By Jack Spencer
October 2, 2015
A new study from Utah State University found that, as of 2013, Michigan’s renewable energy mandate, enacted in 2008, has cost families and businesses here a bundle: $15.1 billion overall, or $3,830 per family, compared to what we would have experienced without the mandate.
According to the study, the economies of all states with a renewable portfolio standard, or RPS, have suffered harm. Among the negative effects are a nearly 14 percent decrease in industrial electricity sales, plus losses in both personal income and employment. A key finding was that an estimated 24,369 jobs have been lost in Michigan because of the mandate, which is in effect a mandate for wind energy.
The study concluded: “Our analysis of the legal rules surrounding RPS in Michigan suggests that the regulatory climate is burdensome for both utilities and bureaucracies, making RPS an even worse venture for taxpayers than the tax-based or empirical analyses suggest.”
This week Michigan Capitol Confidential conducted a telephone interview with Utah State University professor Ryan Yonk, one of the investigators who contributed to the study. Some excerpts:
CapCon: What’s the best way to explain how an RPS causes increased costs?
Yonk: An RPS is an example of picking one policy track and going down it. When you do that, you lose the opportunity for lower direct costs on electric rates and investment opportunities because investments are influenced and rearranged by the decisions of central planners instead of the market.
CapCon: When we say RPS, what we’re mostly talking about is wind energy, right?
Yonk: The majority of it is wind. Second would be solar, but the bulk of it is wind. Most states set their RPSs on wind.
CapCon: In Michigan, even though we have a 10 percent wind power mandate, the law did not require that emissions be monitored to see how much emissions are actually being reduced or if emissions are being reduced at all. Is that the way it was done in most other states that set wind power mandates?
Yonk: I can’t speak to that because I’ve never looked into it. What I can say is that very often the benefit claims for these tend to be esoteric; that is to say, they’re all about what’s supposed to happen in the future while disregarding what the effects are now.
CapCon: According to the study, as of 2013 Michigan’s RPS had resulted in a loss of 24,369 jobs in the state. How was that measured?
Yonk: It doesn’t mean that there were 24,369 jobs that just went away. It’s the additional number of jobs that would have been created had the RPS not been enacted. An advantage of the macroeconomic model we use is that it can be applied to multiple states to measure the impact of an RPS on costs, real income and unemployment.
CapCon: Did you notice any elements of Michigan’s RPS or the way it is implemented or regulated that are unique?
Yonk: Not particularly, other than that it’s more rigid in Michigan than in some other states because in Michigan you have a mandate as opposed to some states that only have goals. As a result, it is more of a regulatory burden.
The study was conducted by the Institute of Political Economy at Utah State University, using a model that applies state-specific data and characteristics to the long-term cumulative effects of an RPS policy. These effects include:
- State electricity sales declined by 13. 075 percent.
- Real personal income declined by 3.6 percent.
- Nonfarm employment decreased by 2.8 percent.
- Manufacturing employment decreased by 3.7 percent.
- The unemployment rate was 9.6 percent higher.
All figures are measurements of the difference between the status quo and what the state would have experienced without the mandate.
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