The Senate Committee on Energy and Natural Resources met this morning and, among other things, discussed a national renewable electricity standard (RES). The RES, which mandates that a certain percentage of our nation’s electricity production come from wind, solar, biomass and other renewable energies, already passed out of committee but is likely to be a part of any energy agenda this year. A new Heritage Foundation study analyzing the costs of an RES finds that a national mandate for pricier, less reliable electricity would be harmful to American families, American businesses and the American economy.
The Heritage analysis models the effects of an RES that starts at 3 percent for 2012 and rises by 1.5 percent per year. This profile mandates a minimum of 15 percent renewable electricity by 2020, a minimum of 22.5 percent by 2025, and a minimum of 37.5 percent by 2035. It looks solely at onshore wind, which is currently the cheapest renewable energy source that can be scaled in significant fashion. While some studies have attempted to model the economic effects of an RES and found only marginal price increases, they fail to take into account the true cost of renewable sources. Wind is not dependable, it cannot be stored and it must be built in geographically disadvantageous locations that require significant new build for transmission lines. A detailed analysis of this can be found in the study. The Heritage Foundation’s Center for Data Analysis projects that an RES would:
• Raise electricity prices by 36 percent for households and 60 percent for industry;
• Cut national income (GDP) by $5.2 trillion between 2012 and 2035;
• Cut national income by $2,400 per year for a family of four;
• Reduce employment by more than 1,000,000 jobs; and
• Add more than $10,000 to a family of four’s share of the national debt by 2035.
The reality is if electricity created by wind and other renewables were cost competitive, consumers would use more of it without a federal law to force consumption. Recent experience with the mandate for renewable fuels like corn ethanol also suggests significant cost increases as well as technical shortcomings. Proponents for wind and solar argue that the two energy sources are still in the infant industry phase and that more reliable sources of energy such as coal and natural receive preferential treatment. But solar and wind have been around for decades and receive subsidies of over $23/Mwh compared with the $0.44/Mwh for conventional coal and $0.25/Mwh for natural gas. The Energy Information Administration crunched these numbers before the passage of the stimulus bill that allocated billions more for clean energy production. At any rate, we believe we should peel back the subsidies for all energy sources (including coal, oil, natural gas and nuclear) so the government does not give preferential treatment to any one over another.
Americans concern about the economic costs of cap and trade throw a wrench in congressional plans to cap carbon dioxide. Alternative approaches like a renewable electricity standard would be just as economically painful. Check out the full study: A Renewable Electricity Standard: What It Will Really Cost Americans.