• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Clean Energy Standard: Another Energy Tax in Disguise

    When are we going to be honest about the impact of “clean energy” standards, renewable energy standards, cap and trade, and all the other policies to cut energy use under the guise of helping future generations? These policies are not things we do for our grandchildren; they are things we would do to them. The costs are hugely back loaded onto future generations, while the front-end costs are often fictionalized with unrealistic assumptions about carbon-reduction strategies.

    On March 1, Senator Jeff Bingaman (D–NM) proposed a national Clean Energy Standard (CES). Clean Energy Standards are modifications of the Renewable Energy Standards that have been proposed before and have been enacted by several states and regions. The primary modifications allow nuclear power (or some of it) to count as clean energy and give partial credit for other sources such as natural gas. (Since carbon dioxide is odorless, invisible, and non-toxic, it is Orwellian doublethink to label CO2 “dirty.”) The standard mandates minimum percentages of electric power that must be generated from clean energy sources.

    One of the little-known facts about cap-and-trade bills is that 85 percent or more of the carbon reductions would come from the electric power industry alone. So, though a CES may cover only the power industry, it can have economic costs that are almost as big as cap and trade.

    Last year, Senator Bingaman requested an Energy Information Administration (EIA) analysis of several clean energy proposals. As with the low-ball estimates of costs done for the cap-and-trade bills, the analyses of Bingaman’s clean energy standards assume huge increases in new nuclear capacity and commercialization of carbon capture and storage.

    These assumptions, however, are wildly unrealistic. Though the technical capacity exists for expanding nuclear capacity over the next two or three decades, the regulatory and waste disposal hurdles that stand in the way of significant capacity expansion are not addressed in the Bingaman bill. Proponents of carbon capture and storage (CCS) can’t point to a single commercial-scale project. Full, wide-scale deployment of CCS—and the possibly more problematic disposal of liquefied CO2—is still a pipe dream.

    Different analyses of renewable energy standards (RES) had widely varying estimates of economic impact. An analysis of one bill by the EIA projected electricity price increases of only 3 percent. On the other hand, a Heritage Foundation analysis of a generic RES projected increases of 36 percent or more by 2035.

    Last month, a study by Robert Bryce of the Manhattan Institute looked at the current prices charged for electricity across states. He found that states with renewable standards had residential electricity rates that are already more than 30 percent higher than states without a renewable standard. The impact is clearer when comparing coal-dependent states with a renewable standard to coal-dependent states without a renewable standard. Those with a renewable mandate saw their residential electricity prices rise at double the rate of coal-dependent states without the mandate between 2001 and 2010. A maximum price impact of 3 percent does not seem plausible given these facts.

    What today’s clean energy standards have going for them that earlier plans to restrict carbon dioxide did not is the currently low price of natural gas. If—in contrast to our experience over the past several decades—natural gas prices remain low and stable, the big costs of Bingaman’s CES would not fully come into play until after the end of the EIA analysis time period (2035), when the partial clean energy credit for natural gas would not be enough to meet the tighter requirements as the standard ratchets down. What will our children and grandchildren do then? If they are smart, they would consider repealing any energy-killing mandates we dumped on them.

    Posted in Featured [slideshow_deploy]

    13 Responses to Clean Energy Standard: Another Energy Tax in Disguise

    1. Ari Peskoe says:

      Robert Bryce's study is flawed and based on poor assumptions.

      "He found that states with renewable standards had residential electricity rates that are already more than 30 percent higher than states without a renewable standard."

      But he fails to consider that many states with an RPS have had higher electricity prices for decades. Examples include California, New England states, New York, New Jersey, and Hawaii. In fact, many of these states were the first to embrace free market principles and deregulate in the mid-late 1990s. Meanwhile, the non-RPS states are mostly traditionally regulated and controlled by vertically integrated monopoly utilities. Rather than comparing RPS to non-RPS states and concluding that an RPS causes prices to go up, I suspect you could have compared states that deregulated to states that are regulated and found that deregulation has caused prices to go up. Unfortunately, that comparison would not have suited the ideology you are trying to promote.

