In Nevada, as well as 29 states and the District of Columbia, laws require that ever-growing percentages of the electricity you use must come from wind, solar and other forms of renewable energy. Because those forms of energy are more costly and less efficient than traditional fossil fuels, however, they are often not popular choices among businesses or utilities – let alone cash-strapped energy consumers.
In a free market, such a situation might encourage a green company to start re-evaluating their business model – but in the world of crony government it’s easier to just start lobbying politicians. Apparently, there’s nothing quite like a government-created cocktail of subsidies and mandates to jump start an uncompetitive industry. And the environmentalist movement knows it.
But “going green,” as it turns out, isn’t quite that easy. Nor is it cheap.
According to a new study by Dr. Timothy J Considine for the Nevada Policy Research Institute, these “renewable portfolio standards” are having a serious impact on Nevada’s ability to rebuild and expand our economy. Because of the Silver State’s aggressive schedule for increasing the use of renewables, energy prices are expected to climb by nearly 15 percent in 2016. And because higher energy costs impact virtually every corner of the economy, the effects will extend far beyond just electricity bills.
Employment growth, the study found, will be reduced by more than 11,000 jobs, and overall economic growth in the state will be reduced by more than $1.7 billion in 2016. For an economy still trying to claw its way back from the destruction wreaked by the Great Recession, it’s an unnecessarily destructive burden. It’s also a high price to pay for government’s obsession with pushing us toward “politically correct” energy production.
But Nevada’s economic future isn’t the only thing being held back by renewable portfolio standards – the green industry itself is, in a significant way, a victim of its own cronyism. Just as subsidies stifle innovation and technological progress, so, too, do government-created marketplaces. After all, what’s the point of appealing to consumers if government is just going to force them to purchase your product anyway?
Keep in mind: The renewable energy industry is already heavily reliant on government subsidies – yet, even with those billions of taxpayer dollars at its disposal, the industry can’t yet compete with traditional fossil fuels in either cost or dependability.
Rather than rethink its business model, as normal companies would have to do, the green energy industry regularly decides to seek a little help from Big Brother.
In a 2013 Forbes opinion piece, addressing the negative effects of subsidies on the industry, Enphase Energy CEO Paul Nahi explained that many companies within the solar industry had abandoned innovation in favor of political favoritism. “Healthy companies depend upon sound business models in a competitive environment,” he wrote. “A robust, renewable energy market will remain hampered if the energy industry continues to chase the next subsidy.”
Nahi is right. Subsidies have been used by countless green energy companies as economic training wheels, and green-energy government mandates are no different. And just like subsidies, the mandates carry a much heavier price tag than advertised.
Renewables have the potential to revolutionize the way America consumes energy – but only if the industry first embraces the real-world entrepreneurial risks through which free-market firms improve their products.
Subsidies, mandates and political initiatives are not only expensive for ratepayers and citizens, but they’re eating away at the industry’s potential to become a legitimate competitor to fossil fuels.
In the end, the greatest hope for renewables is not more government-sponsored favoritism, but a dose of free-market motivation.
Michael Schaus is communications director of the Nevada Policy Research Institute, a free-market think tank. For more visit http://npri.org.