Would Efforts Backfire to Repeal Renewable Portfolio Standards?

Heartland Institute and ALEC are Risking Relevance

Ken Silverstein | Nov 26, 2012


President Obama’s re-election is having little effect on efforts to roll back state laws mandating the use of green energy. The Heartland Institute is now teaming with the American Legislative Exchange Council (ALEC) to try and repeal those standards, arguing that they are increasing the cost of electricity.

What are their true motives? No doubt, the two favor free markets. But they are also getting their funding from sources long-opposed to the green movement and those that are challenging the authenticity of climate science. To that end, the same special interests are bankrolling studies that are used to lobby the 29 state legislatures that have enacted so-called Renewable Portfolio Standards

The other relevant question is whether that initiative contradicts the national mood, which either explicitly or implicitly endorses green energy’s role in a modern economy. That is, President Obama was re-elected by a significant margin, winning 332 electoral votes to Mitt Romney’s 206, and a majority of the national vote. Should these opposition groups engage or should they fight on?

“ALEC is going to wake up and realize that the Heartland Institute, which is funded by special interests, is pushing them in a direction that’s making them irrelevant to, or at best out of touch with, the American public,” says Solar Energy Industries Association President Rhone Resch, in a Washington Post story. “And they can’t afford to do that.”

The same Washington Post story points out that ExxonMobil gave $736,000 to the Heartland Institute from 1998 to 2006. The Koch Brothers, who have oil and gas interests, also donated $25,000 in 2011. Other interests are not disclosed but the Heartland Institute had earlier been embroiled in a controversy in which it was revealed that a host of oil and coal businesses are its bankrollers.

State standards do require utilities to funnel investments in new technologies that they may not otherwise make. But the thinking behind such requirements is that they reduce the barriers to entry and help build economies of scale. In most cases, the green energy mandates have been tweaked but never repealed. 

“Simply put, these policies force citizens, businesses, and an industry within a state to purchases renewable energy whether or not they value or can afford it,” writes Todd Wynn, director of ALEC’s energy and environment task force.

Democratic Process

To be sure, mandating green energy is a more simplistic measure than actually complying with the laws. Indeed, the Edison Electric Institute has expressed concerns that those requirements are getting out ahead of the utility industry’s ability to deliver results.

Those power companies that now rely on coal will get hurt the most. If utilities have to buy the more expensive and less reliable green power, their electric rates will rise, say critics. Higher prices mean businesses are adding to overhead just as they are coming up for air.

“The challenge has been to change how we deal with renewables, to build it into our business so we make it into a profitable business for our shareholders,” says Eric Ackerman, director of alternative regulation for the utility trade group, in a previous EnergyBiz Insider story.

Consider California: Investor-owned utilities there generate 20 percent of their electricity from renewable energy, although most of that comes from hydropower. Getting to its 33 percent mandate by 2020 won’t be easy. The hurdles include transmission constraints, project finance and the difficulty of securing power purchase agreements at reasonable prices, says IHS Emerging Energy Research.

California Governor Jerry Brown is committed to a fair and successful outcome, emphasizing that special interest groups will not be allowed to subvert the process.

Lewis Milford, president of the Clean Energy Group, adds that the public, generally, understands and supports green energy policies. He previously told EnergyBiz Insider that green energy standards had once been the “province of the public utility commissions, but now the legislatures are fully involved in these decisions. There’s been a democratization of renewables policy.”

The renewed push by those think tanks averse to portfolio standards is coming when policymakers at all levels are trying to meet in the middle. And while the Heartland Institute and ALEC believe in their cause, they may end up undermining their arguments and reducing their relevance at a time when the Obama administration holds most of the cards.

EnergyBiz Insider has been awarded the Gold for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been honored as one of MIN’s Most Intriguing People in Media.

Twitter: @Ken_Silverstein


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Rhone Resch Adds

“American voters support solar energy overwhelmingly and they also support policy that increases our use of solar. In fact, for the last five years, polls have consistently shown 9 out of 10 Americans feel it’s important to use more solar energy and more than 75 percent support government policy to develop more solar – and the support cuts across all party lines. We have not found anything else that enjoys so much bipartisan support.”

Counter Argument

The argument that renewable energy is more expensive than traditional energy is well known. The argument that coal and oil (let's leave out natural gas) are dirtier is well known. The cost of that "dirty" fuel is not calculated into the price of the fuel. Those who live in coal areas have higher health care cost and someone or some government has to pay for that price. The choices are to make coal cleaner or to invest in green technologies. I have no problem paying for that as opposed to just letting coal win because it has century-long headstart.

"How many angels can dance on the head of a pin?"

The above question might actually be easier to answer than the question: "What is the environmental externality cost of coal burning powerplant emissions?"

Are RPS's impeding environmental progress?

It is arguable, at least in the case of ERCOT and likely elsewhere, that RPS's and federal subsidies (and I mean true subsidies--not tax breaks where a company has to spend money to reduce their taxable income) are impeding environmental progress by discouraging replacement of older, less efficient, and dirtier power plants.  Why would a company want to build a new, pollution mitigation equipped, more efficient, ultra-supercritical coal-fired powerplant for baseload application when the plant will not be able to run baseload because a mandated or otherwise subsidized wind farm will be generating power between midnight and 6AM that will displace the need for the baseload plant's output?  Why would a company built a new, advanced combined cycle gas turbine mid- to base-load powerplant when it will not run in the midnight to 6AM time frame mentioned above and have its output cut back during the 11AM to 2PM timeframe when solar PV peaks?  At the same time, wind needs back up to make up for its variability and lack of accurately forecastable output and solar PV needs backup for its variability and low capacity factor. So, the various power producers keep in service the older, inefficient, grandfathered polluters that are already paid for rather than building newer plants that will produce far less toxic and CO2 emissions per MWh for the power generated to run our businesses in a manner that keeps them competitive with the world's manufacturers.

By way of comment, President Obama's reelection margin in the Electoral College is a result of the way the rules are set up requiring all the EC votes for a state to go to the winner of the popular vote in a given state.  His popular vote margin was pretty small.  When one considers that 47% of the taxpaying public did not pay any income tax, blacks voted virtually enmasse for Obama because he is black (is that not racism?), and the majority of Hispanics voted for him because he implied a promise to give all the illegals amnesty so that the Hispanic voting bloc increases its share of the electorate in a huge step increase, it is surprising his margin was so low actually.  This President will destroy the US and flush the Constitution down the toilet. 

Green Energy vs. Green Expenditures

If you ask consumers whether they are in favor of "green energy" you get a significant positive response. However, when you ask consumers to "pony up" the higher cost of "green energy", the positive response is reduced by a factor of 3-4.

Renewable portfolio standards are required because "green energy" is more expensive than regular old energy. State commissions would not likely approve utility purchases of "green energy" in the absence of RPS, because of the higher cost.

Current solar and wind technology is not now and willl not ever be competitive. There might be competitive technologies, but they have not yet been discovered or developed. However, some combination of standards, carbon taxes, emissions limits, etc. could certainly drive the price of regular old energy high enough to make "green energy" competitive. The trick for politicians and other "green energy" advocates, is to stay out of the limelight, so that the blame for the higher prices falls on the utilities.

Also, at some point, large capacity, rapid response storage technologies will also be necessary to support a stable grid.