A free-market energy blog
Random header image... Refresh for more!

Sen. Bingaman’s Insidious National “Renewable Electricity Standard” (S. 3813)

On September 21, 2010, U.S. Sen. Jeff Bingaman (D-NM) introduced a bill[1] that would create an insidious national “Renewable Electricity Standard” (RES). Bingaman now has 32 cosponsors but expects 60.

The bill would result in higher monthly bills for millions of home owners and renters, farms, businesses, industries, hospitals, educational institutions, and any other organization that uses electricity.

Despite the intense citizen displeasure with Congress, Bingaman’s RES bill shows that both Democrats and Republicans, while in Washington, are eager to favor special interests and their lobbyists while ignoring the adverse impact of their actions on the nation’s ordinary citizens, consumers and taxpayers. The bill belies Republican claims that they favor less federal government intrusion, control, and damage.

Key Provisions

The bill would require that, by 2021, 15% of the electricity sold by an electric utility must be generated from wind or certain other “renewable” energy sources, or from energy efficiency. The bill would create a new US Department of Energy (DOE) bureaucracy to oversee and enforce the new federal demands. Under the bill, up to 4 of the mandated 15% could, theoretically, be achieved by actions that improve energy efficiency but the measures that qualify are tightly defined so utilities may have to use electricity from renewables instead of energy efficiency to meet the bill’s requirements.

As demonstrated by states and European countries that have imposed similar “renewable” energy requirements, higher electric bills are a direct result. Electric bills will increase because it is much more costly to produce electricity from wind and other “renewables” favored by Bingaman’s bill than from existing, reliable generating units. Electricity from wind is especially high in true cost and low in value.[2]

Special Interests Pushing Hard

During the past decade, the wind and other renewable energy industries have been incredibly successful in getting federal and state government officials to grant them generous tax breaks and subsidies, including state Renewable Portfolio Standards. The lobbying effort mounted during the past few weeks suggests that they are intent on gaining another subsidy in the form of Bingaman’s proposed RES.

The wind industry, which has received nearly $4.5 billion in “stimulus” program[3] cash grants during the past year from the Obama Administration, apparently has plenty of cash to finance its intense lobbying.

Many senators and representatives are vulnerable since they (a) wish to have campaign contributions, (b) don’t yet understand the adverse impacts of wind energy, and (c) may not yet realize the extent of their generosity to owners of “wind farms” and other renewable facilities or the extent to which they are enriching these owners and their financial partners at the expense of taxpayers.[4]

Insidious Impacts of Tax Breaks, Other Subsidies

Tax breaks and subsidies, including “Renewable Electricity Standards” such as those proposed by Senator Bingaman are insidious because they hide from public view the high true cost of electricity from “wind farms” and other favored “renewable” facilities.

Much of the true cost of these facilities is covered by federal and state tax breaks and subsidies. These generous benefits flow directly to facility owners and are separate from and in addition to the revenue facility owners receive from the sale of electricity. Of course the cost of the government subsidies and tax breaks do show up in tax bills. So, tax burden escaped by owners of “wind farms” and other facilities is shifted from the owners to ordinary taxpayers who don’t have the benefit of generous tax shelters.

Wind and other “renewable” energy industries have secured another subsidy in some states in the form of state “Renewable Portfolio Standards” (RPS) that are similar in effect to Bingaman’s proposed national RES. Like the proposed RES, state RPS require that significant shares of the electricity sold by utilities come from wind and certain other “renewable” energy sources.

State RPS and the proposed national RES, in effect, create artificially high priced markets available only to owners of “wind farms” and other renewable energy facilities. These markets are not available to owners of electric generating units using traditional energy sources that produce electricity at lower cost.

Under Bingaman’s proposed national RES, utilities selling electricity to customers would be forced to either (a) produce electricity from renewable electric generating facilities they own, (b) buy electricity at high, above market cost from others who own such facilities, or (c) buy “renewable energy credits” (RECs) or “energy efficiency credits” (EEC) under the complex new national certificate trading system “managed” by DOE.

Utilities that are forced to produce or buy electricity from renewable energy facilities pass along the higher costs to their customers via their monthly bills. When electric bills go up, customers typically blame their local electric utility – not the legislators who have created the additional costs. Thus, RPS and RES are ways legislators are able to satisfy the wind and other renewable industry lobbyists and campaign contributors while not “having their fingerprints” on the higher electric bills.