      • Lloyd Scallan says:

        Ari – Nice try, but the American people are a little smarter than that. The fact is no diversion or distrotions
        can hide what your hero Obama is attempting to do to our way of life. Tis nothing but "cap and trade"
        repackaged, but yet it is still a attempt of collpase this nation's economy through "skyrocking" energy prices.

      • David Kreutzer, Ph.D. David Kreutzer says:

        Sorry I forgot to provide a link to Robert Bryce's study: http://www.manhattan-institute.org/html/eper_10.h

        Bryce slices the data a bunch of different ways and gets the same conclusion–RPS raises costs. If you have a better way of doing it and get different results, then you can publish your study or at least bring real data to the debate instead of "I bet if he did this he would get that."

        • Ari Peskoe says:

          David – No problem. I used EIA data for 2010 residential prices – Table 5.6B available here – http://www.eia.gov/electricity/data.cfm#sales
          Then I looked at EIA's survey of which states restructured, which did not, and which have suspended such efforts –…. Note that "restructuring means that a monopoly system of electric utilities has been replaced with competing sellers."

          I would publish my spreadsheet, but that seems impossible here. So here are the results, and feel free to create your own spreadsheet – restructured: 14.2 cents; suspended: 11.4 cents; regulated monopoly: 10.7 cents. So it appears that introducing free market competition increases prices! And by 33% if you just compare restructured to traditional. In fact, that's more than Bryce's RPS calculation. If you include the suspended states with the restructured, the difference is still 26%.

          The flaw in this analysis is the same as the flaw in Bryce's study. It says nothing about what prices were before restructuring. As I pointed out, many of these states have had higher prices for decades. Also, as I said before, every restructured states has an RPS (nearly every suspended state does too). So, did the RPS cause prices to increase or was it restructuring? In fact, it was neither — prices were higher in these states long before either started.

          Need more evidence? I looked at residential electricity prices in 1990 available from the same link at the EIA and compared RPS to non-RPS. Average price in RPS states = 8.1 cents. Average in non-RPS states = 6.93 cents. A difference of 17%! Bryce calculated the 2010 difference to be 31% – so there has been an increase since restructuring and RPS…and the many other changes to the electricity industry over the past 20 years. But the statement you make above is misleading – you don't say so directly but you seem to imply that the entire 31% price difference is a function of whether or not there is an RPS.

          Also, I have written about these issues, although not directly analyzing price. Feel free to read my article – http://law.missouri.edu/jesl/wp-content/uploads/2… – specifically pages 241 – 247 which look at the many differences in how states regulate electricity.

          • David Kreutzer, Ph.D. David Kreutzer says:


            Thanks for the reply. Note that the Bryce study also shows a comparison of price increases over the past decade (which is after deregulation was put in force, but while RPS standards were being put in place) and the gap between the RPS and NonRPS states grew. In addition virtually all anaysis shows renewable electricity sources to be more costly. Mandating the use of something doesn't make it less costly.

            • Ari Peskoe says:

              My hope was to persuade you that the Bryce's statement comparing RPS to non-RPS electricity rates is misleading and does not prove anything about the impact of an RPS. I think I've pointed out some serious deficiencies with the comparison. I hope you won't quote that stat in your future work.

              You have now moved on the "coal-dependent" state comparison. That comparison is also flawed. First, 4 out of the 7 states that showed the larger price increase have restructured, while 0 of the 7 with the lower price increase restructured. So, again, is the price difference due to restructuring or RPS? I'm not sure what you mean when you write that 2001 is after deregulation was put in force — deregulation happened in the late 1990s. This was a HUGE transition for the industry, fundamentally changing the way it operated for nearly a century. Of course it can take several years before the effects start to show.

              Second, Bryce's choice of states is highly questionable. Why didn't he include Indiana? Only Texas and Ohio (just barely) generated more electricity from coal in 2010 and IN does not have an RPS. But, residential prices went up 38% from 2001 to 2010 — far higher than any state on his list.

