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OPINION: The illusion of prosperity

By ThisIsReno


By Geoffrey Lawrence

NPRI logoThe proponents of “green” energy promise the world.

They say that state laws requiring regulated utilities to purchase electricity produced through “renewable” means such as wind and solar power will reduce emissions and spark economic growth through new job creation. According to these advocates, there’s no downside to aggressive renewable standards — a proposition that raises some obvious questions: Why, then, are the legal standards even necessary? and Why, then, wouldn’t savvy entrepreneurs expand renewable-energy production even in the absence of such laws?

To date, 29 states and the District of Columbia have enacted “renewable portfolio standards” that require utilities to obtain a minimum share of electricity from renewable generation facilities, often with minimum thresholds specifically for higher-cost solar power.

Data from the U.S. Department of Energy confirms that electricity from “renewable” sources is significantly more expensive than conventional-source electricity and will remain so for the foreseeable future. For new generation facilities coming online in 2016, for instance, solar photovoltaic energy will cost more than 21 cents per kilowatt-hour to produce, whereas the same amount of electricity produced from natural gas will cost only 6.3 cents.

Utilities make up this cost difference by charging consumers increasingly higher rates as the minimum share of renewable energy the utilities are required to purchase increases over time. Because regulated utilities are guaranteed a set rate of return, shareholder profits are protected while consumers face rising electricity bills.

Moreover, consumers cannot elect to purchase electricity from a lower-cost competitor, because the regulatory framework mandates monopoly — prohibiting competition among electricity providers. As a result, the effect of a renewable portfolio standard is that of a tax on electricity usage, because consumers have no choice but to pay the additional cost.

But what about “green jobs”? Does new job creation in the renewable-energy field compensate for the additional expense of renewable-energy mandates on households and businesses?

After all, a 2009 study funded by the Union of Concerned Scientists claims that a national requirement for utilities to purchase 25 percent of all electricity from renewable facilities by 2025 would create 297,000 new jobs in manufacturing, construction, operations, maintenance and related fields. Other studies by advocates have supported similar findings.

However, the picture grows less appealing once the specifics are considered. First, these studies routinely consider short-term construction jobs as equivalent to long-term operations jobs. In reality, the bulk of jobs in renewable-energy generation are in construction of the facilities, while ongoing jobs are relatively few. In Nevada, renewable-energy firms have received $1.3 billion in federal subsidies since 2009 and, yet, this large public investment will lead to only 288 permanent, full-time jobs — a cost to federal taxpayers of $4.6 million per job.

Second, these studies fail to consider the net impact of jobs that are destroyed by higher electricity prices. As renewable mandates drive prices up, business costs increase and households have less disposable income — meaning that consumer spending for other goods and services declines. This means that job growth in the renewable sector comes at the direct expense of jobs in other sectors of the economy.

When the net impact is considered, every “green” job created through government mandates and subsidies destroys more than two jobs outside of the renewable sector, according to an April 2009 report in The Economist.

So renewable mandates increase electricity costs and destroy jobs. But at least they save the environment, right?

Even that isn’t as clear as one might hope. The energy-production patterns of wind turbines, especially, cast doubt over the technology’s ability to reduce industrial emissions. Wind turbines tend to produce most of their electricity during off-peak hours when the additional energy isn’t needed.

The production is also intermittent and can vary dramatically from minute to minute as the wind lapses or gusts. That means grid managers must keep conventional power stations running on standby and continuously ramp their production up and down as wind-power production varies.

That reality has led energy experts to conclude that “a wind farm is the true source of emissions from a thermal power station operating spinning standby as spare capacity in support of the wind farm.”

Nevada currently has one of the most aggressive — and thus costly — renewable portfolio standards in the nation — requiring the state’s lone electric monopoly to purchase 25 percent of its electricity mix from renewable generation facilities by 2025.

It’s time to end this costly sham.

Geoffrey Lawrence is deputy policy director at the Nevada Policy Research Institute. For more visit http://npri.org.

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