Harsh Negative Impacts

Tax breaks and subsidies have already become so generous that they – not the alleged environmental and energy benefits — have become the primary reason “wind farms” have been built in the US. In fact, it is now clear that wind energy advocates have overestimated environmental benefits while understating adverse environmental, ecological, economic, scenic, and property value impacts of “wind farms.”

In fact, there are three major adverse economic impacts of government tax breaks, subsidies and renewable standards that should not be overlooked:

  • First, wealth is transferred – hundreds of millions of dollars annually – from the pockets of ordinary taxpayers and electric customers to the pockets of the owners of “wind farms” and other renewable facilities and to the financial partners.
  • Second, billions of capital investment dollars are being misdirected to the construction of energy facilities – particularly high cost “wind farms” that produce only small amounts of electricity – which electricity is intermittent, volatile, unreliable, and low in real value. It is low in real value because it is unreliable and tends to be produced at night and in colder months and not during periods of high electricity demand when electricity has high real value.
  • Third, other resources – including human talent – are diverted. Those in the private sector with resources to invest have learned that they can obtain larger returns with less risk by “mining” generous government tax breaks and subsidies than they can by investing in potentially productive and innovative endeavors in the private sector where risks are higher and returns not guaranteed.

Fallacious Assumptions of Renewable Quota Proposals

As indicated, Bingaman’s proposed RES would be costly to millions of Americans, but it should be recognized as merely the latest in federal and state government “energy technology forcing” proposals that contribute little toward the objective of providing the energy required for the U.S. economy at reasonable economic and environmental cost.

When addressing energy issues, legislators tend to start with the correct assumption that technological advances will eventually be the key to US energy challenges, but they go “off-track” when they turn to demonstrably false assumptions when coming up with specific energy policy proposals.

The three most common false assumptions that underlie proposals that mandate the use of particular energy sources and technologies are the following:

  • False Assumption #1: Planners and political leaders assume they are capable of picking energy sources and technologies that will be successful in the private competitive economy. However, experience in the US and other countries during the past 40 years has demonstrated clearly that neither Republicans nor Democrats, whether in Congress, state legislatures, governorships, or the presidency, are successful in picking energy technology “winners.”

During the past four decades, dozens and dozens of “new” or “alternative” energy technologies have been advocated by presidents, governors, legislators, and regulators as having the potential to make a major contribution towards supplying US energy requirements at a reasonable cost if only they are supported by more tax dollars for R&D, or “helped” by state RPS, a national RES, or other mandate.

But something happens along the way to these government attempts to force selected technology “winners” into the economy. Instead of achieving the great benefits claimed by the promoters of the various technologies and their government supporters, the highly touted “winner” technologies turn out to (a) face insurmountable technical hurdles, (b) cost far more than claimed, (c) take far longer than claimed to develop, and/or (d) have unacceptable environmental effects.

Note that the US Department of Energy (DOE) and its predecessor agencies have spent about $175 billion (2009$) on “energy R&D” focused on a long list of government-selected energy technology “winners” and have very little in benefits to show for those tax dollars.

  • False Assumption #2: Embedded in the above is another false assumption; i.e., that spending more money on R&D will inevitably overcome all obstacles to the development and acceptance of a potentially useful energy technology.[5] While R&D is critically important to the country’s future, not all energy technologies promoted to government officials will be proven successful by more R&D.

The unfortunate truth is that government officials are ill-equipped to select energy technologies that deserve taxpayer supported R&D. They simply don’t have the ability to discern the difference between facts and exaggerated claims made by promoters of new energy technologies and their lobbyists. The unfortunate result is that a promoter’s lobbying prowess can be more important than technological merit when government officials try to pick “winning” energy technologies.

  • False Assumption #3. The third false assumption underlying most government proposals to encourage or force acceptance of government-selected energy technologies is that “economies of scale” (i.e., producing more copies) will inevitably bring down the cost of the technology.

This false assumption underlies state Renewable Portfolio Standards, the Bingaman RES proposal, tax breaks, subsidies, and mandates that federal and state agencies spend tax dollars to buy products using government selected technologies. The thought behind this assumption is that an artificially created market will lead to enough demand to give the selected technology a “foothold.”

While “economies of scale” worked for Henry Ford and dozens of other consumer products developed in the private sector, it does not necessarily work for technologies selected by officials in Washington DC or state capitals.