              Why did Bryce include AR, which generates just under half of its electricity from coal? Well, probably because their electricity rates only went up by 15%. He could have instead included Kentucky, which generates 93% of its electricity from coal and does not have an RPS. But it's residential price skyrocketed by 53% since 2001. Or he could have used Tennessee, which generates 50% of its electricity from coal and saw its residential rate go up by 46%. Or Nebraska, which is 70% coal but saw its prices go up by 38%.

              So if I use IN, KY, NE, TN, GA, WY, and UT, the average increase is now 37.8% from 2001 to 2010.

              On the RPS side, DE and MD, which do generate more than 50% from coal but DE imports more than half of its electricity and MD imports more than 1/3. They're as much import dependent as they are coal dependent. So let's lose those and swap in Montana (61% coal, 33% increase) and New Mexico (70% coal, 20.4% increase — how did he leave that out??).

              Next I'm going to drop WI and add in IA because IA generates a greater percentage from coal than WI (note also that IA is one of the leaders in wind). IA's residential prices have gone up by 24%.

              Finally, I'm dropping MI because it passed its RPS only in 2008, and adding North Carolina. Actually, NC passed its just a year earlier, but they generate about the same percentage from coal. It's increase was 25%.

              So now my RPS states are NC, MT, IA, NM, OH, CO, and MN.

              And the new average is…32.1%
              Compare to my non-RPS average…37.8%

              So now I've shown that in coal dependent states, an RPS actually leads to lower electricity prices!

    2. Slick says:

      Let's just turn our energy future over to the progressives and their scientists because we all KNOW how honest they have proven to be!!! "Sticks and stone will break my bones, but words will never hurt me" . . . . all of us better be ready to be bloody and bruised because these guys are going to "kill us with kindness" AND supposed energy reform.

    3. Lloyd Scallan says:

      Clean Energy Standard is "cap and trade" repackaged. Jeff Bingaman (D-NM) is just another lackey Obama is using by trotting him out so Obama can remain hidden in the weeds so he won't be blamed when another of his wealth redistripubtion policies goes down in flames.

      • Ari Peskoe says:

        Lloyd – The key difference between the CES proposal and the cap and trade bill that passed the house in 2010 is that the CES only affects electricity production. Cap and trade was economy-wide. It's more of a slimming down than a repackaging.

    4. Bobbie says:

      most faces of democrats especially prs have deceit and more intentional sacrifice (in various forms) on the people, written all over them. Look what they've done to society and what their "highly paid work" puts this country through needlessly.

    5. Stirling says:

      At least these "Clean Energy" Zellots are showing themselves.. Once the sham hits the general public financially where it hurts, you will find these lemings in government voted and laughed out of office.

    6. Joey says:

      Realize that Foo Man Chu (the Chinese Energy Moron) doesn't understand economics any better than he understands what energy should cost now and later. He will be leaving his energy czar spot sometime next February, 2013.

    7. Scottar says:

      When you look how renewables are fairing in Europe I can only think of ENRON! They are the ones that came up with this renewable energy scam of wind and solar farms. In Denmark, poster child for wind, 20%, They are paying the highest electrical rates in all of Europe. They have not shut down one coal plant, in fact, they are building more.

      The energy department came out with the levelised costs of wind and solar and surprise-surprise, are about 2~3 x more subsidized then either advanced nuclear or coal. Yes the energy is essentially free but the infrastructure costs are not. Until they have a viable energy storage system the actual costs will be prohibitive when removing all the subsidies of these renewable farms.

      So bottom line- it's just another measure to keep the middleclass subservient to the political and special interests. It's like you upgrade you house or auto under the expectation that you will get a raise and move up the ladder. It's based more on speculation rather then realities and the hype of CO2 being the leading cause global warming.

      Instead of trying to mandate stuff, provide incentives to power producers to comeup with relatively more clean and viable energy sources instead of some re-baked ENRON scam.

      Corruption Beyond Our Imaginations
      Exclusive: Joseph Farah quotes Joe Biden in rundown of 'clean energy' skulduggery

      Sep 06, 2011
      Our Least Sustainable Energy Option

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.