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Category — Renewable Portfolio Standard/Renewable Electricity Standard

FERC Order 1000: Cost Socialization for ‘Green’ Energy (NRDC, AWEA Rejoice)

“Regular people only need to understand that this is likely the most progressive clean energy action the federal government will take this year.”Center for American Progress

The Federal Energy Regulatory Commission (FERC) is capable of making bold moves under the radar. Last year it imposed a $245 million sanction on a major utility without too much fuss. Beginning this year, as part of a landmark rulemaking called Order No. 1000, FERC will be lending a multi-billion-dollar hand to large wind developers.

Overview

According to FERC, “Order No. 1000 is a Final Rule that reforms the Commission’s electric transmission planning and cost allocation requirements for public utility transmission providers.”

At the risk of oversimplifying a 600+ page document, Order No. 1000 essentially adds a requirement that (1) transmission providers consider new projects driven by state and federal “public policy,” and (2) planning regions do away with “participant funding,” at least at the regional and inter-regional level, which means that transmission costs must be allocated over a broad region. There was also a third major requirement (that transmission providers remove language regarding the “right of first refusal” from their tariffs), but let’s save that for another day.

If the combination of (1) and (2) above sounds like a rent-seeker’s dream, then kudos for seeing through the jargon. To put it differently, regional electricity transmission plans must take state and federal public policies into account, no matter how costly or ineffective they are (think renewable energy mandates).

Then the costs of the transmission lines built according to those plans are socialized. How great is that if you’re a large wind developer? States mandate that their citizens buy your intermittent power, and then a regulatory agency helps you spread one of your biggest costs far and wide, across state lines and to countless unaware consumers. [Read more →]

April 8, 2013   12 Comments

Defeating Big-Government Renewables in Michigan (Prop. 3′s “suicide by gluttony”)

Proposition 3, sponsored by by Michigan Energy-Michigan Jobs (MEMJ), would have forced utilities to produce 25 percent of Michigan’s electricity by 2025 from renewable sources, primarily industrial wind. Despite national backing and a lot of money spent, Michigan voters rejected the “25×25″ measure by a 64–36% margin.

Clearly, the voters saw through what would have been effectivity a tax increase on electricity which would threaten to endanger reliability as well.

Background

This initiative was hardly local. It was driven by national pressure groups like the Sierra Club with their backing by natural gas company Chesapeake Energy, and the League of Conservation Voters, also heavily funded by deep-pocketed elites.

MEMJ itself was funded largely by the Green Tech Action Fund of San Francisco and the Natural Resources Defense Fund of New York, both darlings of green industrialists, particularly Tom Steyer, a California hedge fund billionaire.

These carpetbagger activists placed a bull’s-eye on Michigan ratepayers with Proposal 3. The Sierra Club was blunt: “If successful, the [Michigan] 25×25 initiative will send an important signal to the nation that public desire to move toward green energy remains strong.”

Answering the Sierra Club, Michigan ratepayers shouted that there is no such “public desire.” In fact, there is widespread opposition to mandating forest-denuding biomass and massively expensive solar. But the hottest conflict centers on industrial wind. [Read more →]

December 6, 2012   4 Comments

ALEC to States: Repeal Renewable Energy Mandates (‘Electricity Freedom Act’ model bill adopted)

“Households in 29 states are and will continue to see higher electricity rates, lower economic growth and, subsequently, lower standard of livings without outright repeal of these crony capitalist policies.” 

The American Legislative Exchange Council (ALEC), the nation’s largest non-partisan association of state legislators boasting more than 2,000 members from all 50 states, recently adopted a firm stance opposing misguided government intervention into the electricity market which works against affordable, reliable electricity.

ALEC’s model bill for state legislators, entitled the Electricity Freedom Act, repeals a state’s renewable energy mandate stating:

“…a renewable energy mandate is essentially a tax on consumers of electricity that forces the use of renewable energy sources beyond what would be called for by real market forces and under conditions of real competition in generation resources…”

Due in part to pressure from environmental groups and the renewable energy industry lobby, a movement began in the late 1990s and continued through the mid-2000s to enact state-based renewable energy mandates. These mandates have been called Renewable Portfolio Standards, Renewable Energy Standards or, more innocuously, Alternative Energy Standards.

No matter how described, these policies force electric utilities to provide a percentage or quota of renewable energy as part of the electricity generation mix by a certain target year. Simply put, these policies force citizens, businesses, and industry within a state to purchase renewable energy whether or not they value or can afford it. [Read more →]

November 1, 2012   20 Comments

The U.S. Southeast: Renewable Energy Mandates Not (ratepayer blessing; industrial advantage)

Seven Southeastern states have rejected renewable energy mandates and/or voluntary alternative energy quotas on electric companies: Louisiana, Alabama, Arkansas, Georgia, Kentucky, Mississippi, South Carolina and Tennessee. (North Carolina is another story, requiring a 10% share for renewables and mandated efficiency savings by 2018.)

The good news for the seven states is not only that unnecessary costs have been avoided during the political boom of ‘green’ energy. The benefit is also that artificial bubble jobs are not on a death watch as they are in other states that now face ‘green’-energy retrenchment.

