State renewable portfolio standards, the key policies driving renewable power growth across the United States, are under attack from opponents who say they increase electricity costs for consumers.
But a new report finds that any costs are far outweighed by the economic benefits derived from the environmental and health improvements that come with greening the energy mix in the 29 states that have adopted RPS targets.
That’s not counting the potential for billions of dollars in reduced natural-gas costs and wholesale electricity costs -- although these additional cost reductions come at the expense of the companies that make money on generating electricity from fossil fuels.
Wednesday’s report, A Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards, found an average of $2.2 billion in economic benefits from reduced greenhouse gas emissions, and another $5.2 billion in benefits from reductions in sulfur dioxide and other air pollutants, for RPS programs in 2013.
These averages are taken from wider-range estimates of the value of mitigating the negative effects of climate change for GHG reductions, as well as reducing mortality from air pollution.
These figures are much higher than the roughly $1 billion in annual compliance costs (that is, higher electricity prices) that have come about as a result of state RPS mandates between the years 2010 and 2013.
Those figures come from a previous study from the Department of Energy’s Lawrence Berkeley National Laboratory (LBNL) and the National Renewable Energy Laboratory, which also co-authored Wednesday’s report.
The two reports use different methodologies, which makes a direct comparison difficult, said Ryan Wiser, LBNL analyst and report co-author, in an interview. Specifically, the previous study relied on state-by-state measures of RPS compliance costs, which vary widely in their sophistication and methods, while the new report used a common methodology across all 29 states (plus the District of Columbia) that have RPS mandates in place.
Still, the new report does help provide an important counterweight to arguments that state RPS targets are driving up electricity costs to unacceptable levels, he said.
“Most people and most organizations that have come out in opposition to RPS programs have focused on the cost angle,” said Wiser. “We did this work previously that compiled all these RPS state cost analyses, while recognizing that the states developed their RPS programs not to deliver short-term savings, but to deliver long-term benefits.”
“This more recent work helps us understand what we are getting for these costs, and [whether] those benefits seem like they’re in excess of those costs,” he said.
Groups such as American Legislative Exchange Council, Americans for Prosperity, Americans for Tax Reform and the Chamber of Commerce have been fighting to block or overturn RPS mandates in individual states, citing costs to consumers.
These groups are also funded by fossil fuel companies that stand to lose money in the transition to green energy -- and which have been caught many times making misleading claims about the costs of wind and solar power.
The new report also calculates a separate set of economic measures that are termed “impacts,” rather than benefits, Wiser said. These include estimates of nearly 200,000 jobs created in the renewable energy sector, driving over $20 billion in gross domestic product in 2013, along with some potentially large (but still unknown) effects on lowering wholesale electricity prices and natural-gas prices.
The difference here, he said, is that “benefits are undoubtedly societal benefits." Few would argue that reducing early deaths from air pollution and mitigating the harm of climate change aren’t good for everyone.
But new green energy jobs could be seen as coming at the expense of jobs lost in the fossil fuel sector, and reduced wholesale electricity and natural-gas prices, while good for people who pay for them, aren’t good for the power-plant owners and natural-gas producers who make money on them.
One very interesting figure is the calculation of how state RPS goals could lead to reducing wholesale electricity prices. According to Wednesday’s report, the growth of wind, solar and other renewable energy driven by these mandates could lead to up to $1.2 billion in reduced electricity costs and consumer bills -- but it could also be calculated as delivering an impact of zero, or no reduction at all.
“In simplest form, the question here becomes one of the adjustment time period,” Wiser explained. “The year you inject a huge amount of solar and wind into the system, you depress wholesale electricity prices,” which one might assume leads to lower costs.
But if that leads to the retirement of existing coal, natural gas or nuclear power plants, or the decision not to build new power plants, that could lead to a shortage of electricity, which would cause prices to rise yet again, potentially erasing the short-term benefits.
One can see these concepts playing out in Germany, where massive injections of solar and wind power under lucrative feed-in tariff regimes have led to significant disruptions in its energy markets and pushed traditional utility business models to the breaking point.
Of course, the United States isn’t nearly as far along in the green energy transformation as is Germany, Wiser noted. Even so, it’s a factor that is being considered by states that are targeting 50 percent or higher shares of renewables within traditional energy market structures that weren’t designed to manage them.