Renewable energy mandates raise electricity costs

Currently, 29 states plus the District of Columbia and Puerto Rico have renewable energy mandates requiring that some electricity be produced by renewable energy sources such as solar or wind generation. California has the most stringent requirement of 33% renewable generation by 2020; Arizona has a requirement of 15% by 2025.

These mandates are costing us money and more. A new study from the Manhattan Institute for Policy Research has been examining the consequences of these energy mandates, some excerpts:.

There is growing evidence that the costs may be too high—that the price tag for purchasing renewable energy, and for building new transmission lines to deliver it, may not only outweigh any environmental benefits but may also be detrimental to the economy, costing jobs rather than adding them.

The mandates amount to a “back-end way to put a price on carbon,” says one former federal regulator. Put another way, the higher cost of electricity is essentially a de facto carbon-reduction tax, one that is putting a strain on a struggling economy and is falling most heavily, in the way that regressive taxes do, on the least well-off among residential users.

[O]ur analysis of available data has revealed a pattern of starkly higher rates in most states with RPS mandates [Renewable portfolio standards]compared with those without mandates. The gap is particularly striking in coal-dependent states—seven such states with RPS mandates saw their rates soar by an average of 54.2 percent between 2001 and 2010, more than twice the average increase experienced by seven other coal-dependent states without mandates.

Our study highlights another pattern as well, of a disconnect between the optimistic estimates by government policymakers of the impact that the mandates will have on rates and the harsh reality of the soaring rates that typically result. In some states, the implementation of mandate levels is proceeding so rapidly that residential and commercial users are being locked into exorbitant rates for many years to come. The experiences of Oregon, California, and Ontario (which is subject to a similar mandate plan) serve as case studies of how rates have spiraled.

In June 2011, the Electric Power Research Institute (EPRI), an independent science and research organization, released a report on technology innovation in electricity generation. The report examined fossil- and nuclear-based technologies, as well as four renewable technologies. EPRI found that burning natural gas was, by far, the cheapest way to generate electricity, and it predicted that gas would continue to provide the lowest-cost option through 2025.

In 2015, generating a megawatt-hour of electricity with natural gas will cost between $49 and $79, according to EPRI estimates. That same quantity of energy produced from onshore wind will cost between $75 and $138, while generating it with solar photovoltaic will cost at least $242 and as much as $455. By 2025, very little will have changed, EPRI says: gas-fired electricity production will have gone down a few dollars, to between $47 and $74 per megawatt-hour, leaving it comfortably ahead of onshore wind generation, down only marginally as well, to a range of $73 to $134 per megawatt-hour.

 

In addition to the direct cost of electricity, the Manhattan Institute notes that the increasing subsidies to renewable energy ventures (some $14.6 billion in 2010) is essentially using our tax money to raise our electricity rates. Many of these projects also receive tax breaks from the states. These mandates also increase costs to businesses which means we ultimately pay more for consumer products.

If renewable energy is such a good deal, let such ventures obtain financing privately and compete in the open market without mandates for sales. If that happened, we would see that most renewable energy ventures are not economically competitive and survive only through mandates and subsidies.

 

See the full report from the Manhattan Institute at:

http://www.manhattan-institute.org/html/eper_10.htm

 

See also:

National Renewable Energy Standard Will Mean Higher Electricity Bills

Arizona Corporation Commission May Ration Electricity

EIA says Clean Energy program will increase electricity costs 29%

Renewables receive bulk of tax preference subsidies

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19 comments

  1. PV subsidies are equivalent to a carbon tax, but it’s not very cost effective at reducing CO2.  Carbon credits trade for about $20/ton in the EU, but saving CO2 with PV cost about ~$100/ton.  It’s foolish and wasteful.  There are far more cost effective ways to reduce CO2, just ask those in the EU saving Carbon for $20/ton.

    Beside there is some evidence that installing on-grid PV is a net CO2 emitter, once the direct and indirect energy inputs are counted as well as the energy opportunity cost.

    Energy opportunity cost is the lost CO2 saving which we could have had if the copper, aluminum, labor, etc, were used smarter to reduce CO2, rather than wasted installing uneconomic on-grid PV systems.

    The sooner the subsidies stop the quicker our state’s economy will recover and we can focus on legitimate energy solutions.

      1. For the energy opportunity cost discussion Google “William Baumol” and “Subsidies to new energy sources, do they add to energy stock.”  It’s a complex economic argument, but fortunately I have a friend/professor with a Ph.D. in Economics that spent considerable  time explaining the concept to me.  It seems clear now, but it was very difficult to grasp it at first.

        For the carbon cost, you can find the carbon trading price on the internet (~$20/ton in the EU).  Then you can calculate the cost of mitigating CO2 with PV, by using the installed cost of PV ($3-$5/watt) and the lifetime energy output (1650 kWh/yr/kW of PV * ~30 year).  Then look up the CO2 per kWh for coal and gas.  I think you can find the data on the Energy Information Administration Website.  The savings are larger in AZ than the national average because AZ is energy is heavy in coal.

