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Debunking the myth that clean energy and carbon reduction policies aren’t good for ratepayers

By Stephen Lacey  

"Debunking the myth that clean energy and carbon reduction policies aren’t good for ratepayers"

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There’s a common myth perpetrated by the anti-clean energy crowd that renewable energy standards and carbon-reduction polices will make energy costs skyrocket and derail the economy. But experience proves exactly the opposite.

Two reports released over the last month show that these policies cost ratepayers very little; and, when factoring in the inherent benefits of a cleaner, more efficient energy system, actually save ratepayers money.

The first piece of proof came from a great story in Midwest Energy News about the impact that wind is having on Midwestern states. The story was written shortly after the Minnesota Free Market Institute and the American Tradition Institute released a joint report projecting that Minnesota’s Renewable Portfolio Standard (RPS) – 20% renewable electricity by 2025 – would cause rates to jump by up to 37% by that date. According to the report, the average household would pay over $1,800 more for electricity due to Minnesota’s RPS.

The real cost impact so far? Next to nothing, says Xcel, a utility with one of the largest wind portfolios in the country:

Xcel Energy, the state’s largest utility, has come up with a much smaller number: $0.003. That’s the difference Xcel forecasts between its projected per-kilowatt-hour energy price in 2025 under its proposed wind expansion plan compared to a hypothetical scenario in which it stopped adding new wind capacity after 2012.

Asked to comment on the Free Market Institute’s study, Xcel Energy spokesman Steve Roalstad said, “It doesn’t seem to be moving in that direction.” The cost of adding renewable energy sources, especially wind, continues to fall and has become very competitive with traditional generating sources, he said.

With long-term contracts for wind consistently being signed in the 5 to 6 cents per kilowatt-hour range, the technology can be priced lower than natural gas and coal in states like Minnesota.

Otter Tail Power, which serves about 130,000 customers in the Dakotas and western Minnesota, has had a similar experience. Todd Wahlund, Otter Tail’s vice president for renewable energy development, said the company would have added wind capacity regardless of Minnesota’s renewable standard. That’s because it’s been the most economical option.

“Absent these wind resource additions, an alternative resource would have been needed, and from our analysis, other options would have been higher cost,” Wahlund said.

The story also cites a couple well-known studies: one from the Lawrence Berkeley National Laboratory that concluded rate increases from state-level RPS goals were less than 1%; and one from the Energy Information Administration estimating the nation-wide impact of a national RPS of 25% by 2025 to be 3% at most, with those increases likely coming even without a renewable energy mandate.

The LBNL report is admittedly somewhat dated. It was put together in 2008 when states were aggressively creating RPS programs, but experience was somewhat limited. So today, after almost three more years of experience, can we still make the same conclusions?

“I think we can,” says Tam Hunt, a California lawyer focused on clean energy issues, in a conversation with Climate Progress:

“Wind power has shown to be particularly cost effective for ratepayers with either a tax credit or a grant. And looking forward, while natural gas prices are low today, I think there’s a very real possibility that prices could rise substantially. Historically, natural gas fields have a high up-front profile, but decline very fast. So with renewables, you can provide a hedge for that fuel volatility. There’s a lot of hype over how these programs will raise rates, but we haven’t seen it and I don’t think we’ll see it.”

The same goes for carbon cap and trade. The nation’s first carbon trading system, the 10-state Regional Greenhouse Gas Initiative (RGGI) in the Northeastern U.S., has been falsely labeled by groups like Americans for Prosperity as a “job killer” that will raise rates by up to 90%. Yes, you read that correctly: 90%.

The reality? To date, the rate impacts of RGGI have been so miniscule, it’s been very difficult to separate them from other costs in the system, says Seth Kaplan of the Conservation Law Foundation to Climate Progress:

“The fact is, RGGI is a very, very, very small piece of the overall cost of electricity. There are so many costs that are much greater. Pulling out the cost of RGGI would be like factoring in the cost of mowing the lawn at the power plant or factoring in the property taxes. Some of the claims that groups are making about the cost of the program are patently absurd.”

The program administrators recently released a report showing the economic benefits of RGGI – finding that 80% of the $789 million raised through auctioning carbon credits has gone back to ratepayers and businesses for renewable energy projects and energy efficiency upgrades. As we reported last week, three states – Delaware, Maine and New Hampshire – have attempted to pull out of RGGI. But after evaluating the economic benefits, all three states decided to remain in the program, says Kaplan:

“This is a program that has a very real, tangible benefit. What we saw in various states were people coming out of the woodwork, getting up and saying, ‘we don’t want this to go away because this is good for business.’ It actually opened people’s eyes to how the program was working and made them aware.”

Rather than kill jobs and hurt ratepayer’s pocketbooks, the program has boosted economic activity: In Connecticut, 2,500 direct jobs were created through energy efficiency programs helped by RGGI; in New Hampshire, 2009 investments in efficiency helped train an additional 170 workers; and in New York, funds from RGGI have been used to grow the state’s green jobs program, which will provide training to thousands of people in the renewable energy and energy efficiency field. According to RGGI, for every $1 invested through the program, ratepayers have seen $3 to $4 in additional benefits.

New Jersey Governor Chris Christie announced last week that under his leadership, that state would try to pull out of RGGI too. Kaplan thinks the same thing that happened in Delaware, Maine and New Hampshire may play out in New Jersey.

“This is the opening bell in the debate,” says Kaplan.

Given that Governor Christie has been an avid supporter of renewables and green jobs, one wonders how long he can ignore the dozens of MW of renewable energy projects the program has directly supported. (Not to mention the $65 million he took from the fund to close a budget gap.)

Admittedly, RGGI and many state-level RPS programs are only a few years old, so we’ll need to continue collecting data on their impacts. But it’s clear from current experience that the myths pushed by anti-renewable energy and anti-climate action organizations are not holding up.

Below are the comments from the Facebook commenting system:

Mike Roddy

Wind is already competitive with coal and gas, and the fossil fuel companies’ claim of high energy costs to consumers is a lie just on its face. There’s a bigger issue here, though- even if electricity costs rose, that does not mean hardship or economic decline. As CP pointed out in a prior post, transmission, collection, and administrative costs account for a big chunk of an electric bill.

More important, perhaps, is the positive correlation between high electricity costs and regional economic health. This relationship is very consistent, here in the US and, especially, in the EU. Low power costs correlate with economic stagnation and blackouts. High power costs correlate with vibrant and progressive economies that integrate energy savings and system innovation.

The problem is, no politician questions what the coal and gas companies are saying, since their economic power is so great, and since the truth here is counterintuitive. We need political and media courage as much as we need new power technologies.

June 1 at 9:36am

Michael Westmoreland-White

Clean energy policies HELP the economy. Otherwise China wouldn’t be investing billions in them!

June 1 at 3:24pm

Steve Offutt

Could we please retire the use of the word “ratepayer?” That’s what utilities used to call “customers,” when they considered them nothing more than inputs into their financials. (Some still do, but they are the ones still pretending it’s the 1960s) It’s an anachronism.

June 1 at 10:45pm

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