The Leaflet: Higher State Support for Green Energy Increases Energy Costs for Consumers

Published June 2, 2016

In May 2016 the Daily Caller News Foundation (DCNF) published an analysis that revealed a “statistically significant correlation … between high electricity bills and states with numerous policies supporting green energy.”

Using data from the Energy Information Administration (EIA) and the Database of State Incentives for Renewables and Efficiency, the study concluded states offering incentives such as “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.”

DCNF pointed to California and West Virginia to exhibit the failure of many states’ failing green-energy programs. Electricity prices in California, which includes 183 different policies that “support” green energy, are currently at 14.3 cents per kilowatt-hour. Electricity prices in West Virginia, which has only 11 green-energy-friendly polies, average 7.91 cents per kilowatt-hour.

DNCF says Connecticut and New York have had the most expensive energy costs since 2013, with prices averaging 15.7 and 15.4 cents per kilowatt-hour, respectively. Washington State (7.1 cents per kilowatt-hour) and Wyoming (7.55 cents per kilowatt-hour) had the lowest. Washington State has a higher number of green-energy policies, but the state produces 30 percent of the nation’s net hydroelectricity generation, which helps to lower the state’s energy prices.

Renewable portfolio standards—the subsidies and renewable power mandates state legislatures impose upon consumers—are very costly. The Brookings Institution published a 2014 study that found U.S. wind power is on average twice as expense as the conventional power it replaces. The study also concluded solar power is three times as expensive. The higher costs eventually trickle down to consumers.

H. Sterling Burnett, an environment and climate research fellow at The Heartland Institute, concluded states with renewable power mandates are seeing retail electricity prices rise twice as fast as the national average.

Wind and solar power receive disproportionate federal, state, and local taxpayer subsidies. To fund those subsidies, higher tax rates are utilized, which impose significant costs in addition to those reflected in retail electricity prices.

EIA says while solar power receives more federal subsidies than all fossil-fuel industries, it only produces 0.4 percent of the country’s electricity. Wind power receives more subsidies than fossil-fuel industries as well, and it produces only 4.4 percent the nation’s electricity. It is estimated wind and solar power receive 25 times more subsidies than fossil fuels when estimates are calculated based on the dollar per unit of electricity produced.

Low-income households are more impacted by such policies, because they spend a larger share of income on electricity, effectively making renewable power mandates a regressive tax.

Repealing renewable power mandates and eliminating green-energy subsidies would significantly lower electricity prices and raise the standard of living; lower-cost electricity would allow for the purchase of goods and services that improve lives. The economy would grow, and the number of jobs would increase as available money flows into other areas of the economy, creating the need for additional goods and services.

State legislators should reevaluate current renewable mandates and energy subsidies, not enact costly energy policies.

What We’re Working On

Budget & Tax
Research & Commentary: Attack on Nexus Standard Will Hurt Online Economy
The debate over internet sales taxes has reached a critical crossroads. For years, the principle of nexus—the idea state governments cannot tax a person or business without them having a physical presence in the state—has been at the center of all proposals to add a sales tax to transactions made on the internet, but now, states are beginning to challenge that principle, notably  Rhode Island and South Dakota. In this Research & Commentary, Senior Policy Analyst Matthew Glans argues state legislators should implement “a sales tax system based on where the product was sold, known as an origin-based tax system. This would truly level the playing field, with both online and bricks-and-mortar retailers paying the same tax.” Read more

Constitutional Reform
Answering the John Birch Society Questions about Article V
Discussion about the possibility of a “convention of the states” to amend the U.S. Constitution is heating up. It’s now likely such a meeting will take place at some point in the next few years. Whether it will lead to constitutional reform remains to be seen, however.

In this paper, Michael Farris, a legal advisor for the Convention of States Project, addresses 16 common objections to the creation of an Article V convention, especially those leveled by the John Birch Society (JBS). Farris provides thorough, thoughtful responses to JBS’ objections, concluding, “Every possible plan ultimately relies on motivating a number of loyal Americans to do the right thing to save the country. We are confident that the vast majority of people who love liberty will join us in supporting the Constitution’s own solution to federal power abuses. We urge the JBS to reconsider its position and join with us.” Read more

Research & Commentary: What the Empirical Research Says on Education Choice
In this Research & Commentary, Heartland Policy Analyst Tim Benson highlights the publication of the fourth edition of A Win-Win Solution: The Empirical Evidence on School Choice, authored by Greg Forster of the Friedman Foundation for Educational Choice. The 100 empirical studies examined within the report are centered around five key topic areas: The “academic outcomes of choice participants,” the “academic outcomes of public schools,” the fiscal “impact on taxpayers and public schools,” school choice programs’ impact on the “racial segregation [of] schools,” and their impact on the “civic values and practices” of participants. Of the 100 studies, only three found any negative effects for students.  Read more

Energy & Environment
Research & Commentary: Texas Earthquakes and Hydraulic Fracturing
Researchers at the University of Texas-Austin and Southern Methodist University published a study in May 2016 in the scholarly journal Seismological Research Letters claiming 87 percent of all earthquakes in the Lone Star State from 1975 to 2015 were “possibly” caused by “petroleum production.” According to the study, 59 percent of earthquakes were “probably” or “almost certainly” caused by production of fossil fuels. The study also argues wastewater disposal from injection wells used in the hydraulic fracturing (“fracking”) process have caused most of the state’s earthquakes since 2008. In this Research & Commentary, Policy Analyst Tim Benson argues using the term “earthquake” to refer to the minor seismic activity produced by the overwhelming number of injection wells, although technically correct, is misleading because most of these so-called earthquakes cannot even be felt by people. Benson says it is much more accurate to describe the seismic activity produced by injection wells as mere tremors, not “earthquakes.” Benson says the actual hydraulic fracturing process itself, having been used in at least one million wells nationwide since 1947, is incredibly safe. Read more

Health Care
Research & Commentary: Michigan Direct Primary Care Pilot Could Save Medicaid Millions
A new pilot proposal currently being considered in Michigan would integrate a direct primary care (DPC) program into the state’s expensive Medicaid system to help reduce costs and improve care. Under the pilot project, 2,400 Medicaid recipients would be enrolled in the state’s Direct Primary Care Services. In this Research & Commentary, Senior Policy Analyst Matthew Glans examines the pilot program and recommends it to other states as a model to follow. Glans said if implemented nationwide, it could save billions in Medicaid spending while providing better care for patients. “Medicaid spending has become a substantial problem in Michigan; it has become the single largest item in the state budget, currently at $17.5 billion. According to the pilot bill’s sponsors, the success of the pilot would be determined based on a reduction in the number and severity of non-primary-care claims.” Read more

From Our Free-Market Friends
Mercatus Releases New Study: State Fiscal Solvency
The Mercatus Center at George Mason University released its 2016 edition of Ranking the States by Fiscal Condition. This study ranks each U.S. state’s financial health based on short- and long-term debt and other key fiscal obligations, such as unfunded pen­sions and health care benefits. Using the approach pioneered in the 2015 study, the 2016 edition presents information from each state’s audited financial report in an easily accessible format, this time including Puerto Rico to provide a benchmark of poor fiscal performance. Alaska, Nebraska, Wyoming, North Dakota, and South Dakota were the five highest-ranked states. Read more