        The calculations with take an hour or so, but I had my work checked by the former director of the DOE EIA.

        Email me at david135711@gmail.com if you have any questions.

      2. http://en.wikipedia.org/wiki/File:EROI_-_Ratio_of_Energy_Returned_on_Energy_Invested_-_USA.svg

        Of the different energies, what kind of return are getting for the energy invested into them. Oil used to 100 to 1 EROEI. Energy returned on energy invested. Photovoltaics ranks better than biofuels (corn) and tar sands. Wind is around 20 to 1, better than tar sands and slightly less than oil. As oil gets harder and harder to extract even PV will have a better EROEI than oil. PV will improve over time and oil will get worse.

      3. EROEI is a flawed and bogus method of measuring value, which no creditable economist will use.  Not only it is fraught with error in trying to determine actual energy inputs (like those addressed in the Baumol paper), but it completely ignores the value of all the other good a valuable inputs such as labor, copper, aluminum, silicon, capital, etc.

        Again, PV does not offset oil.  You continue make this erroneous connection.

      4. The erroneous connection you are making about what I am saying is that I said PV would replace oil. Talk to Lutz from General Motors. Electricity will be used more in transportation where possible. It is important for electricity to replace oil for economic and climate reasons. And it will happen.

        Electricity is regulated in its price and oil is on a free world market roller coaster.

        The link I provided you on EROEI did describe  the downfalls of their numbers and some of the weaknesses. But the eroei of oil has been falling for oil and the price has been going up overall. There is correlation. If you look at corn ethanol there is a very low EROEI. Yet we continue to use it. What it does point out validly is that there isn’t much energy gain from using it. Coal has a very high EROEI but we use it inefficiently with only about 30% efficiently.

        Looking at shale oil which is what the Bakken oil fields are in North Dakota. Has a reasonably low EROEI, lower than PV. IT represents where we are in the curve of peakoil. WE are willing to do more effort for a smaller amount of gain.

    1. Interesting that you would say that PV is ineffective at reducing co2. PV is a peak load producing source of electricity. PV produces power when society uses it the most. This keeps peak power power plants from turning on because just produces that power everyday the sun shines. PV saves the utility money, saves the rate payers money and reduces co2 pollution. Once installed has low operating costs and a long lifetime. Uses less land space than a coal plant, coal needs to be continually fed from some source of low sulfur coal.

      In response to PV cannot replace oil. IF our society chooses to build into the future more electric transportation, the state of Arizona has enough sunlight to run all the transportation of the United States.

      1. PV is just too expensive to be a useful alternative.  Sorry.

        You’re very confused about solar economics.  I can’t take the time to reply to any more of your comments.  best wishes.  

      2. As a CEO you are way too opinionated. If you haven’t noticed the price of PV coming down, then what are you really doing here? You are wrong in that area. The cost of PV is expected to decrease the rest of this decade. Do you have some sort of grudge or something. Carbon based energy is shifting the world climate warmer and must be left in the ground for the safety of our future generations. Even natural gas is really not a decent substitute. For the first 20 years of leakage methane is 100 times more powerful of a ghg.

        You wouldn’t be a head in the sand type also would you? 

      3. Studies about the experience in Europe show that wind and solar energy actually increase CO2 emissions.  Because solar and wind require intermittent backup, the gas-fired generators much be continuously cycled up and down rather than run efficiently.  The constant cycling uses more fuel than they otherwise would.

      4. Germeny is the strong economic engine of Europe and during a good economy on their behalf they have reduced co2 emissions greatly.

        BMU/UBA: German Greenhouse Gas Emissions 25% Below 1990 Levels in 2010 Published on January 17, 2012 in Climate Change. 1 Comment Tags: CO2 emissions, kyoto protocol, Nationaler Inventarbericht 2012, UBA.
        Despite the economic upturn Germany is on track regarding its Kyoto Protocol obligations. Greenhouse gas emissions in 2010 were 25% below the 1990 levels (Kyoto Protocol reference year), corresponding to a decline of more than 295 million tons of CO2 per year, the Federal Ministry for the Environment (BMU) and the Federal Environment Agency (UBA) informed in a joint press release.Continue reading ‘BMU/UBA: German Greenhouse Gas Emissions 25% Below 1990 Levels in 2010′

  2. http://thinkprogress.org/climate/2012/04/11/462218/study-no-relationship-between-renewable-energy-targets-and-higher-electric-rates/

    There seems to be an organized effort to thwart RE. I know quite a few conservatives who don’t agree with this position. Renewable energy is the cleanest way to make energy there is. Fossil fuels are the dirtiest with health degradation to a portion of our population. Then we have talked about AGW before. Somehow that is not very well recognized amongst conservatives. But then which party recieves the most contributions from the fossil fuel companies? For the ssake of health, national security, climate, economy, we should start by reducing oil dramitcally to make our nation sound. Oil knows this and doesn’t like it. THerefore attack the one that will take away their market share.