Wind industry officials and lobbyists and their supporters in government have long claimed that the industry needed tax breaks and subsidies only initially so that wind turbine technology could gain a market foothold and be competitive with other energy sources used to produce electricity. In fact, however, there are now a number of large wind turbine manufacturers competing in the global government created market for wind turbines but the true cost of electricity from wind remains much higher than the cost from traditional sources.

Outlook for S. 3813.

 Wind industry officials, through their massive lobbying for continuation and expansion of tax breaks and subsidies for “wind farms” – including Bingaman’s RES proposal – have made it clear that they have no realistic expectation that electricity from wind will become commercially viable.

As indicated earlier, Senator Bingaman has more than 30 Democrat and Republican cosponsors for his bill and has indicated that he expects to have at least 60 favorable votes when the bill is taken up in a November 2010 lame duck session or early in 2011. Since bills with similar provisions have passed the House in 2009-2010 with support from both Republicans and Democrats, Bingaman and the interests he favors are confident that Bingaman’s bill would also pass the House in 2011.

Whether the bill will pass will depend heavily on the actions taken by citizens who express their views on the bill to their senators and representatives. Decisions by members of Congress from states that have few potential wind or other “renewable” energy resources will be especially important. Bingaman’s proposed RES and other subsidies and tax breaks for wind and renewables will continue or increase the outflow of wealth from their states to those states with greater “renewable” energy sources.


[1] Search on bill number S.3813 at http://thomas.loc.gov/

[2] http://www.windaction.org/documents/25496 & http://www.wind-watch.org/documents/?p=1671

[3] Section 1603 of the American Recovery and Reinvestment Act, commonly referred to as the “Stimulus bill.”

[4] See, for example, http://www.masterresource.org/2010/07/dear-virginia-windpower/

[5] A partial defense for politicians who rely on this assumption is that in times of a perceived energy “crisis” or rapid increase in energy prices, they are pressured to do “something” to relieve citizens’ economic pain. In such situations, officials often decide to “do something even if it is wrong” to appear responsive to constituents. Spending more money on “energy R&D” is a convenient “answer” since the general public may recognize that it is unreasonable to expect immediate results from R&D. This provides time for the “crisis” to resolve itself, for the constituent to turn to different concerns, or for the government official to move on.

18 comments

1 Tom Tanton { 10.06.10 at 8:34 am }

Thanks for an excellent piece Mr. Schleede. I find it particularly frustrating that the same tired b.s. has been occuring for over 35 years always justified as support for an “infant industry.”

2 Charles { 10.06.10 at 5:04 pm }

Good summary of the evils of politicians thinking for themselves. When it comes to acting in business circles, such as the energy sector, the polioticians need to realise they are very much on training wheels and should act with equivalent restraint.

In fact, nothing like they have been acting in the last couple of decades, where naive and gullible enthusiasm has completely overtaken considered judgement.

3 Andrew { 10.06.10 at 7:03 pm }

“The bill belies Republican claims that they favor less federal government intrusion, control, and damage.”

Just how many Republicans are expected to support this monstrosity? In order for Bingaman to get this passed, he only needs one, assuming no Democratic defections. Before you go and attack all Republicans, you might explain just which ones deserve it. I expect most Republicans won’t support it.

4 Paul Lindsey { 10.06.10 at 7:22 pm }

That’s easy Andrew: Sam Brownback (R-KS) and Susan Collins (R-MN). That’s why the AWEA is congratulating them. http://www.awea.org/newsroom/releases/09-21-10_AWEA_Responds_To_RES_Bill.html

5 Andrew { 10.06.10 at 9:15 pm }

4-Thanks, but Susan Collins’ state is not MN (Minnesota) but ME (Maine).

I am not surprised that Susan Collins is among the Republicans supporting this thing. The Two GOP women from Maine are notoriously unreliable. Brownback really ought to know better, though.

6 Paul in Sweden { 10.07.10 at 5:36 am }

The madness can’t be allowed to spread.

Blame green madness for these bills
Herald Sun
Andrew Bolt

“The consequences of mad green policies are now being felt – and even social welfare groups are now complaining:

THE triple whammy of soaring electricity, gas and water costs follows years of financial pain already biting into budgets across the state. A Herald Sun investigation has found typical households are paying a staggering $900 more for the essentials compared with 2005…
http://blogs.news.com.au/heraldsun/andrewbolt/index.php/heraldsun/comments/blame_green_madness_for_these_bills/

7 Vinnie in Rhode Island { 10.07.10 at 1:29 pm }

Considering Mr. Schleede’s work experience in the coal and nuclear industries, his opinions should come as no surprise. Let’s see a paper from him on the dangers of coal slurry impoundments or nuclear waste, or the tax subsidies for the oil industry, or the cost of american lives fighting wars, in areas of oil interests. Renewable energy represents a sustainable future, get with the program folks. Unless, of course, you like it hot all year around and you want your children and grandchildren to grow up in air conditioned bubbles.