Bad Wind

William Yeatman, an energy policy analyst for the Competitive Enterprise Institute, contends that Southeastern states do not have as much renewable energy potential as the rest of the country. “The Southeast has the lowest wind energy potential of all regions, and wind is the energy source that is used to achieve virtually all renewable electricity mandates in the U.S.”

However, Yeatman says that even though the Southeast has limited renewable energy potential, that does not mean renewable energy mandates are a good idea in the Northwest, Northeast or the Southwest. Rather, “It is to say that renewable energy is even more uneconomical in the southeast than in the rest of the country.”

Louisiana’s Politically Clean Energy

Robert Bradley of the Institute for Energy Research affirms that, “It is a competitive advantage that Louisiana is energy clean when it comes to politically forced energies.” [Read more →]

August 25, 2011   3 Comments

California’s 33% Renewable Energy Goal by 2020: Form or Substance? (Part II-RECs Required)

Part I yesterday reviewed in-state electricity generation and power imports required to meet California’s current power demand. Part II today shows how Renewable Energy Credits may be used to meet California’s aggressive renewable energy goals.

Renewable Energy Credits

Renewable Energy Credits (RECs) are the power generation credits that a distribution system can use to meet its renewable portfolio. These RECs come in two flavors—bundled and unbundled. The bundled RECs are the credits that are bought and used within the same distribution system; unbundled RECs are those bought by one distribution system but used in another. These RECs are managed by the Center for Resource Solutions, which also prevents double counting of credits.

Unbundled RECs are particularly interesting, because it means that a distribution system doesn’t need to build renewable energy power plants because the distribution system can simply buy the renewable power that is generated in another distribution system.

Paper Renewables?

This creates significant problems for the exporting distribution system. For example, the Bonneville Power Administration is currently negotiating with California about (in BPA’s words)

potentially significant negative consequences for Northwest and California consumers if decisions about the use of unbundled RECs are made without full consideration of the infrastructure requirements associated with the delivering a reliable, least cost supply of renewable energy to California.

So, what are the consequences? The use of unbundled RECs seems to mean that California could purchase all the renewable power generated by all the windmills that are connected to the California grid.

This is happening right now as California is contracting for wind energy from places as far away as Alberta, Canada. The electricity generated in Alberta, however, will not arrive in California. It is too far away. The only thing that is happening is that Californians are paying for it to meet their renewable portfolio. This seems pretty strange, that Californians are required to pay for a benefit that they don’t get.

The fact that 15 percent of its imports in 2009 are “unspecified” probably means that California intends to purchase enough renewable energy credits to meet its goal. This would mean that it would not need to build any more renewable power generators. It just needs to purchase the power from its neighbors (at the expense of the rate payers in California).

There are three major problems with unbundled RECs: [Read more →]

August 11, 2011   8 Comments

California’s 33% Renewable Energy Goal by 2020: Form or Substance? (Part I–Current Situation)

California is committed to a renewable energy portfolio to provide 33 percent of its electricity by 2020 from qualifying resources such as wind, solar, geothermal, biomass, and small hydroelectric facilities.

Can this portfolio succeed? Ambitious goals take more than legislative action to have a chance for success. It takes an actual plan that can be implemented with actual engineering accomplishments.

Drastic Increase Needed

In order to determine the probability of success, we can look at California’s renewable energy sources in prior years. These are available on the Internetand are presented in the following graph.

The plot shows the actual renewable sources of electricity generated in California from 2005 to 2009 and shows the projected increase required to achieve the goal of 33 percent by 2020. Notice that the renewable contribution has been rather constant over the previous years and requires a dramatic increaseto achieve the goal. This implies that something different needs to be done than what has been done it the past, otherwise the projection line will be ever steeper and eventually needs to be abandoned.

Looking at the Pieces

So, exactly which of the renewable energy sources can be increased to reach the goal? It is generally accepted that biomass, geothermal, and small hydro cannot be increased significantly, which leaves the intermittent sources of solar and wind to do the job. Is it reasonable to expect that solar and wind can accomplish the task? The gap that must be closed by 2020 is 21 percent of the total electricity consumption.

Solar currently contributes only 0.3 percent (2009) of the electricity used in California. This contribution is too small to expect a significant contribution by 2020. It might be doubled by 2020, but this is still a small amount.

Windcontributed 2.7 percent (2009). The expectation that it will close the 21-percent renewable gap is unrealistic, however, for the following reasons: [Read more →]

August 10, 2011   10 Comments

Little Killers of Economic Recovery: State Mandates for Dilute, Unreliable Energy

[Editor note: Marita Noon is the Executive Director at Energy Makes America Great Inc., the advocacy arm of the Citizens’ Alliance for Responsible Energy. CARE works to educate the public and influence policymakers regarding the role of energy in freedom and the American way of life.]

