Economics, Energy and the Environment

Energy fact of the week: Renewable stupidity needs no mandate

Renewable Portfolio Standards (RPS) are all the rage in pro-green energy circles these days; they’ve become the chief fallback position since the collapse of cap and trade—a back door way to regulate carbon. Twenty-nine states and the District of Columbia (and Puerto Rico!) have adopted mandates calling for a certain portion of electricity to come from renewable sources (chiefly wind, solar, and biomass; some RPS standards do not count hydro power, since dams are environmentally incorrect). California has the most ambitious target, with a new law calling for 33 percent of its electricity to come from renewable sources by the year 2020. Most state RPS goals are around 20 percent. And proposals for a national RPS are a hardy perennial; New Mexico Senator Jeff Bingaman is out right now with another national RPS proposal (though he calls it a “Clean Energy Standard,” or CES). Senator Bingaman claims that “a properly designed CES would have almost zero impact on GDP growth, and little to no impact on national electricity rates for the first decade of the program.” Well maybe, but what about the second decade?

Naturally, RPS boosters all claim, and can point to forecasts, that RPS standards won’t significantly increase electricity prices to consumers, even though every study shows renewable electricity sources are significantly more expensive than conventional fossil fuel sources. But never let the belief in the possibility of free lunches get in the way of reality: think of it as renewable stupidity, which really is abundant and cheap.

The Manhattan Institute’s Robert Bryce is out with a new report, “The High Cost of Renewable Energy Mandates,” that sheds considerable light on the subject. The whole thing is worth reading, but I’m particularly struck by his Table 1, which shows that of the ten states with the cheapest electricity rates, only two (Oregon and Washington) have RPSs, while of the ten most expensive states, eight have RPSs. And Oregon and Washington deserve asterisks to go with their RPS asterisks: both of those northwestern states enjoy a high amount of cheap hydro power, built by the federal government about 80 years ago. Washington state also gets a lot of its power from cheap nuclear power, heavily subsidized by the federal government 50 years ago. In both cases, the capital cost of their current electricity infrastructure is pretty cheap.

These old, non-carbon sources of energy enable Oregon and Washington more easily to absorb RPS sources like wind power, though, as Forbes magazine explained a few months ago, when the dams have too much water to manage through the dams, they shut off wind power, which is rather telling about the limitations of renewable sources.

Source: Energy Information Administration.

4 thoughts on “Energy fact of the week: Renewable stupidity needs no mandate

  1. Is there a part 2 to this post? What are you trying to say?

    If you intended to imply that renewable energy will raise the electric rates of the states with the highest energy costs you are wrong. We can produce electricity for $.06 kW depending on the cost of the biomass fuel. Often the fuel is free or even has a negative cost.

    While wind and solar are not 24/7 power, gasification is. And it is carbon neutral or even negative when done correctly.

  2. Looking at data for all 50 states, there is very strong evidence to suggest that wind is helping to hold electricity costs down.

    For the 30 states with the least installed wind capacity, electric rates increased by an average of 26.74% between 2005 and 2010, according to Department of Energy (DOE) data. In contrast, for the 20 states that produced the largest share of their electricity from wind in 2010, consumer electricity prices increased an average of only 15.72% between 2005 and 2010. Moreover, for the top 10 states in wind generation, electricity prices increased an average of only 10.94% between 2005 and 2010.

    There are many factors that influence the price of electricity, so this isn’t necessarily proof that states with more wind will always have smaller electricity price increases. What is clear is that the data stands in strong opposition to those who have tried to make unsupported claims that wind energy will drive up electricity prices.

  3. Thanks for the comments. Unfortunately, an AEI Scholars got it wrong again. And, In fact, your very own data listed in the article shows that. You cite an EIA chart on the leveled cost of energy…and low and behold…it shows that Wind is less expensive than Conventional Coal, Advanced Coal, Nuclear and all of the other renewables….Only existing Hyrdo and Combined Cycle are cheaper….

    Thanks for making the point for wind.


  4. Three responses so far, and all three miss the point of the article. The article talks about renewable energy sources in general, not just wind. Energy produced from renewable resources on average cost more than the energy that is currently being produced. Mandating that a certain portion of the energy used in the state or the country be more expensive to produce means that the prices will go up.

    Wind energy is may well be cheaper to produce than fossil fuel based energy. However, it is not reliable, and it cannot meet the demands for energy in this country. In fact, less than 3% of the energy used in the US was from wind. If the government mandes that 50% or 30% must come from renewable sources, then non-wind sourses will have to make up the vast majority of the difference. That means much higher prices for everyone.

    As for biomass gasification, the capacity is even less. The cost of the fuel may be free or negative now, but for gasification have a significant impact on the price of energy on a national or even state-wide scale production has to increase massively. This means greater demand for biomass fuel. Once the demand starts growing the cost of biomass fuel will significanly increase.

    That being said, anything that can be done to lower the cost of energy is good, so if wind and biomass fuel generated electricity can be scaled up to produce a larger percentage of the energy this country requires it will happen without government mandates. People are always looking to find ways to produce cheaper, cleaner energy because it means they make money. Government mandates are not the way to get things done.

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