8 KHawkins { 10.07.10 at 5:40 pm }

A correction has been made in the first sentence under “Key Provisions. The year 2013 has been changed to 2021.

9 Dan { 10.07.10 at 10:59 pm }

My thoughts exactly, Vinnie. While many of the articles on this website are instructive, I do not recall seeing any (granted, I have not read every article) addressing the externalities and/or subsidies associated with the fossil fuel industry. Anyone know the ratio of fossil fuel to renewable subsidies in the U.S.? 10:1 – http://www.renewableenergyworld.com/rea/news/article/2010/07/fossil-fuel-subsidies-outpace-renewables. And these are only DIRECT subsidies, and do not count war costs, foreign aid, etc.

I agree that subsidies are not always used wisely, but seriously guys, let’s try to show a little balanced reporting once in a while.

10 Jon Boone { 10.08.10 at 8:34 am }

Vinnie’s graffiti about “sustainable renewables” once again coarsens, cheapens the kind of dialog necessary to effect more enlightened energy policy. Neither wind nor solar have the kind of fuel on board to provide modern power.

11 Jon Boone { 10.08.10 at 12:14 pm }

Subsidies for electricity generation should support capacity delivery and modern power quality, not sputtering, feckless energy output. Popular culture, including information on this site, is replete with the downsides of coal, natural gas, and oil–without evening mentioning the greenhouse effect on climate. Clearly society here and around the world has chosen to accept those downsides while working to mitigate them (scrubbers on coal plants, for example) because it believes the benefits of modern life far outweigh the risks, prolonging lifespans and improving life quality.

What this site has made abundantly clear, however, is that capacity-less, pretentious renewable technologies like wind cannot replace coal, gas, and oil , and, in many cases, would make the downsides from those power sources worse, including any effects they may have on climate. Those who think wind plants would replace coal farms and halt mountaintop removal coal extraction practices would instead see, as is the case now in West Virginia, the mountains ravaged by both. What a mess.

12 Bob in Washington { 10.08.10 at 5:19 pm }

Does anybody understand the foolishness of wind power? This is a 400-year old technology that is totally worthless in today’s world. Every KW of wind power has to be backed up by conventional power generation sources, because wind is completely unreliable. Why are we subsidizing an unreliable power source? It makes no sense. This is symbolic exhibitionism at its worst.

13 Power Engineer { 10.09.10 at 10:44 am }

The Connecticut DPUC recently endorsed the recommendations of the legislature appointed CT Energy Advisory Board:
“The Department agrees that Connecticut needs to re-evaluate its 20% Class I RPS requirement by 2020 in light of its impact on electric generation and transmission costs and environmental benefits.”

Connecticut presently has the second highest electricity rates(after Hawaii) and the RPS and climate change legislation would drive another large increase.

The decision was driven by generation costs assessment conducted by an outside consultant which showed the renewables costing 3-6 times the present gas generation cost:
Wind 24-36 cents/kWh depending on amount of transmission
Gas 6.5-10 cents/kWh for gas at 5-9 $/mmBtu
Nuclear 12 cents /kWh
Conservation 5 cents/kWh
Note that the wind cost did not include storage nor the increased capacity payments required by the gas plants to c0mpensate for energy revenue lost.

The cost of CO2 removal was 333-666 $ per ton compared to 40-70 $ for nuclear and the 10-15 $per ton used by the administration to justify the CO2 bill.

In the nuclear scenario one 1100 MW nuclear plant removed twice the CO2 at much less cost than the wind scenario.

The least costly solution was to build nothing as there is excess capacity especially in view of the recession….something applicable to many parts of the country.

14 Power Engineer { 10.09.10 at 11:04 am }

Probably the biggest fib being told by the RPS promoters is that it will reduce oil imports and lead to energy independence.

Oil is used to generate only 1.1% of the electricity in the US according to the DOE for 2008 the latest year that numbers are available….In New England which historically had high oil consumption, it is now even lower: 0.8% for 2009 according to ISO-NE.

