Moving To Renewable Energy Is More Costly Than You Think 

Moving To Renewable Energy Is More Costly Than You Think

The Ivanpah Solar Electric Generating System near Primm, Nev. Solar power is three times as expensive as conventional power, according to the Brookings Institution. (AP)

• TIMOTHY J. CONSIDINE
• 7/06/2016

Recently, Maryland Gov. Larry Hogan vetoed a bill to raise his state's renewable portfolio standards (RPS) -- the fraction of electrical generation that must come from renewable energy -- from 20% to 25%. He called the goal "laudable" but noted that he couldn't support the costs such a move would impose on the state's ratepayers.
Gov. Hogan's decision is part of a recent trend of states moving away from RPS, which exist in mandatory form in 29 states and Washington D.C., ranging from 75% in Vermont to 10% in Wisconsin. Last year, West Virginia and Kansas repealed their RPS. And the year before that, Ohio paused its RPS. Currently, proposed legislation exists in numerous statehouses to cut or scrap RPS.
The reason? Cost. According to the Brookings Institution, wind power is twice as expensive as conventional power, and solar power is three times as expensive. These higher energy costs are passed on to electrical ratepayers, depressing economic output and disproportionately hurting the poor, who spend a larger fraction of their incomes on electricity.
My new RPS research sheds more light on the degree and scope of these costs and explains how they impact various states differently. Understandably, I find that states with moderate RPS goals experience moderate rate increases, while states with ambitious RPS goals experience more significant rate increases.
For instance, Nevada's 25% RPS will increase state electricity prices by 16% in 2020. But Wisconsin's 10% mandate will only increase its state's electricity prices by 4% in 2020. (According to Energy Information Administration data, residential electricity prices are currently 29% higher in states with mandatory RPS than in states without them.)
The economic costs associated with the higher electricity rates go beyond just reducing spending among ratepayers, who now must devote more of their income to their electric bill. Since energy is an essential factor of production and consumption activities, businesses pass along higher rates in the form of higher prices for customers.
As a result, net economic output in states with RPS is reduced -- often by billions of dollars. I conclude, for instance, that Colorado's 30% RPS will reduce its economic output by $2 billion in 2020. New Mexico's 20% RPS will reduce its economic output by $444 million in 2020.
Less economic output means fewer jobs. I expect RPS to cost thousands of jobs per state, varying based on each state's unique labor market. I estimate that North Carolina's 12.5% RPS will cost it 43,000 jobs in 2020, for example.
It's true that RPS do create some jobs in building and maintaining solar, wind and other renewable capacity, but these job gains are dwarfed by the job losses caused by reduced economic output.
RPS are beneficial insofar as they reduce carbon dioxide emissions. But these benefits come at a high cost of between $60 and $80 per ton on average across all 12 states, according to my analysis. This is a far higher price than the social cost of carbon estimated by the federal government.
Reducing carbon emissions is a worthy goal. But the costs of doing so must also be taken into account.
As my research shows, and as numerous states are recognizing, at a certain point the costs of removing the next ton of carbon from the atmosphere outweigh the benefits. While this may sound radical to environmental activists, such cost-benefit analyses are an essential part of nearly all other public policy considerations.