By H. Sterling Burnett
October 5, 2015
The legislators in Raleigh recently took a step to lower North Carolinian’s tax bill.
At the end of midnight marathon session of the North Carolina House of Representatives, the House passed a compromise budget bill funding the government for the coming fiscal year. One of the provisions of the bill ends North Carolina’s generous 35 percent tax credit solar or other renewable energy projects. One project alone, the Desert Wind Project, if completed would cost North Carolina taxpayers more than $140 million to produce energy for out of state customers. Iberdrola, the Spanish company that owns Desert Wind, gets more subsidies from U.S. taxpayers than any other renewable energy company in the world, yet investors fear it is on the edge of financial collapse while it is simultaneously the subject of several federal investigations. There is no good reason for North Carolinians to throw more good money after bad.
Until the legislature ended this credit, North Carolinians had been forced to pay twice to prop up the state’s renewable energy lobby: once in the form of the tax credit and again for higher electric bills as a result the state’s renewable power mandate.
Unfortunately, having dealt with the first issue, the legislature failed to end a second source of the higher prices state residents and businesses pay for energy. HB 332 was not allowed an up or down vote in the Senate despite passing out of committee. In the debate over HB 322, according to WRAL, Republican State Sen. Bill Cook (Beaufort) said “It sounds like you’ve got one camp that’s real interested in promoting the wind and solar industry and another camp that’s interested in trying to save the rate-payers.” I couldn’t have said it better myself.
Some in the Senate evidently thought it was more important to cater to green special interests desires for unearned profits rather than put North Carolinians needs for affordable, reliable energy first.
HB 332, would have had North Carolina follow Ohio’s lead and freeze the state’s renewable energy mandate at its current level of six percent. Absent the freeze, utilities will be required to increase the amount of renewable energy they provide to 10% in 2018 and 12.5% in 2021. The bill would also reduce the guaranteed market for renewables by requiring utilities pay a standard rate for power from small renewable power generators.
The case for freezing the mandate, or even better, repealing it entirely as West Virginia and Kansas both did earlier this year, comes down to money. Renewable energy, like wind and solar power, costs more in part because it is not not available 100 percent of the time as are conventional fuel sources, thus you have extra costs associated to provide backup energy by traditional power sources when wind and solar drop off line, or as the power they supply fluctuates. Both problems are common.
Higher energy costs hit low-income households the hardest, as they must spend a larger share of their monthly income on utility bills than do higher middle- and upper income households.
What impact has six percent renewable mandate had on North Carolina? A lot! Earlier this year, Utah State University’s Institute of Political Economy estimated North Carolina residential ratepayers paid slightly more than $3,800 for a typical household in North Carolina in 2013 alone because of the renewable mandates. The study further concluded higher energy costs to commercial and industrial ratepayers has discouraged investment, already costing the state 24,000 jobs and $14.4 billion in personal income.
And it’s not just North Carolina as studies consistently show states with renewable power mandates have seen their energy costs rise higher and faster than states lacking such market interventions.
State Rep. Mike Hager (R-Rutherfordton), the sponsor of the bill in the House testified before the Senate Commerce committee the bill was about helping the poor, saying, “What we’re trying to do on that is protect those folks in each of your districts that can least afford to pay more on their power bills.”
Like all legislative mandates and tax credits for specific industries, the renewable tax credits which will now die, and the renewable mandate, which should be killed, distort the market. They are a form of welfare for the well-to-do, giving big bucks to politically connected renewable energy producers who know how to game the system. They, in turn, fund environmental groups and hire lobbyists to ensure the revenue stream continues flowing. Absent tax breaks and mandates wind and solar boondoggles just can’t survive, except for niche applications for the very rich, who don’t need such subsidies.
While HB 332 died in North Carolina’s Senate, in Ohio, the legislative committee established by the law freezing its renewable energy mandate until 2017 recommended maintaining the freeze indefinitely. The committee recognized that, if anything, the justification for freezing the mandate had become even stronger since it went into effect.
A study of the impact of Ohio’s renewable mandate by the same Utah State University think tank that examined the cost renewable energy to the state’s economy and residents found Ohio’s renewable mandate will cost electricity customers up to $1.92 billion between now and 2026.
In a news release announcing the study’s release, Ryan Yonk, one of the study’s authors said, “This study, one of the strongest and most widely examined ever conducted on RPS, shows there is significant evidence to suggest RPS mandates were not helping local economies. Rather, they were causing economic damage to families and businesses.”
The study reports Ohio’s renewable mandate will reduce personal income by $258 million between now and 2026. Ohioans can expect to receive approximately $3,800 less per household than households in states without a renewable mandate. In addition, the RPS could result in a loss of nearly 3,600 jobs.
This uncontroverted evidence led the Energy Mandates Study Committee to its decision to recommend extending the freeze indefinitely.
Oddly, Gov. John Kasich (R), who signed the earlier freeze, has come out against the Committee’s recommendation. Perhaps, Kasich’s presidential ambitions have overcome his concern for Ohio’s ratepayers and businesses – maybe he’s trying to win the vote of moderate Republicans and independents who consider a candidates views on the environment as important when they vote.