The economic impact of Arizona’s renewable energy mandate

In a recent, rather befuddled, guest opinion in the Arizona Daily Star, solar energy advocate Terry Finefrock urges the Arizona Corporation Commission to compel our electric utilities to install more solar energy generation. Finefrock starts his article with this sentence: “I challenge the Arizona Corporation Commission to fairly evaluate all electricity-generation technologies and act to actually reduce ratepayer and taxpayer costs.” I agree with that sentence. Ironically, Finefrock’s call for mandating more solar energy will have the opposite effect.

The Beacon Hill Institute at Suffolk University in Boston, MA., has been studying the probable impact of renewable energy standards and tariffs (REST) on a state-by-state basis. This month they published their analysis of Arizona’s renewable energy mandate. You can read the entire report here.

They calculate low, medium, and high estimated impacts. Among their findings are:

The current REST rule will raise the cost of electricity by $389 million for the state’s electricity consumers in 2025, within a range of $239 million and $626 million.

The REST mandate will cost Arizona’s electricity consumers $1.383 billion from 2013 to 2025, within a range of $857 million and $2.221 billion.

Arizona’s electricity prices will rise by 6 percent by 2025, within a range of 3.7 percent and 9.7 percent.

These increased energy prices will hurt Arizona’s households and businesses and, in turn, inflict harm on the state economy. In 2025, the REST would:

Lower employment by 2,500 jobs, within a range of 1,500 jobs and 4,100 jobs.

Reduce real disposable income by $334 million, within a range of $202 million and $543 million.

Decrease investment in the state by $38 million, within a range of $23 million and $61 million.

Increase the average household electricity bill by $128 per year; commercial businesses by an average of $686 per year; and industrial businesses by an average of $28,600 per year.

See also:

Petition to Arizona legislature – Dump Renewable Energy MandatesThat post gives six main reasons why we should dump Arizona’s renewable energy mandate. Among those reason are that renewable energy such as solar and wind are much more expensive and very unreliable and the unreliability puts the stability of the electric grid in danger.

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8 comments

  1. I realize the author of this blog does not accept global warming, but this is exactly what they are talking about with green jobs. Arizona has the best conditions in the world for generating renewable energy economically. The extra income brought into Arizona circulates through the economy benefitting everyone.
    Arizona Solar Energy and Economics Outlook

    By George Frisvold, William P. Patton, and Stan Reynolds

    Economic Impact of Construction

    Economic Impact of Construction

    The massive level of solar power plant construction over the next 20 years generates the lion’s share of solar power’s economic benefits in terms of employment, wages and value added. The O&M phase of the solar generation process adds very little economic impact in Arizona.

    The annual amount of direct labor used on solar construction and installation projects will increase from 565 jobs in 2010 to a peak 16,530 jobs in 2025. The total amount of jobs created (including direct, indirect and induced jobs) increases from 1,068 to a maximum of 32,082 over the same period.

    The cumulative impact of direct construction employment amounts to 142,368 man-years of direct employment by 2030. The cumulative total construction employment amounts to 277,759 man-years by 2030. Since these construction jobs only last a year and are not permanent, the cumulative employment represents man-hours of effort over the twenty year period, not total construction jobs at the end of the period.

    The amount of wages generated by solar power construction and installation will be significant. The total annual wages (direct, indirect and induced) will rise from $51 million in 2010 to a peak of $1,560 million in 2025. The cumulative value of wages over the period 2010 to 2030 amounts to $13.5 billion.

    The value added created by solar power construction and installation will also be significant. The total annual value added (direct, indirect and induced) increases from $74 million in 2010 to a peak of $2,240 million in 2025. The cumulative amount of wages from 2010 to 2030 amounts to $19.4 billion.

    1. The key word here is “economically.” So far these projects would not exist without mandates or subsidies. Jeffery, please provide a link to the report you cite.

      1. I would be happy to copy the link, I’m not aware of how to do that when it opens straight into pdf. My next best option to provide for you is to give you the title so that you can do a google search at the top.

      2. All utilities get a special tax benefit because of their intensive capital investment. If a coal plant were to go in today, they would expect to get the same benefits as in the past. To help capitalists get their investment back faster is desireable so that they can go out and do more work with their money.
        There aren’t any nuclear plants that make it without a special incentive for the plsnts to be built. Same should go for renewable energies.

  2. In Terry Finefrock’s defense; he did say “fairly evaluate.”
    Objectivity is not much associated with the Beacon Hill Institute.
    Seems to me, instead of practicing journalism, you are pushing an agenda.

  3. Jonathan, you are to be commended for your consumer protection efforts,but you need more support. Unless we ratepayers unite, the mandated theft and skyrocketing electric rates will continue. The Arizona Corporation makes the rules, so we need to hold their feet to the fire.
    The “solar team” has been voted off the Commission, which is now more conservative and consumer friendly. Eliminate the RES,yes, but perhaps piecemeal is best. In addition to recently lowering subsidies and rebates for solar, the Commission has suggested reducing the REM from 15% to some lower value. That’s a step in the right direction. Everyone,please write or call your legislators and commissioners, remind them they are working for us, not special interests.

  4. I like how in your previous op-ed you’ll dismiss a report in favor of renewable energy with “The claim is based on computer modeling: garbage in, garbage out.” but here, you’re totally fine with the black box computer modeling effort of two economics professors based in Massachusetts. Any idea how the STAMP model works? Any idea why it makes no sense to model any increased costs of renewable energy in this fashion? Why it’s important not to exclude externalities like STAMP does? Curious – when you cut and paste from fossil fuel industry funded studies, do you round up your hourly rate on the invoice?

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