Last year, Ohio led the nation and became the first state to freeze its Renewable Portfolio Standard (RPS), a government mandate that forces Ohio to use more expensive renewable energy. State legislators should take the next step and repeal the RPS altogether.
Ohio’s RPS – the Alternative Energy Portfolio Standard – requires utilities to generate an increasing amount of their electricity from alternative sources like wind and solar. After the most recent reform, the 2015 requirement is 2.5 percent of total retail electricity sales, with 0.12 percent coming specifically from solar energy.
Unfortunately, the real costs of renewable energy are higher than RPS advocates like to admit. Wind and solar resources only generate electricity when the wind blows and the sun shines, so when the air is still and the skies are cloudy, fossil fuel plants must ramp up their output to meet demand. This “cycling” of coal plants greatly increases their operating costs. One study accounting for this intermittency, along with the costs of government subsidies and additional transmission lines, found that wind-generated energy is two to three times as expensive as coal and natural gas.
Worse, when coal plants are forced to cycle up and cycle down, they emit pollutants at higher rates, significantly reducing the environmental benefits of adding renewable source capacity.
RPS advocates nonetheless insist that RPS mandates create positive economic outcomes, including more jobs and lower electricity prices. The economic evidence suggests otherwise.
When states grant special privileges for renewable energy sources, they not only displace conventional electricity sources and their employees, but also increase electricity bills that harm families and business owners. This increase is particularly painful in states like Ohio that have vibrant manufacturing sectors that require a great deal of energy.
A new report from the Utah State University Institute of Political Economy reveals what Ohio is giving up economically to keep this mandated policy in place. Researchers found that personal incomes in RPS states are nearly four percent lower than in non-RPS states. In 2013, Ohioans left up to $18 billion in personal income on the table due to the RPS. If the RPS were not in place, the average Ohio family could have been up to $3,842 richer in 2013 alone. Even more troubling, RPS mandates correlate with a near 10 percent increase in a state’s unemployment rate. For Ohio, this means that from 2008 through 2014, the state had 29,366 fewer job opportunities than it would have had.
Those are not positive economic outcomes.
RPS advocates respond with studies purporting to show employment gains attributed to RPS policies. Unfortunately, these studies focus solely on employment statistics for industries involved with the construction and manufacture of wind turbines and solar arrays. Unlike the Utah State study, they do not measure job losses in competing industries, or other adverse employment effects in industries that deal with RPS-fueled higher energy costs – something that every Ohio business now faces.
Instead, as The Buckeye Institute has shown, these studies count only the observable benefits, and ignore the hidden damages of higher costs to businesses. So it is misleading at best for RPS advocates to claim that RPS mandates “created” 100 jobs at a wind turbine manufacturer, for example, if the higher electricity prices that they imposed forced 20 small businesses with 20 employees each to close their doors.
In addition, if the General Assembly fails to repeal the RPS and allows it to resume in 2017, Ohioans will pay an extra $1.92 billion in higher electricity bills between now and 2026 due to RPS, according to the Utah State report. Over the same time period, it projects that Ohio will have 3,590 fewer job opportunities, suffer $52 million in lost investment and $258 million in lost personal income. Lawmakers should not ignore these sobering forecasts.
Last year’s RPS freeze provided much-needed relief from the harmful effects of this flawed government mandate. But a short-term stay is not enough. Ohio needs long-term solutions that will ensure access to affordable, reliable electricity. Repealing the RPS is a good place to start.
Rea S. Hederman Jr. is executive vice president for The Buckeye Institute for Public Policy Solutions.