In 2015, Ohio took a small but important first step for electricity consumers by voting to freeze the state’s Alternative Energy Portfolio Standard (AEPS), also known as a renewable power mandate. The freeze makes Ohio the first state to delay its mandate to increase the amount of electricity sold in the state that must be generated from alternative energy sources. Ohio state Sen. Bill Seitz (R-Cincinnati) has recently introduced a bill that would extend the current two-year freeze of the state’s renewable and energy efficiency standards. Under Seitz’s proposal, the AEPS freeze would end in 2020
Ohio passed a law in 2008 that requires 25 percent of the electricity sold in the state to come from alternative sources of energy, including nuclear, by 2025. Under the legislation, half of those alternative sources must be categorized as renewable, such as wind, solar, or biofuels. Nuclear power is excluded. The newly proposed bill calls for an additional three-year freeze in the state’s renewable-energy and energy-efficiency standards.
The green energy forced on consumers by state legislatures through renewable portfolio standards is extremely expensive. 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. H. Sterling Burnett, an environment and climate research fellow at The Heartland Institute, says retail electricity prices in states with renewable power mandates are rising twice as fast as the national average.
The freeze represents an important step in reducing prices for electricity consumers and strengthening the state’s economy, because the alternative energy mandate forces utility companies to purchase electricity from less-reliable and more-expensive sources, causing prices to increase throughout the economy. This fact was highlighted in a 2011 study by the Beacon Hill Institute, which found the Alternative Energy Portfolio Standard will cause Ohio to lose 9,753 jobs by 2025 and cost Ohio energy consumers $8.629 billion in higher prices between 2016 and 2025, including more than $1.4 billion in 2025 alone.
The higher prices are not limited to Ohio. A study by the Manhattan Institute found the average price of residential electricity in RPS states was 31.9 percent higher than in non-RPS states in 2010. Commercial electricity rates were 27.4 percent higher, and industrial rates were 30.7 percent higher. Higher residential electricity prices unfairly increase the cost of keeping the lights on for seniors and low-income families least able to afford higher prices, and raising the costs for job-creators results in higher unemployment and less overall economic activity.
The proposal represents a step toward keeping electricity costs from skyrocketing due to RPS mandates and showing how these mandates raise consumer prices. Ultimately, consumers will only be able to feel relief only when these mandates are repealed.
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 ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography.
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.”
Ohio Renewable Mandates Driving Up Electricity Prices
Heartland Institute Senior Fellow James M. Taylor reports on the impact of Ohio’s Alternative Energy Portfolio Standard: “Renewable power mandates are driving up Ohio’s electricity prices, U.S. Energy Information Administration data show. Electricity prices in Ohio have risen more than twice as fast as the national average since Ohio enacted the mandates in 2008. The sharp price increases occurred despite promises during 2008 legislative hearings that renewable power mandates would have little or no impact on electricity prices.”
Tip Sheet: Ohio Alternative Energy Portfolio Standard
Former Heartland Institute Policy Analyst Taylor Smith analyzes the Alternative Energy Portfolio Standards (AEPS) set in place by the Ohio Legislature in 2008, noting AEPS requires 25 percent of all electricity sold to come from alternative sources, with half coming from renewable sources. The analysis shows AEPS will increase costs by 9.3 percent by 2025 and result in job losses.
The Cost and Economic Impact of Ohio’s Alternative Energy Portfolio Standard
The American Tradition Institute and Beacon Hill Institute conducted an economic analysis of the effects of Ohio’s Alternative Energy Portfolio Standard, finding it will decrease real wages, increase the cost of electricity, destroy jobs, and reduce investment – all without measurably increasing environmental protection.
The Status of Renewable Electricity Mandates in the States
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 High Cost of Renewable-Energy Mandates
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 costs about $750,000 and electricity rates would have to be increased by 31 percent to account for the additional costs 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 subject, visit Environment & Climate News at http://news.heartland.org/education, The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.
The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Logan Elizabeth Pike, Heartland’s state government relations manager, at [email protected] or 312/377-4000.