The Leaflet: Study Suggests Renewable Portfolio Standards are Costly and Inefficient

Published July 22, 2016

On July 21, renewable-energy advocates hosted the “People’s Energy Forum” in Reno, Nevada. Sponsored by the Sierra Club and the Progressive Leadership Alliance of Nevada, the forum focused its efforts on ways Nevada can promote renewable-energy mandates. Recent attempts to increase renewable-energy mandates have reignited the debate over America’s energy future around the state and across the country.

Twenty-nine states have Renewable Portfolio Standards (RPS) laws, most of which passed in the early 2000s. In the past two years, dozens of states have considered reducing or repealing these mandates. In July 2014, Ohio became the first state in the nation to pass a freeze of its renewable mandate, and in 2015, West Virginia repealed its mandate as well.

Renewable portfolio standards – often referred to as “renewable power mandates” or “renewable energy mandates” – force expensive, heavily subsidized electricity on ratepayers and taxpayers while providing few if any net environmental benefits. The wind and solar power forced upon consumers by renewable power mandates is extremely expensive.

A recent study by Timothy J. Considine, distinguished professor of energy economics with the School of Energy Resources and the Department of Economics and Finance at the University of Wyoming, found while RPS investments stimulate economic activity, the negative economic impacts associated with higher electricity prices offset the economic “benefits” from RPS investments. The study, which examines 12 different states, suggests RPS mandates are costly and inefficient means to reduce greenhouse-gas emissions, and the study says they ultimately reduce economic growth and employment.

Thomas Tanton, president of T2 and Associates, argues in a 2015 Policy Study published by the Reason Foundation only some renewable-energy technology installations conserve resources. Tanton also argues while some of these installations are efficient, many are not.

“Renewable portfolio standards (further exacerbated by various federal tax treatments and local subsidies) fail to recognize this distinction and foster the development of inefficient installations, thereby discouraging the use of more efficient and environmentally effective facilities,” wrote Tanton.

“For example, most of the compliance with state-level RPSs has come in the form of wind energy,” wrote Tanton. “Wind energy is unpredictable and volatile, leading to lower value and imposing significant costs on others. Advocating for RPS reveals the belief by proponents that the market would not otherwise embrace cost-effective, resource-conserving installations of renewables. History proves otherwise.”

A recent fact sheet produced by the Palmetto Promise Institute argues Environmental Protection Agency (EPA) standards and rules continue to drive electricity costs higher in Palmetto’s home state of South Carolina. “The EPA’s Renewable Portfolio Standard (RPS) bears much of the blame for these negative consequences,” wrote the Palmetto Promise Institute. “The RPS was set into motion by the EPA in 2014 and requires states to increase the percentage of energy produced by renewable energy sources. The EPA has required 2.1 percent of South Carolina’s total energy consumption be renewable energy by the year 2021.”

In a recent Research & Commentary, Policy Analyst Tim Benson argues repealing renewable power mandates will raise living standards, stimulate long-term economic growth, and create a substantial increase in net jobs. “Living standards increase because lower-cost electricity frees up money for consumers to purchase additional goods and services that improve their lives,” wrote Benson. “Economic growth and net job numbers increase because the newly available money spent on additional goods and services creates additional jobs throughout the economy.”

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