At least 18 states have legislation proposed or pending—44 bills—relating to renewable energy mandates, according to the American Legislative Exchange Council. Within the last couple of weeks, I have had wary legislators from two different states ask me about such mandates. I have spoken to energy groups opening with, “How many of you know what an RPS is?” … Nothing…. “It stands for Renewable Portfolio Standard.” … Still blank.

The RPS is a silent little killer of the American economy. “Silent” because, despite widespread activity, its presence is nearly unknown. It is not dramatic or sexy—seeming hardly newsworthy. With little attention, 29 states have enacted an RPS and 7 more have agreed to voluntary goals (see here for more).

Background

The RPS is a legislated mandate requiring a certain percentage of a state’s electricity “portfolio” come from renewable energy (typically referring to wind and solar) by predetermined dates. Most states’ standards are 15% by 2015, and 20% by 2020. Maine is the most aggressive with a goal of 40% by 2017. In his State of the Union Address, President Obama announced that he’d like to see 80% clean energy by 2035.

Renewable energy is known to be more expensive for the consumer than electricity generated from traditional sources—even with subsidies of about $24 per megawatt hour (based on data from the Energy Information Administration). During a hearing for the New Mexico state-wide cap and trade program in which I participated, the supporting attorney stated, “The reason for Renewable Portfolio Standards (RPS) is because renewables are more expensive. No one would choose them if it wasn’t required.”

Regardless of high cost and intermittent availability, renewable energy is touted as the savior. Environmental groups lobby legislators to push for mandates—or higher mandates when the states have already voted in the RPS. But, from what is renewable energy “saving” us?

Two Falsehoods: Oil Security and Climate Alarmism

The need for renewables is based on two falsehoods. [Read more →]

March 14, 2011   2 Comments

‘Gresham’s Law of Green Energy’ (Jonathan Lesser on bad energy driving out good)

[Editors note: this post is a summary/review of the article by Jonathan Lesser, "Gresham's Law of Green Energy: High-Cost Subsidized Renewable Resources Destroy Jobs and Hurt Consumers" (Regulation magazine, Cato Institute).]

“Industries that require never-ending subsidies simply cannot increase overall economic welfare. To conclude otherwise is to believe in ‘free-lunch’ economics of the worst kind. Yet, free-lunch economics are driving the push for renewable energy.”

- Jonathan A. Lesser

Jonathan A. Lesser, of Continental Economics Inc., has written a penetrating essay describing the unmet promises of subsidies to so-called green energy (or politically correct, nonhydro renewables). He looks at the supposed benefits of these subsidies and the associated costs and comes to a familiar conclusion: government-subsidized energy is uneconomic energy.

The arguments for green energy subsidies are numerous; perhaps most used are those pertaining to putting people to work and even creating wholly new industries that will re-invigorate the entire economy (the Obama fantasy). At its core, Lesser’s refutation of these notions provides quite a good lesson in some of the foundational theories of microeconomics (and good common sense).

Lesser begins by exploring the history of electricity markets, and how with the creation of markets for “installed capacity” (backup power to meet peak demand), several states reacted with price-suppression policies. The principle lesson one learns in microeconomics is that markets are intended to get the prices “right”. If extra capacity comes free, that drives down the market clearing price other utilities can receive, thus meaning they exit the market (cannot make a profit). Less competition is never good for consumers.

He refers to this principle as “Gresham’s Law of Green Energy,” an application of a principle that says that bad can drive out good (rather than the other way around) from government interference with consumer preference in an open market. Elsewhere in the piece he uses a more appropriate metaphor: transferring wealth instead of creating it. Subsidies for green energy are taken from taxpayer dollars, meaning that you and I are less well-off while the owners and employees of green energy companies are better off. But factor in ratepayers, all losers, and the wealth transfer is negative and pernicous indeed. [Read more →]

February 1, 2011   2 Comments

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. [Read more →]

October 6, 2010   18 Comments

Simulations or Country Experience? Spain, Denmark, and NREL in the Renewable Energy Controversy

For a long time, fans of renewable electricity have made their case by running simulations. Input the right data and (more importantly) the right assumptions, impose a renewable portfolio requirement or carbon plan, compute 30 years forward, and walk into a clean, fully employed future. Just close your eyes, click your heels, remember
to believe, and elect the right federal government.

Then reality intervened in the form of two country-wide case studies.

Denmark

More than a year ago, this column scooped the mainstream media with the truth about Denmark’s 20 percent wind generation. The country actually uses less than half of that power, but can keep the machines spinning thanks to (export) connections with the coal-based German grid and the nuclear- and hydro-based Scandinavian RTO.

For all this, the little mermaid enjoys the highest power costs in Europe. There is now an excellent report with lots of data by a think-tank there called CEPOS, which occupies roughly the same position that the pro-market Cato Institute does in Washington. (Disclosure: I am a Cato adjunct scholar and have taken money from them. Cato itself, like CEPOS, is supported almost entirely by private—as opposed to corporate—money.)

The study points out the sad fact that in a few years Denmark’s neighbors will be producing enough of their own wind power that their grid will have difficulty accepting Denmark’s, even if it comes gratis.

Spain

Spain is a more tragic story. [Read more →]

October 1, 2009   2 Comments