Fifteen years ago, legislators, convinced that Wisconsin needed to embrace renewable energy at any cost, adopted the state’s first so-called Renewable Portfolio Standard.
Rewritten since then, the standard now requires that utilities generate 10% of electricity from sources such as wind and solar by the end of 2015.
Now that the state is within shooting distance of attaining that goal, there is movement in the Legislature to increase the requirement to 25% by 2025. The Badger state’s future, proponents of such mandates believe, lies in seizing green opportunities that will create scads of jobs for its residents and add billions of dollars to its economy.
Unfortunately, what looks good on the surface – both in terms of economics and the environment – is often not the case when drilling down to the details.
A deeper analysis reveals that the standard is far from the job creator and economic engine proponents claim. In simple terms (and in the laws of basic economics), when you mandate the purchase of a more expensive product (such as wind or solar power) to replace a less costly one (such as coal- or natural gas-generated power), the additional expense is passed to the buyer. The higher costs filter throughout the economy and leave less buying power for consumers and businesses.
In the case of Wisconsin, a specific analysis, “The Economic Impact of Wisconsin’s Renewable Portfolio Standard,” has been done. According to the study by the Beacon Hill Institute, an economics think tank at Suffolk University in Boston, the standard will raise electricity costs by 2.4% in 2016 alone. Over the four-year period between 2013 and 2016, the standard will cost the Badger State $788 million in higher electricity costs.
Wisconsin citizens can expect to see those impacts filter into the goods and services they purchase once the standard is in full effect. Based on Beacon Hill’s analysis, commercial businesses will pay $1,195 more in electricity costs over the same four-year period, and the typical industrial user will pay $91,620 more. Those additional costs to business and industry then will be recovered at the checkout line and when you pay your bills.
Maybe it would be worth the extra cost if wind and solar technologies meant a cleaner environment. But environmental benefits are lost because these unreliable energy sources require backup power generation to be ready when, for example, wind or solar power are unavailable. Other studies have shown that when fossil-fuel generators are used in that fashion, they actually emit more pollutants than they would if they were just used as primary power sources instead of as backups.
Proponents contend wind energy is a technology of the future, but in reality it is so last century. It is analogous to the government forcing telecommunications companies to provide 25% of their Internet access service via dial-up connections or coercing automakers to make horse-drawn buggies a quarter of their sales fleet.
If renewables are viable energy sources, American ingenuity and the profit motive will get them to the marketplace at a price we can afford. How much of our energy should come from renewables? We do not know and neither do lawmakers or bureaucrats. A better way to make that determination is the free market, where people can make choices about the energy sources they need.
If renewable power was the desirable resource that the public wanted, it would not need the seemingly endless subsidies and tax breaks it receives, nor would government need to mandate its use. But instead those policies just prop up industries that otherwise can’t stand on their own.
So consumers not only get hit with the Renewable Portfolio Standard’s hidden tax in their electric bills, but lawmakers also waste precious public money on these inefficiencies as well.
Paul Bachman is the director of research at the Beacon Hill Institute at Suffolk University in Boston. The Institute’s full report, which was released by the Wisconsin Policy Research Institute, can be found at www.wpri.org.
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