New Report Says Energy Mandates Will Cost RI $150M by 2020
Wednesday, February 05, 2014
"The Economic Impact of Rhode Island's Renewable Energy Standard: How Energy Mandates Harm the Economy," published by the Rhode Island Center for Freedom and Prosperity in cooperation with the Beacon Hill Institute in Massachusetts, projects that current energy mandates will raise the cost of electricity by almost $150 million for the state's consumers through 2020 -- and RI's electricity prices will unnecessarily rise by an additional 1.85% by 2020.
"These energy mandates are yet another way that we have artificially increased the cost of living and conducting business in our state, resulting in fewer jobs and lower disposable incomes for families," said Mike Stenhouse, CEO for the nonprofit Center. "With no definable benefit, our economy is not strong enough to absorb this added drag. We all must face the new energy reality; therefore our Center recommends immediate repeal," referring to the state's Renewable Energy Standards enacted in 2004.
However, those in the renewable energy community question the efforts to repeal state mandates -- and point to their success to date. "There have been other efforts in recent years," said Kevin Haley with the American Council on Renewable Energy (ACORE). "We saw repeal movements in 15 states, from North Carolina to Minnesota, to Ohio, to Kansas, -- none of those efforts succeeded. This has been going on for several years."
Haley continued, "There has been very little discussion on economic benefits from those opposed. Groups say that renewable energy mandates are bad, but they don't point to the benefits -- and jobs created." Haley said the projected estimate for implementation of renewable standards would be around $17 million for Rhode Island.
Study Points to Costs
"Few policies can be more harmful to a state's overall competitiveness than decisions to increase the cost of energy, particularly to commercial and industrial users," said Paul Bachman, one of the study's authors. "The RI RES will do little to improve the environment and much to convince manufacturers that the state is not welcoming to business expansion. By 2020 the costs of subsidizing green energy will be approximately $1,330 per industrial user."
The report goes on to state that there are a number of "strong arguments to suggest that most of the assumptions that were used as a basis for the energy mandates imposed in Rhode Island were off the mark," including projections that "renewable energy would be more cost-efficient; renewable energy could be abundantly plentiful, fossil fuels would become increasingly expensive, fossil fuels could become scarce in the near future, renewable energy would spur a boom in green jobs, renewable energy is better for the environment, and global warming is an immediate danger" -- all of which the report says are assumptions "openly in dispute."
"If the General Assembly is willing to consider reform of existing RES laws, our Center recommends [that it] enact the Electricity Freedom Act, repealing the state’s renewable energy standards, and require that the state investigate and utilize methods of predicting and tracing the economic effects of renewable energy standards on Rhode Island, prior to renewed implementation," writes the Center in the Report.
Recently, the Rhode Island Public Utilities Commission voted to keep the percentage of renewable energy level for coming year.
"Every 5 years, the Commission is asked to determine whether there are sufficient RECs to allow for the increase in percentage of new renewable resources to go ahead according to schedule," said Thomas Kogut with the RIDPUC
"This past December, there was a split vote -- two to one -- to vote to hold off for a year, which marked the first time since the standards that there was a hold. While the law allowed for an increase of 1.5%, the target percentage will remain at 8.5% for the next year."
ACORE's Haley thought the move could be a prudent one by Rhode Island. "If they held constant at the current percent, tthere are very few standards that are radical. It benefits states to determine what's best for them. It could have been where they're at right now is a good place for the state." The goal of RI's renewable energy portfolio standard is to be at 16% by 2019.
Proponents of Renewable Energy Standards -- and Opponents
"What this report doesn't talk about is that energy bills have been coming down faster than the national average, due to natural gas, and efficiency, and the cost of renewable energy coming down faster than expected, continued Rothstein. "No one says solar is the least expensive, but it's come down 50% from where it was. The markets are driving competition, innovation and on a path to become even more cost effective."
"The other piece of our policy is to produce energy in our region -- we've always had to import those resources, now we're keeping more of those dollars here. Creating more jobs here -- I think they ignored that in their analysis," said Rothstein, who added, "We're 45% below where we targeted for greenhouse reductions for 2014."
The report released today by the Center for Freedom and Prosperity and Beacon Hill Institiute acknowledges the proponents of RES laws, but counters the benefits don't outweigh costs
"Lost amidst the claims of increased investment and jobs in the “green energy sector” is a discussion of the opportunity costs of RES policies. By mandating that electricity be produced from more expensive sources, the state government forces local ratepayers to experience higher electricity prices. This means that every business and manufacturer in the state will have higher costs, leading to less investment in both capital and labor. Moreover, every household will have less money to spend on things from groceries to entertainment.
"Proponents of RES laws are correct: There will be more investment and jobs in the “green energy sector,” but rarely do they mention the loss of jobs and investment in every other sector. The methodology in this paper took all of the state into account, resulting in a very likely outcome of fewer jobs and lower investment for Rhode Island," concludes the report.
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