15 Cooler Heads Digest 8 October 2010 | GlobalWarming.org { 10.13.10 at 4:37 pm }

[...] Sen. Bingaman’s Insidious National Renewable Electricity Standard Glenn Schleede, MasterResource.org, 6 October 2010 [...]

16 Patricia in Texas { 10.19.10 at 11:47 am }

What is also not mentioned in the true cost of wind power is the need for additional transmission lines/capacity. In Texas the high wind areas are in the Plains and Panhandle part of the state. Construction of new transmission lines must carry the produced electricity from the wind farms in that region to the large metropolitan consumption centers throughout the state (Dallas and Ft. Worth, Austin, Houston, and San Antonio. For each electric ratepayer in the State of Texas an additional fee (~$3.00) is added to the monthly electric bill to pay for these new tranmission lines. You would not have this issue with nuclear power plant, a baseload reliable source of elecricity production. You would also have 3 times the output of a nuclear plant vs. the wind farm. What a waste of taxpayer and ratepayer dollars to support wind power when a more viable source–nuclear power–meets the demand needs, the CO2 reductions, the cost issues, and serves to be environmentally more attractive in land usage (there is roughly 1200 times the amount of land used for wind power vs. a nucleasr power plant). It is simply common sense, clearly something that many of our “feel good politicians’ are in short supply.

17 Ted Rockwell { 10.19.10 at 12:05 pm }

Are we going to require the Navy to dry-dock 15% of its nuclear ships and launch sail boats? Are we going to replace 15% of our trucks and trains with horse-drawn vehicles?

18 T. Caine { 10.21.10 at 5:40 pm }

Good article Mr. Schleede, and good comments. I was particularly drawn to the “False Assumptions” and I don’t really have disagreements with any of them. However, I think there are a series of false assumptions that swing the other way, against the status quo and “traditional” sources of energy that Americans, in particular, perpetuate every day. They may not necessarily make RES a great idea, but they have to factor into our collective decision making.

False Assumption #4: The Cheapest Choice is the Best Choice

I’m not going to deny that affecting the nation’s base costs of living is a serious topic that has to be approached with consideration, but the fact is that the low cost option is not always the smartest or “best” way to go. Being a nation of shoppers and consumers, it’s only natural that our deft ability to smell out a deal would lead us to gravitate towards the lowest price tag, but there is a level of holistic quality that may just be worth paying for. To me it’s similar to vinyl siding or foam moulding. They’re substandard products whose discounted price does not justify their use. Their business model is based on uninformed consumers and there’s no need for them to be available. There are many aspects of our lives where we spend the extra 10-15% because we know we’re getting a better product. Just because we can get cheaper Nikes from sweat shops in China doesn’t mean it’s worth the savings.

False Assumption #5: The corporate free market will figure it all out in the end

Embedded in the above is another false assumption; that there always seems to be this belief that the idealized beauty of the free market economy will ultimately arrive at the right decision over time and provide it at a low cost to consumers. This isn’t really true though and we prove it over and over again. Pharmaceuticals, Banking, Real Estate… Admittedly, consumers have a share of that blame for making the sale of said products and services viable, but the point is the system doesn’t operate as a capitalist utopia. Regulation is necessary to keep us in touch with reality (though it can also be abused). Just because the market has deemed fossil fuels appropriate doesn’t mean it’s the endgame we should be accepting.

False Assumption #6: The rate on your power bill for traditionally fueled power is how much that power ultimately costs rate-payers/taxpayers

Coal power looks really cheap on the power bill, but its extraction, transportation, combustion and disposal all carry costs that come back to us sooner or later within the real “price” of the product/process. Coal doesn’t seem quite as cheap to the families in West Virginia that have tens of thousands in dental bills because coal plants flush their effluent into the ground water and it dissolves the enamel off of their kids’ teeth. There is no line item on our power bill for the estimated $120 billion in health damages caused by the coal industry in 2005 (NRC Study). The EPA spends millions of dollars cleaning up problems from coal and oil, all of which we are picking up the tab for in the end. That’s not even counting damage to natural habitats (if one cares about that sort of thing). The same premium we think we’re paying for renewables could be perceived only because “cheaper” methods cut corners in order to facilitate their lower cost. (Some people indirectly touched on this above, apologies if I’m being redundant)

Again, I’m not necessarily saying that any of these justify legislation for a national RES, but things should be weighed appropriately across the board.

Leave a Comment