In July, the Kansas Policy Institute and Beacon Hill Institute released a joint report assessing the expected economic results of the Kansas renewable energy mandate, signed into law by Gov. Mark Parkinson in May 2009. The report finds the mandate will cause further energy cost increases, reduce employment opportunities, and send capital investment out of state while producing few if any environmental benefits.
The standard currently requires at least 10 percent of electricity generation capacity in Kansas be from renewable sources. By 2016 that requirement will jump to 15 percent, and from 2020 onward it will be 20 percent.
The report estimates that by 2020 electricity prices will rise by 45 percent above baseline estimates. For commercial businesses that’s an average increase of $3,915 per year, and for industrial businesses, a cost hike of $25,516 a year. Unsurprisingly, business investment is expected to be negatively impacted by $191 million. The combination of higher energy costs and less investment will reduce employment and disposable income: The report forecasts the mandate will cost the state 12,110 jobs and $1.483 billion in real disposable income through 2020.
For low-income households, the increased energy costs will have to compete directly with essential purchases such as food and shelter. The study found the mandate would add an average of $660 per year to household electricity bills.
The report also questions the alleged benefits of the mandate, citing a separate study that found wind energy (the most viable of all renewable sources of energy) actually causes an increase in certain emissions. Because wind energy requires coal- and natural gas-fired back-up generators to compensate for the intermittency of wind flow, the generators are ramped up and down inefficiently, driving the heat rate up unnecessarily and resulting in higher sulfur dioxide and nitrogen oxide emissions than would be the case if wind energy weren’t mandated.
Repealing the Kansas renewable energy standard would avoid significant job loss, disposable income, and business investment and make energy more affordable for consumers and producers. It also would allow more efficient use of these resources and minimize dangerous emissions. Kansas should encourage the development of economically competitive energy sources through sound regulatory and pro-growth tax policy. That would increase Kansas’s status among the nation’s most competitive states for business.
The following documents provide additional information about renewable portfolio standards.
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, supported by a thorough bibliography.
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.
Eleventh Annual State Competitiveness Report
http://heartland.org/policy-documents/eleventh-annual-state-competitiveness-report
The Beacon Hill Institute ranks all 50 states on competitiveness, defining the term as policies and conditions that ensure and sustain a high level of per-capita income and sustained economic growth. Kansas ranks a respectable 12th in overall competitiveness, relying heavily on its best-performing sub-index ranking: infrastructure. Infrastructure rankings are strongly affected by electricity prices, so Kansas’s renewable portfolio standard is a big threat to the state’s economic competitiveness.
The Economic Impact of the Kansas Renewable Portfolio Standard
http://www.kansaspolicy.org/researchcenters/budgetandspending/budgetandspendingstudies/d95311.aspx?type=view
This Kansas Policy Institute study quantifies the economic harm caused by renewable energy subsidies and mandates.
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 and found states with mandates have on average 40 percent higher electricity rates than those without such mandates.
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.
How Less Became More: Wind, Power and Unintended Consequences in the Colorado Energy Market
http://heartland.org/policy-documents/how-less-became-more-wind-power-and-unintended-consequences-colorado-energy-marke-0
Bentek Energy, LLC, a leading energy markets information company, evaluates the “must take” provisions of Colorado’s Renewable Portfolio Standard, which forces coal plants to accommodate the intermittency of wind power by “cycling” generating units. The report finds the requirement results in inefficiency and produces significantly greater emissions.
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 Environment & Climate News Web site at http://news.heartland.org/energy-and-environment, The Heartland Institute’s Web site at http://heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.
If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Policy Analyst Taylor Smith at [email protected] or 312/377-4000.
Taylor Smith was a policy analyst for The Heartland Institute specializing in energy, climate, and environmental regulation. He is coauthor with James M.
