Vermont has several interventionist policies designed to encourage the development of wind and solar power. These include a 7.2 percent investment tax credit for small wind (100 kw or less) and solar photovoltaic electricity installed on commercial properties. The Sustainably Priced Energy Enterprise Development (SPEED) Program encourages renewable energy development through long-term contacts, and the state has established a renewable energy goal of 20 percent of total statewide electric retail sales coming from new SPEED resources by 2017.
Vermont also has generous net-metering policies requiring utilities to purchase excess solar and wind power for up to five times the wholesale price. These incentives, mandates, and subsidies supplement many generous federal incentives. The costs of all of these programs are passed through to ratepayers.
According to the U.S. Energy Information Administration (EIA), Vermont has the nation’s lowest carbon dioxide (CO2) emissions from the electric power sector. This is primarily because Vermont leads the nation in the share of net electricity generation produced by nuclear power. Most of the state’s remaining power generation comes from hydroelectric, a small amount from wood, and an insignificant amount from wind power.
In addition to low CO2 emissions, Vermont ranks at or near the bottom for many common energy emissions such as nitrogen oxide and sulfur oxide. Vermont also has the fifth-highest electricity prices in the nation, at 18.09 cents/kWh. According to the Ethan Allen Institute, renewable electricity costs two to five times as much as electricity from the conventional New England power grid.
High electricity prices have deleterious effects on economic growth, business investment, and job creation. Proponents of renewable energy mandates and subsidies argue renewable energy projects grow jobs, but those jobs are created by shifting economic resources from other sectors, inflicting a net cost on the overall economy. A 2009 study by King Juan Carlos University in Spain found for every “green job” created, 2.2 jobs were destroyed in the overall economy.
Research from the Brookings Institution has found wind and solar are the two least cost-effective low-CO2 emissions technologies available, especially compared to nuclear and hydroelectric power, from which Vermont generates more than 90 percent of its electricity. Vermont should eliminate and oppose all policies that arbitrarily favor wind and solar development, including subsidies and renewable power mandates. This will free Vermont’s energy sector to be more competitive and will lower electricity prices, thereby making Vermont a better state to do business while keeping emissions low.
The following documents provide additional information about renewable energy and the policies that promote it.
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 deal with ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography.
Profile Analysis: Vermont
http://www.eia.gov/state/analysis.cfm?sid=VT
The U.S. Energy Information Administration analyzes Vermont’s economy, geography, and energy profile and finds the state to be in great environmental standing. However, Vermont is also ranked among the highest in the nation for electricity prices, likely due to several policies intended to encourage renewable energy development.
Renewable Subsidies for the Rich
http://ethanallen.org/renewable-subsidies-for-the-rich/
A May 2013 essay by Ethan Allen Institute Vice President John McClaughry describes the numerous renewable energy subsidies enacted on the state level, which supplement generous federal subsidies. McClaughry argues this is a big reason Vermont has high electricity prices.
How Wind and Solar Power Are Polluting the Commons
http://seekingalpha.com/article/938671-how-wind-and-solar-power-are-polluting-the-commons
Lawyer and accountant John Petersen argues our nation’s electric grid is an essential commons no less important to an industrial society than our air or water. Regarding renewable power sources, he writes, “the electric current they generate is inherently unreliable and intermittent, which makes it fundamentally destabilizing to the grid. That introduction of massive intermittency into a system that requires absolute stability is, by definition, pollution.”
The Status of Renewable Electricity Mandates in the States
http://heartland.org/policy-documents/status-renewable-electricity-mandates-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.
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.
Five Things CEOs Are Worried About in 2014
http://blogs.wsj.com/five-things/2014/01/03/5-things-ceos-are-worried-about-in-2014/
The Wall Street Journal outlines the five things CEOs are worried about that are outside their control in 2014, listing “Keeping Energy Costs Under Control” as number one. The information was polled from The Wall Street Journal CEO Council, a group of 33 CEOs, some from the nation’s biggest companies.
Why Is Renewable Energy So Expensive?
http://www.economist.com/blogs/economist-explains/2014/01/economist-explains-0
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 abate 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.
A Global Transition to Renewable Energy Will Take Many Decades
http://www.scientificamerican.com/article.cfm?id=a-global-transition-to-renewable-energy-will-take-many-decades
Writing for Scientific American in January 2014, scientist and policy analyst Vaclav Smil notes, “[In the] U.S. and around the world, each widespread transition from one dominant fuel to another has taken 50 to 60 years.” Smil notes there are plenty of reasons to want to reduce dependence on fossil fuels, beyond greenhouse gas emissions, but current environmental policies “have been dismal.” He suggests the best way to foster an energy transition is to “avoid picking energy winners,” because such policies distort all-important investment and price signals and impede economic progress.
Why the Best Path to a Low-Carbon Future Is Not Wind or Solar Power
http://www.brookings.edu/blogs/planetpolicy/posts/2014/05/20-low-carbon-wind-solar-power-frank
Charles Frank, a nonresident senior fellow at the Brookings Institution, reports on his research on low-CO2 energy alternatives. Frank finds natural gas combined cycle is the cheapest low-CO2 energy alternative, even cheaper per kilowatt hour than power from coal or gas simple cycle plants. The most expensive alternatives are solar and wind. Frank says gas combined cycle, nuclear, and hydroelectric are the most cost-effective options for transitioning to a low-CO2 future.
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 Web site for Environment & Climate News 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.
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 Pike, Heartland’s state government relations manager, 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.
