In North Carolina, government mandates require that 12.5 percent of electricity come from renewable energy by 2021. Many advocates consider this a worthy goal, but at what cost to North Carolinians?
The bottom line: in our state, the mandates will raise electricity bills, cut economic output by billions of dollars, and cost thousands of jobs.
To understand why, let’s look at what these mandates actually do.
Legislation passed here in 2007 established so-called renewable energy portfolio standards (RPS), setting goals for a growing share of electricity to be generated by renewable energy.
Because those forms of energy are more costly and less efficient, state governments eager to be seen as “green” had to make their use by utility companies mandatory.
But there’s a catch. According to a new Civitas Institute study, North Carolina’s RPS will increase state electricity prices by 42 percent by 2020.
Already, residential electricity prices are 29 percent higher in states with mandatory RPS than those without them, according to U.S. Energy Information Administration data.
Instead of continuing down this path, North Carolina should look to other states that are proceeding with caution or even scrapping their RPS.
For example, last year, West Virginia and Kansas completely repealed their RPS.
With the soaring electricity prices associated with RPS, this shouldn’t be a surprise. According to the Brookings Institute, wind power is twice as expensive as conventional power, and solar power is three times as expensive.
Our new RPS research sheds more light on the degree and scope of these costs and explains how they impact various states differently. Understandably, we find that states with moderate RPS goals experience moderate rate increases, while states with ambitious RPS goals experience more significant rate increases.
RPS’ economic costs go beyond heftier electricity bills for ratepayers. Because energy is an essential factor of production activities, businesses forced to absorb higher electricity bills must curb expenses elsewhere.
Our study concludes that North Carolina’s RPS will reduce its economic output by more than $7 billion in 2020, for example.
By contrast, South Carolina’s lower 2.1 percent RPS leads to a much smaller reduction – $198 million – in economic output in the same year.
We estimate RPS will cost our state 50,000 jobs in 2020 alone.
RPS advocates will say the mandates create some jobs in building and maintaining solar, wind, and other renewable capacity. The number of these jobs, however, is dwarfed by the job losses caused by reduced economic output.
Last year legislation was introduced to freeze North Carolina’s RPS at current levels. Unfortunately, that legislation failed, and disappointingly no legislative momentum to curb the RPS emerged in this year’s legislative session.
As our research shows and many states are recognizing, forcing inefficient, expensive renewable energy on a state imposes significant harm on its economy, especially hurting its most economically vulnerable.
It’s time for North Carolina lawmakers to join other states and ditch our state’s renewable energy mandate and provide low-income households relief from rising utility bills. Doing so would also make North Carolina more competitive for job and investment growth. At minimum, it is time to freeze the mandate and more closely examine its real costs.
Timothy J. Considine is professor of energy economics at the University of Wyoming. Brian Balfour is Executive Vice President at the Civitas Institute.