Renewable energy standards: The health, security, and competitiveness benefits

By CAP’s Jorge Madrid, Bracken Hendricks, and Kate Gordon.

It has become quite the trend lately for conservatives and their media cronies to come out with attacks on “clean energy” and “green jobs.” These attacks run the gamut from debates about exactly how many jobs have been created to broad jabs at the very notion that America needs to move to a cleaner, more efficient clean energy economy. While the attacks range widely in their scope and focus, they all miss a critical point: greening our economy is an environmental and energy security imperative, and one that also happens to provide the opportunity for the U.S. to compete in the huge emerging global clean tech marketplace.

A recent New York Post article by Shikha Dalmia, “Green Boondoggles” (3/1/2011), is a great example of just how misguided these attacks can be.

While attacking the President’s clean energy investment in general, Ms. Dalmia also focuses in on — and utterly mischaracterizes — a national renewable energy standard (RES).

First, a quick explanation: a national RES, or a similar policy called a Clean Energy Standard or CES, would require U.S. utilities to produce a percent of their electricity from renewable energy or low-carbon energy sources. Twenty-nine states already have such policies in place, as do China, the E.U. nations, and a host of other countries.

Contrary to Ms. Dalmia’s article, which asserts that a national RES is simply a smoke screen for an “anti-warming” agenda, there are a number of strong reasons beyond greenhouse gas reduction (which, by the way, should be enough of a reason on its own) why the U.S. should embrace this type of policy.

Energy Security

The only way the U.S. can end our current energy insecurity is to diversify our use of energy away from our dependence on fossil fuels — and in fact away from dependence on any one technology or magic bullet energy solution. That means investing now in home grown American renewable energy and energy efficiency. Growing global energy demand, particularly from rapidly industrializing countries like China and India, will increase competition for the earth’s finite resources; this is already increasing scarcity and driving up prices. Unrest in places like Egypt, Libya, and the Middle East only serve to further drives price volatility, sending shockwaves throughout our economy and down to consumers. A renewable energy standard represents an insurance policy for the economy against these gyrations in global energy markets. Indeed, failing to free our economy from volatile fossil fuels is one of the greatest risks to our energy security — not to mention the risks to our public health and national security.

Competitiveness

Throughout Europe and Asia, countries are not only setting renewable standards but they are surpassing their original goals in favor of stricter pollution controls and stronger economies. As other countries continue to invest in renewable energy, supported by a strong energy policy, not only is the United States falling farther behind, but investments will continue to leave this country in search of stronger, more reliable markets overseas. In the last few years, China has invested a large percentage of total GDP into clean energy R&D and deployment and it outpaced the world in manufacturing, being the world’s leading supplier of solar PV panels and solar hot water heaters. China’s huge success has not been because of their historical strengths of efficiency and cost cutting in its manufacturing sector but because of its development of stringent renewable energy policies.

Energy Costs

The Center for American Progress recently came out with a Clean Energy Standard that includes a specific goal of reaching 35 percent renewable energy use by 2025. Ms. Dalmia attacks this standard, calling it a “guarantee for higher prices”. But her basis for this absurd claim is a thoroughly debunked “study” by the hard-right (and oil-funded) Heritage Foundation.

For starters, CAP calls for ten percent of the “35” to be achieved with energy efficiency measures, a low cost way to reduce electricity use in homes and businesses, thus leading to lower electricity bills. Efficiency investments beyond 10 percent will only further reduce costs, and both President Obama’s and CAP’s plan support this.

The even greater weakness in Ms. Dalmia’s argument, however, is that renewable energy standards in individual states, and abroad, have successfully demonstrated that an aggressive RES will not drive up prices. Moreover, we know that as we move these technologies to scale, renewable energy will be cheaper to deploy than traditional fossil fuels.

In the State of Michigan, for example, utility contracts for renewable electricity under their 2008 renewable energy standard have come in at prices below the cost of power generated from new coal plants, and consumers continue to pay below the national average for their electricity. In fact, a report from the Michigan government clearly states that there is “no indication” that their clean energy standards “have had any impact on electricity prices in Michigan.” While a report done by Bernstein Research found that wind generation in Texas (complimented with an aggressive RES of 5880 MW of installed renewable capacity by 2015) actually lowered the cost of power for utilities by $2 and $4 per megawatt-hour in 2008.[1] This experience is borne out by other countries as well, with wind prices reaching cost competitiveness with coal in a number of regional electricity markets in countries as diverse as Mexico, Sweden, and Brazil.

