Big Government Plays Favorites with Renewable Energy, We All Pay the Difference
Renewable portfolio standards (RPS) can be considered the flagship environmental policy for state government in the US. The RPS programs have been adopted by 29 states and apply to half of the national electricity market.
The staple of any RPS program is mandating the use of one energy source over another, making energy more expensive. In theory, fossil fuels —the traditional, and still cheaper, energy source – would be traded for cleaner, efficient, and cost-effective renewable energy. Nearly all RPS programs require a certain percentage of electricity to come from renewable sources, with the renewable energy amount increasing to 100 percent over time.
Unfortunately, when the government picks and chooses which energy policies to support, ratepayers are stuck paying the difference.
A recent working paper by the University of Chicago found that RPS programs significantly increase average retail electricity prices by 11 to 17 percent seven years after implementation. The authors, Michael Greenstone and Ishan Nath, conclude that consumers in the 29 states with RPS programs had paid $125.2 billion more for electricity over the seven-year timeframe.
PRI’s Legislating Energy Poverty study by Dr. Wayne Winegarden found energy expenditures in California are $21.2 billion higher relative to the average national costs based on 2016 numbers.
A Louisiana State University study from 2017 that found that states with RPSs experienced 10.9 to 11.4 percent increases in electricity prices.
California’s RPS program was created in 2002, starting the Golden State on (or down?) a path toward a carbon free future by incentivizing wind and solar power. Many may argue that these costs are necessary to transition state energy markets off fossil fuel dependent electricity, despite their cheaper price.
But what if state policy ignores one type of inexpensive renewable energy at the expense of others?
That debate is being played out right now in the California State Legislature. Senate Bill 386 would limit state RPS program obligations for the Turlock and Modesto Irrigation Districts by counting zero-emission power generated from the Don Pedro Reservoir as renewable energy.
That’s right. California, like many other states, does not count large-scale hydroelectric power – which produces no emissions – toward state RPS goals.
States initially prohibit counting large-scale hydroelectric power in RPS programs to encourage adoption of wind and solar and discourage the construction of more dams. Then they add them in later, after other industries have caught up, so to speak.
According to the California Energy Commission, hydroelectric power accounted for 12 percent of the state’s electricity in 2018. Years with heavier precipitation can see hydroelectric totals as high as 17 percent.
Senate Bill 386 will allow the local irrigation districts to reap the benefits of the large-scale hydropower in their backyard. According to one Modesto Irrigation District spokesperson Senate Bill 386 would save customers $14 million over the next decade. As the Los Angeles Times article quoted a Turlock Irrigation District official, “We simply want to count the existing carbon-free resources that our customers have paid for.”
The Modesto Irrigation District and Turlock Irrigation District have spent a combined $235 million on solar and wind generation and they’re probably confused why they cannot use the cleanest emission-free energy available to them.
In voicing their support of Senate Bill 386, the Modesto Bee editorial board shares another painfully obvious fact: eventually all large-scale hydroelectric power will count toward the state RFP program by 2045.
One thing you may have figured it by now is who pays for these additional costs – ratepayers. Instead of benefiting from the clean energy in their area, they are bankrolling the hundreds of millions of dollars in unnecessary upgrades. That is until state law decides that hydropower can count toward renewable energy goals in a couple decades.
Big government green energy policies are too big, broad, and not flexible enough to prevent price increases. Here is hoping ratepayers don’t have to wait until 2045 for the state to figure that out.
Evan Harris is the Pacific Research Institute’s media relations and outreach manager.