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    As conservative lobbyist Grover Norquist wrote in a recent Politico op-ed:

    Renewable energy standards, by design, are intended to drive up energy costs—requiring utilities to use more expensive and often less reliable sources of energy. Not surprisingly, such laws have hit ratepayers hard. States that have a binding [renewable energy standard] now have electricity costs that are 39 percent higher than states that don’t have a binding [standard].
    And Robert Bryce of the conservative Manhattan Institute adds:

    There is growing evidence that the costs may be too high—that the price tag for purchasing renewable energy, and for building new transmission lines to deliver it, may not only outweigh any environmental benefits but may also be detrimental to the economy, costing jobs rather than adding them.
    Fortunately for consumers in the 29 states with renewable energy standards, these critics are wrong. There are no data showing that these standards cause electricity rates to skyrocket.

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    If you should choose to look at fig. 1 in the article there are several states that before they set RPS their rates were going up and after RPS their rates go down. If a conservative organization wants to just focus only the few states that prove their point then so be it. But to spread that to “therefore its the whole country is just plain wrong”. If those that publish wrong information know the real truth of the matter and just published anyway, then that qualifies as a lie. Very deceitful. Otherwise its just sloppy becuase they didn’t do their homework properly.

    1. There is no denying that RE mandates have caused electricity rates to rise.  For proof, all I have to do is look at my electric bill which itemizes the extra charges.

      The bottom line is that your favored solar and wind generation could not compete without mandated usage and subsidies.  

      1. It is totally your privelidge to view the world as you wish. Go to figure one of the article I have showed you and look at the data. If you choose to be irritated with Renewable Energy that is your privelege. If you don’t see the connection between RE and national security, that is your privelege. If you don’t see the link between RE and energy security, again that is your privelege. If you choose to see no problem with AGW and therefore RE not relevant, that is your privelege.

        Instead of false information being presented to make a faux case, why not deal with the truth. Look at Iowa in fig 1. 20% wind energy per capita electricity with a decrease in electricty prices. The real question you should be asking then is what is your state doing wrong. Because Iowa is doing something right. They are world leaders in moving forward in RE.

        Also you are ignoring this is an organized attack based on false information. Most of the country is doing it right, and it is their right to choose RE if that is what they want for their state. Its time for the wealthy interests to butt out.

        Using our government to strengthen our country in clean infrastructure is the best thing we can do for ourselves and the world. The case is very clear if you choose to be open to it.

    2. You need to recognize that installing PV on the grid does not reduce our oil consumption.  In the US, we make electricity from: 

      Coal (~50%), 
      natural gas (~20%), 
      nuclear (~20%), and
      Hydro(~7%) 
      plus minor amounts from other technologies.  

      Almost none of our electricity comes from oil.  Solar PV reduces coal and natural gas use, not oil.  
      But worse, the technologies which can reduce oil imports, such as electric cars are hindered by the higher electric rates caused by forcing uneconomic solar PV onto the power grid.  

      1. quote:But worse, the technologies which can reduce oil imports, such as electric cars are hindered by the higher electric rates caused by forcing uneconomic solar PV onto the power grid.:unquote

        I disagree with that. Take the Chevy Volt for example or the Nissan Leaf. $3/100miles, I have just heard that quoted. THe price of electricty could increase and electric vehicles would still be cheaper. When society uses more batteries in its transportation the utility can pay you to use your battery for peak supplements of the grid. It is possible to get your battery bank paid for in the future.

        http://www.scientificamerican.com/article.cfm?id=electric-cars-cost-per-charge

        When you compare battery to gasoline power, electricity wins hands down. A 2007 study by the non-profit Electric Power Research Institute (EPRI) calculated that powering a plug-in hybrid electric vehicle (PHEV) would cost the equivalent of roughly 75 cents per gallon of gasoline—a price not seen at the pump for 30 years.

      2. If electric wins hands down everyone would buy one.  But this is not what is happening in the market.
        When considering an electric vehicle, the typical consumer must trade between the benefit of lower fuel cost and the inconveniences of limited range, limited/slow charging, and battery life/cost uncertainty. 

        Many buyers will make a rational trade between the savings and cost  The less the savings, the less the number of people that will buy an EV.  For example, few are willing to buy EV’s today.

        Unfortunately, higher electric bills will further tilt the balance away from electric vehicle for many rational buyers.

      3. I can give you a certainty. The price of oil will go up on average. I believe that electric can at first supplement gas and then with due dillegence be a replacement. Looking out to 2020 and  2030 reducing costs of transportation from expensive hard to get oil pretty much has to start now. Who the economic leaders are of tomorrow are the ones who can see the general trends from today. I believe oil to be a bad bet in the future economically and environmentatlly.

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