The truth is that in addition to cutting pollution and reducing our dependence on oil imports, renewable energy has a major advantage over fossil fuels: sharply declining prices over time. The price of solar energy production, for example, has fallen dramatically as the industry has gained new economies of scale. A recent request for proposals by Southern California Edison (one of the largest investor-owned utilities in the country) found that solar power is already among the cheapest ways for them to generate new electricity. And to understand where this technology is headed as the industry scales to meet new markets, you need look only to the experience of semi-conductors and computing power which followed “Moore’s Law” of a continuous declining cost curve every time the market grew.

Colorado is another state that has successfully pursued an aggressive a renewable energy standard. In November of 2004, Colorado passed a renewable energy standard for the first time. The original standard required that the state’s three largest utilities acquire 3 percent of their electricity from renewable energy sources by 2007 and 10 percent by 2015. Colorado’s program has been extremely successful with the first 1,000 megawatts of wind power generating enough electricity to power almost 250,000 homes, creating 1,700 full-time jobs during construction and 300 permanent jobs thereafter plus multiple other benefits. In April of last year, the Colorado State Senate passed a bill to increase the renewable energy standard to 30 percent by 2020. Currently, a study of the Xcel system, a utility in Colorado, found that the wind already on their system would save Colorado ratepayers over $251 million.

Colorado is one of 29 states plus Washington D.C. and Puerto Rico (7 more have goals to implement), that have an established a renewable energy standard. Each states goal varies, from 8% by 2020 in Pennsylvania to 33% by 2030 in California. Nevertheless, these laws will encourage utilities and businesses to invest in clean energy resources by creating certainty through guaranteed markets.

Likewise, benefits from established renewable energy standards are being felt abroad as well. Recent data released by the Irish Wind Energy Association states, “11.5% reduction in wholesale electricity prices will be achieved through delivering 45% of the overall generation mix from wind by 2020.”

Clearly Dalmia fails to realize that renewable energy stabilizes energy costs because, unlike fossil fuels, renewable fuels (wind, sun, etc) are 100% free. Administrators of the University of Minnesota understand this; their newly installed wind turbines will allow campus officials to “predict what energy costs will be for the next 15 years.” That is a level of economic security you can’t get from OPEC.

Low Income Families

Ms. Dalmia next pivots her argument to say that low-income families will suffer the most from a renewable energy standard. What Ms. Dalmia fails to recognize is that price spikes in energy are significantly caused by volatility in the unstable fossil fuels market, and that diversifying our energy portfolio would actually even out prices and give consumers more options. Not to mention the fact that low-income families bear the worst of the health impacts caused by burning fossil fuels. An aggressive clean energy standard coupled with strong targets for renewable energy and energy efficiency would help stabilize and reduce prices for working families. The real enemy of the poor is our current “do nothing” energy plan.

Exhibit A can be found in our recent experience. Throughout the G.W. Bush administration (and without a RES), energy prices were high and unstable. In the years leading up to the recession beginning in December of 2007, American households began spending significantly more on energy. During this time, the typical annual American household expenditure on electricity increased more than $170, and the typical annual American expenditure on gasoline increased more than $960 (in 2007 dollars). This kind of increase is certainly felt most by low-income families. In contrast, a renewable energy standard would lower American household energy bills.

With no coherent energy policy in place, America continues to remain vulnerable to price spikes for imported energy, while we allow ourselves to be exposed to unnecessary costs from inefficiency and the real impacts of pollution. Instead, America will be stronger, healthier, and more prosperous with a Clean Energy Standard guaranteeing that America meets 80 percent of its energy needs from advanced low carbon energy, as the President has proposed, if coupled with a strong target of 35 percent renewable energy and efficiency by 2035, as the Center for American Progress has suggested. This is a policy prescription to stabilize and reduce consumer energy bills, even as we create U.S. jobs, enhance our competitive position, cut energy imports, and reduce pollution. That is a smart investment in the future.

By Jorge Madrid, Bracken Hendricks, and Kate Gordon.

[1] Platts Gas Daily, August 14, 2009.