Primary Investigators:

Randy T Simmons, PhD
Utah State University
Ryan M Yonk, PhD
Utah State University
Tyler Brough, PhD
Utah State University
Ken Sim, MS
Strata Policy
Jacob Fishbeck
Strata Policy

EXECUTIVE SUMMARY

The U.S. has no federal mandate for “renewable” power production. Instead, a majority of states, including North Carolina, have created their own state laws called Renewable Portfolio
Standards (RPS). These laws mandate that electricity generators and utilities provide a certain amount of their electricity from renewable sources. This report analyzes how the changes in electricity markets caused by RPS alter the functioning of a state’s economy and institutions, with a specific focus on North Carolina. The report uses a theoretical model, an empirical analysis, and a survey of legal rules. The following are the key findings:

The theoretical analysis found that North Carolina’s RPS will raise electricity prices significantly across all sectors, with the brunt of the costs falling upon the commercial sector. North Carolina’s cost caps will mitigate these effects, but even that will be at the cost of actually meeting North Carolina’s mandate. If the legislature lifts the cost caps for the purpose of meeting its mandate, electricity prices will skyrocket.

The empirical analysis finds significant harmful effects on the economies of all states with RPS. States that have adopted an RPS have seen a drop in industrial electricity sales by 14.43 percent. Real personal income has fallen by almost four percent, which figures to a loss of $13.5 billion or $3,479 per family. Non-farm employment has declined by 2.52 percent. Lastly, RPS is correlated with an increase of 7.85 percent in a state’s unemployment rate, equaling a loss of 32,239 jobs.

The analysis of the legal rules surrounding the RPS in North Carolina outlines several hindrances to compliance in its requirement for generation from poultry and swine waste, and also from its costs caps—a prediction our theoretical analysis substantiates. North Carolina’s RPS also may not embody the spirit of RPS in general, largely due to the burning of poultry and swine waste, which is not as environmentally-friendly as other sources of renewable generation.

For more information, see the full report.