Nevada’s New Energy Industry Task Force (NEITF) recently released its long-awaited list of recommendations for legislation in the upcoming legislative session. NEITF’s review and discussion process lasted about six months. NEITF’s purpose was to “specifically address policies that encourage development of clean energy sources and integrate renewable energy technologies into Nevada’s energy sector, foster the creation of a modern, resilient, and cost-effective energy grid, and support distributed generation and storage with a specific focus on rooftop solar and net metering.”
The task force included members of Gov. Brian Sandoval’s (R) office, members of the state legislature, executives from energy companies, and advocates for renewable power sources.
Among NEITF’s 20 recommendations are the reestablishment of retail-rate net metering for new solar customers and a proposed mandate that would require utility companies and energy providers to source 50 percent of their energy from renewable energy sources by 2040.
Renewable energy mandates – often referred to as “renewable power mandates” or “renewable portfolio standards” (RPS) – force expensive, heavily subsidized electricity on ratepayers and taxpayers while providing few if any net environmental benefits. A 2014 study by the Brookings Institution found wind power is twice as expensive as the conventional power it replaces. The same study found solar power is three times as expensive as conventional power. These higher costs impose real burdens on electricity consumers: Retail electricity prices in states with renewable power mandates are rising twice as fast as the national average.
Nevada already has an RPS, which requires 25 percent of the state’s energy to come from renewable sources by 2025. Solar and wind combined only accounted for 2.7 percent of electricity generation in Nevada in 2013.
A study by Timothy Considine of the University of Wyoming found Nevada’s RPS has thus far increased electricity costs by 32.85 percent in 2016 and would continue to raise costs by 37.33 percent in 2025. The total cost of the RPS, if subsidies are included, is $520.6 million in 2016, and Considine says it will reach $573.2 million by 2025. The direct RPS and subsidy costs required to reduce carbon dioxide from the atmosphere are estimated to be $76.82 per ton in 2016, with a projected reduction of 6.78 million tons. Considine also projects a $1.75 billion loss in value added in 2016, with employment levels reduced by 12,600 jobs.
Wholesale-rate net metering has only been in practice in Nevada since December 2015, when state regulators unanimously ended retail-rate pricing for electricity put back on the grid. NEITF was commissioned in direct response to concerns from solar developers who, unhappy with the regulators’ decision, seek to reverse it.
Currently, Nevada owners of rooftop solar panels are paid for the electricity they sell back to the grid at the same rate conventional sources are paid, reflecting the true wholesale cost of electricity.
Owners of rooftop solar panels should be paid for the electricity they sell back to the grid, but they should be paid at the same rate conventional sources are paid, which is currently the case in Nevada. This reflects the true wholesale cost of electricity. It is particularly unfair for solar owners to be paid for the costs of maintaining the grid because the intermittency of solar power actually increases those costs.
By solar proponents’ own admission, these maintenance costs are shifted onto homes without solar panels, many of which are usually less affluent. This unfairly raises homeowners’ monthly bills.
An updated study by Energy and Environmental Economics on the impacts of Nevada’s net-metering program found solar is not cost-effective for those who install the panels or for the state as a whole. It also found the net-metering program increases costs for those who don’t install panels and concluded the “non-monetized benefits” (i.e. environmental benefits) are “not substantial.”
Nevada’s residential electricity rates are already the highest in the Mountain States region, according to the Energy Information Administration. The best policy option is to repeal all RPS mandates, net metering, and energy subsidies. A second-best alternative would be for Nevada to continue to roll back or freeze the state’s RPS mandates at current levels and keep net-metering rates based on the wholesale price of electricity. This would create a freer, consumer-friendly energy market in which all utilities and all energy providers are given the right to compete for customers. It would also lower electricity prices, raise living standards, stimulate long-term economic growth, and create a substantial increase in net jobs for Nevada.
The following documents provide more information on renewable energy mandates and net metering.
Nevada Net Energy Metering Impacts Evaluation 2016 Update
This study, which is an update to a 2014 report, calculates the benefits and costs of Nevada’s net-metering program and finds net metering will raise electricity rates and is a costlier approach for encouraging renewable energy generation than utility-scale renewables.
A Guide to Nevada Energy Policy
This guide, which was written by James Taylor, founder and president of the Spark of Freedom Foundation, on behalf of the Nevada Policy Research Institute, “offers a full-spectrum assessment of environmental impacts associated with competing power sources” and is “designed to give policymakers important information necessary to cultivate sustainable economic growth through wise energy policy.”
Evaluating the Costs and Benefits of Renewable Portfolio Standards
This paper by Timothy J. Considine, a distinguished professor of energy economics at the School of Energy Resources and the Department of Economics and Finance at the University of Wyoming, examines the renewable portfolio standards (RPS) of 12 different states and concludes while RPS investments stimulate economic activity, the negative economic impacts associated with higher electricity prices offset the claimed economic advantages of these RPS investments.
Research & Commentary: Higher State Support for Green Energy Increases Energy Costs for Consumers
Heartland Institute Policy Analyst Tim Benson discusses an analysis by the Daily Caller News Foundation (DCNF), which found, “States which offered rebates, buy-back programs, tax exemptions and direct cash subsidies to green energy were 64 percent more likely to have higher than average electric bills. For every additional pro-green energy policy in a state, the average price of electricity rose by about .01 cents per kilowatt-hour.”
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.
Net Metering 101
The Institute for Energy Research provides an instructive explanation about the fundamentals of net metering, net-metering policies, and renewable energy.
Isaac Orr: Net Metering
In this edition of the Heartland Daily Podcast, Isaac Orr, research fellow at The Heartland Institute, discusses the Champagne wishes and caviar dreams espoused by net-metering proponents.
California Net Energy Metering (NEM) Draft Cost-Effectiveness Evaluation
This California Public Utilities Commission report found net-metering policies are raising electricity prices throughout the state, harming low-income residents more than any other group. The report states rooftop-solar customers have an average household income of about $91,000 per year, well above the state average of $54,000 per year. Under the pricing mechanism of net metering, utilities pay artificially high prices to rooftop-solar customers for the excess electricity they produce, the cost of which is paid by other customers.
What Happens to an Economy When Forced to Use Renewable Energy?
The Manhattan Institute conducted an economic analysis of the effects renewable portfolio standards (RPS) had on the average price of electricity in states with mandates compared to those without mandates. The study found residential and commercial electricity rates were significantly higher in states with RPS mandates than in states without them.
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 cost of renewables.
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/publications-resources/newsletters/environment-climate-news, The Heartland Institute’s website, http://heartland.org, and PolicyBot, Heartland’s free online research database, at www.heartland.org/policybot.
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