 percent mark must buy credits to make up the difference. The proposal would also place a price increase cap of 2.015 percent per year compared to 2009 rates.
Energy sources that would qualify toward the mandate would be nuclear, wind, solar, hydropower, and coal-fueled plants that capture and sequester greenhouse gas emissions. Illinois already has a renewable portfolio standard (RPS) mandating 25 percent of power distribution be composed of renewable energy (not including nuclear) by 2025. Exelon claims Illinois will lose thousands of jobs without such a mandate and that the LCPS would create additional jobs.
None of the agency reports compare the modest net increase in future retail electricity prices resulting from a shutdown of Exelon’s unprofitable nuclear power plants to the cost of subsidizing the plants or imposing regulatory interventions that would keep the plants afloat. The cost of government subsidies or other market interventions might exceed any consumer benefits linked to lower electricity prices.
Forcing electricity consumers or taxpayers to pay artificially elevated prices to keep power plants in operation may appear to “save jobs,” but this ignores the alternative: Employers could create more jobs if electricity costs were lower. According to a Beacon Hill Institute study, by 2026 Illinois’ existing RPS will “lower employment by a likely 8,000 jobs, reduce real disposable income by $793 million, and increase the average household electricity bill by $36 per year; commercial businesses by an expected $364 per year; and industrial businesses by an expected $36,125.”
Imposing “clean energy” mandates on top of those already in place will raise electricity prices, hurting consumers. The only free-market-based policy option mentioned in the agency reports is to “rely upon external forces and initiatives.” An alternative not mentioned by the agencies would be to soften or eliminate the state’s existing renewable portfolio mandate, thereby reducing energy prices and encouraging investment in the most efficient sources of fuel, which today and for the foreseeable future are clean coal and natural gas. Utilities should compete to provide electricity without government assistance or restraint.
The following documents provide additional information about renewable portfolio standards.
Ten Principles of Energy Policy
Heartland Institute President Joseph Bast outlines the 10 most important principles for policymakers confronting energy issues, providing guidance to help deal with changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography.
Study: Illinois’s Renewable Energy Standard No Help to State’s Economy
The Beacon Hill Institute at Suffolk University finds Illinois’ renewable portfolio standard will increase the cost of electricity to consumers and reduce business opportunities and job creation.
The Status of Renewable Electricity Mandates in the States
The Institute for Energy Research finds states with renewable electricity mandates have on average 40 percent higher electricity rates than those without such mandates.
Policy Tip Sheet No. 11: Illinois Renewable Energy Mandate
This Heartland Institute Policy Tip Sheet outlines the fundamental problems of renewable energy mandates in Illinois and recommends an alternative.
Study of the Effects on Employment of Public Aid to 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.
Study: Consumers Unwilling to Pay More for Renewable Energy
Relatively few consumers are willing to pay extra for renewable energy offered under voluntary “green” pricing programs, according to a report from the Institute for Energy Research.
Why Is Renewable Energy So Expensive?
This brief but useful essay in a January 2014 blog post for The Economist states countries with the most renewable power generation also have the highest electricity prices, and government efforts to alleviate 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.
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 of Environment & Climate News at https://heartland.org/Center-Climate-Environment/index.html, The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.
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