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Outside the Beltway: Austin Electricity Consumers Paying More for Renewable Energy

Posted By Nicolas Loris On July 14, 2009 @ 1:00 pm In Energy | Comments Disabled

Austin, TX

Our latest post takes us to Austin, Texas. Consumers are suffering from higher electricity prices, stemming from a renewable energy push that allows consumers to opt into plans to buy their electricity from renewable energy. The problem is, people aren’t buying it anymore, because it’s too expensive. The obvious solution? Spread the costs to all consumers. A recent article in the American-Statesman elaborates [1]:

For the past decade, Austin’s ambition to become the world’s clean-energy capital has been best exemplified by one effort: GreenChoice, a program that sells electricity generated entirely from renewable sources such as wind.

Now the nationally renowned program is struggling to find buyers — the latest allotment is 99 percent unsold after seven months on the market — and Austin Energy is looking for ways to bring down the rising costs.

Austin Energy officials say that times have changed and that the nation’s most successful (by volume of sales) green-energy program, which offers the renewable energy only to those who select it, might no longer be the best way to carry out the city’s goals. It now costs almost three times more than the standard electricity rate.

“It was our intent to use it to stimulate the market for renewables, which it did, and then eventually phase it out,” Roger Duncan, the head of Austin Energy and the chief architect of GreenChoice, said. “It was never intended to go on forever.”

Duncan said part of the solution might just be adding new wind, solar and other renewable-energy projects into the bills of all Austin Energy customers, which could increase rates for everyone. He said there are also numerous other policies being considered but declined to discuss them, saying only that they will be proposed publicly in the near future.”

Government subsidies for renewable energy is only necessary because renewables are too expensive to compete in the market otherwise. In effect, the government is forcing costlier energy options on electricity consumers. Since renewables are lavished with substantial tax breaks, a national mandate will cost Americans both as taxpayers and as ratepayers. Clearly, when consumers are given the choice, they are going to opt not to pay for pricier electricity. But unfortunately for consumers in Austin, they may not have a choice, as the costs may soon be spread to all consumers.

Moreover, subsidies are poor policies because they distort normal market forces and encourage government dependence. By subsidizing a portion of the actual cost of a non-competitive project, the government is artificially making it cheaper. In doing so, they distort the allocation of resources by directing capital away from more competitive projects.

Duncan went on to say, “I think it’s time to sit back and look at the philosophy behind GreenChoice.”

The same could be said for the whole green movement.


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URL to article: http://blog.heritage.org/2009/07/14/outside-the-beltway-austin-electricity-consumers-paying-more-for-renewable-energy/

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[1] elaborates: http://www.statesman.com/news/content/news/stories/local/2009/07/12/0712greenchoice.html

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