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Maximum Utility
Why states should focus on reliable, low-cost power.


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Like the federal government, state governments have adopted policies that undermine efforts to secure low-cost and reliable energy sources. States have created numerous obstacles to developing low-cost energy, and even outright mandated the use of expensive and unreliable forms of energy.

The stated goal of these policies is to fight global warming. However, even if the United States drastically reduced its carbon-dioxide emissions, there would be no meaningful effect on global temperature. The idea that emissions reductions in the U.S. can heal the planet, while China’s and India’s emissions grow unchecked, is absurd.

Further, there hasn’t been global warming since 1995. In fact, since 2001, there’s been a decline in global temperatures even as atmospheric carbon-dioxide levels have risen.

There are three simple things that states can do to develop sound energy policy.

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First, states should allow utility companies to use the least expensive and most reliable sources of electricity. Electricity customers want to be able to flick a switch and know that the lights will turn on. And they want this reliability at the lowest possible cost.

Unfortunately, about 35 states mandate that utility companies generate some electricity from renewable energy sources, such as solar and wind power. These mandates, called renewable-portfolio standards, drive up electricity costs and undermine the reliability of the electricity grid.

There’s no great mystery as to why these mandates exist. If mandates didn’t exist, utility companies wouldn’t buy electricity from these sources — primarily because they are unreliable and expensive.

Second, states need to stop blocking the development of low-cost and reliable electricity sources, such as nuclear power. Across the country, many states make it difficult if not impossible to build nuclear power plants. Among the more extreme states are Minnesota, which has a moratorium on the construction of nuclear power plants, and Hawaii, which has a constitutional amendment that bans the construction of nuclear power plants without a two-thirds vote of each chamber of the legislature.   

According to the Energy Information Administration, a new advanced nuclear power plant costs about 32 percent less, in dollars per megawatt hour, than a new on-shore wind power plant. This estimate is conservative, because the back-up generation needed for wind power — typically natural-gas turbines, which keep the lights on when the wind isn’t blowing — isn’t taken into consideration.

There’s no electricity source more reliable than nuclear power. It has a capacity factor of about 90 percent. This means that it generates 90 percent of the total electricity it technically can generate. In comparison, wind power only has a capacity factor of about 30 percent, largely because the wind doesn’t blow at the right speeds all the time.

Third, coastal states, in particular, need to take a leadership role in promoting offshore drilling. Now that federal moratoria have been lifted, states can be the driving force for increased domestic oil and natural-gas production. In the areas currently off-limits to drilling, the United States Department of the Interior estimates that there’s about 18 billion barrels of oil. Based on current numbers, this would be equivalent to 32 years’ worth of imports from Saudi Arabia.

There’s an estimated 76 trillion cubic feet of natural gas. To put this in perspective, this would be equivalent to 19 years’ worth of natural-gas imports. Besides reducing dependence on foreign energy sources, offshore drilling would increase the supply of oil and natural gas, thereby driving down prices.  

States also would directly benefit from removing obstacles to offshore drilling; they would share in the royalties from offshore leases. An estimate by the House Natural Resources Committee’s Republican staff indicated that North Carolina would receive about $24 billion over a 30–40 year period. Sen. Mary Landrieu’s (D., La.) staff has estimated that Louisiana would receive up to $40 billion over 50 years based on new leases in offshore areas that were opened up in 2006.  

Energy is the lifeblood of our entire nation. It keeps our factories humming, computer disks whirring, and telecoms crackling. It is essential for operating our schools and hospitals. It allows us to cool ourselves in the summer and warm ourselves in the winter.

While the federal government continues to look for ways to drive up energy costs through proposals such as cap-and-trade, the states don’t have to join in. They can take the lead and once again commit themselves to policies that enhance energy supplies and lower energy costs.

– Daren Bakst is legal and regulatory analyst for the John Locke Foundation.



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