It’s a tried-and-true way to make money off costly, inferior products: Get the government to force the public to buy them.
This is exactly what is happening with renewable electricity. The House and Senate are both considering renewable-electricity “standards.” These standards require that utilities generate or purchase a certain percentage of electricity from renewable-energy sources. Electricity customers, not the utilities, pay for the higher costs and the inferior quality of renewables.
On Friday, the House is expected to consider the American Clean Energy and Security Act (H.R. 2454), also known as Waxman-Markey. This 1,000-page bill contains the House’s version of a renewable-electricity mandate. By 2020, states would be required to generate or purchase 15 percent of their electricity from renewable-energy sources. Governors whose states are unable to meet this standard could petition the federal government to reduce the mandate to 12 percent.
States don’t all have the same potential for producing electricity from renewable sources, and for some, even a 12 percent mandate is excessive. North Carolina, for example, recently developed its own mandate of 7.5 percent — and in selecting this number, the state legislature ignored the state’s own consultant, who stressed that 5 percent was the realistic number. Entire regions of the country, such as the southeast, will get slammed by such a federal mandate.
Since the mandate can be met in part through the purchase of renewable electricity outside a state, it will lead to a wealth transfer from southeastern and some midwestern states with low renewable-electricity potential (due to low wind resources) to states with higher renewable-electricity potential, such as Texas and California. Also, states forced to “buy” renewable energy from other states wouldn’t actually use the electricity. Rather, an electricity customer in (for example) Georgia would pay higher electricity rates to subsidize renewable electricity in Texas.
Further, a federal standard would cut short the efforts of state governments — efforts that very well might solve the “problem” by themselves. According to the Energy Information Administration (EIA), about half of the states already have their own renewable-electricity standards. Most of these state requirements have been around less than five years; it is too early to conclude that these state experiments have failed, and that we therefore need a federal cookie-cutter approach.
Another problem with Waxman-Markey is that while wind power, solar, and some biomass are included, hydropower and nuclear power are excluded. Hydropower is a renewable and fairly effective source of electricity — its exclusion makes no sense. The exclusion of nuclear power, while not surprising, shows how disingenuous this push for “renewable” electricity really is.
The European Union characterizes nuclear power as a renewable energy source for the purposes of its fuel-source mandates. Now, technically, uranium isn’t renewable. However, it isn’t running out anytime soon. And more important, if the goal is addressing the supposed threat of climate change — rather than preventing carbon-emitting energy sources from running out — why does it even matter whether a given source is “renewable”? Nuclear power should be the primary way to meet any type of climate-minded mandate. But green activists, voicing overblown environmental concerns, have long opposed nuclear power.
Some proponents of federal energy mandates, even those who claim to be conservative, justify their support based on the need to promote energy independence. It is critical to distinguish renewable energy when it comes to electricity, which these mandates cover, and renewable energy (such as biofuels) used for transportation.
Based on EIA data, electricity generation accounted for only 1.5 percent of all petroleum consumption in the United States. Unless we start using lots of electricity for electric cars, switching our mix of electricity sources would have a negligible effect on petroleum consumption. When it comes to electricity, the United States is already energy independent.
The costs, though, are the biggest problem with these mandates.
According to the EIA, new on-shore wind power is about 37 percent more expensive than new advanced-coal technologies. And solar power makes wind power look like a bargain — new solar photovoltaic power is close to 300 percent more expensive than new advanced-coal technologies. Americans already massively subsidize these costly forms of energy. Wind receives federal subsidies equal to $23.37 per megawatt hour, and solar receives $24.34 per megawatt hour. (Coal receives 44 cents per megawatt hour.)
Congress should recognize that the United States is blessed with resources to generate low-cost electricity. We need to stop shooting ourselves in the foot and instead be thankful that we have low-cost and reliable electricity. Especially in these tough economic times, Americans simply can’t afford to have the government artificially raising electricity prices to appease special interests.
– Daren Bakst is legal- and regulatory-policy analyst for the North Carolina-based John Locke Foundation.