John Locke Update / Research Newsletter (Archive)

Fight over North Carolina’s renewable energy portfolio standards pits poor captive ratepayers against special interests

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A bill that would rein in and rethink North Carolina’s renewable energy portfolio standard was rejected in a House committee, with several Republicans joining Democrats — and falling in lockstep with the dictates of Pres. Barack Obama through his permanent campaign arm, Organizing for Action.

When S.B. 3 instituted the RPS mandate back in 2007, the revolution in shale gas extraction through horizontal drilling and hydraulic fracturing had not yet come about. Now, however, cheap, plentiful natural gas — which is recognized in the European Union as green energy because it is clean-burning — is an inescapable feature of the energy landscape.

As my report on S.B. 3 explained, natural gas is a game-changer that also would satisfy the state’s purposes behind the RPS better than renewable energy sources have: "it boosts ‘energy security,’ encourages private investment and job creation, and lowers energy-related carbon emissions."

Natural gas is also a far, far more efficient source of electricity generation than either wind or solar, as this chart shows:

Other RPS states are grappling with this reality. Bloomberg reports this week that

More than half the U.S. states with laws requiring utilities to buy renewable energy are considering ways to pare back those mandates after a plunge in natural gas prices brought on by technology that boosted supply.

Here is how natural gas’s projected costs compare with solar’s. These data are from the U.S. Energy Information Administration’s Annual Energy Outlook 2013. Concerning these costs, the EIA explains: "Key inputs to calculating levelized costs include overnight capital costs, fuel costs, fixed and variable operations and maintenance (O&M) costs, financing costs, and an assumed utilization rate for each plant type."

Lighting beacons of corporate welfare

Regardless, North Carolina’s RPS mandate forces utilities to chase electricity from sources with those higher costs. Of course the utilities — which are monopoly providers of electricity with guaranteed captured ratepayers — don’t absorb those higher costs. They merely pass them along.

So the upshot of forcing the state’s electricity monopolies to buy more expensive electricity is that poor, captured ratepayers are forced to pay higher rates. Put it this way: drive through poor neighborhoods in North Carolina, and every light you see is a beacon of welfare for Obama and the General Assembly’s solar cronies.

Wealthy neighborhoods are also forced to flip the switches for corporate welfare, but make no mistake: for the poorest among us, it’s no small matter. Electricity is a basic household necessity. It isn’t a goodie you treat your family to if you’ve managed the budget well that month. For that reason it consumes quite a big chunk of the after-tax income of poor families — a proportion that has grown steadily larger over the last decade and a half as politicians subjected ratepayers to renewable-energy mandates and made utilities bear (that is, pass through) the costs of increasingly burdensome regulations.

As the following chart shows, for those households earning under $30,000 per year in after-tax income, the cost of residential energy takes one-tenth to one-third of their budgets. That isn’t something trivial to be toyed with, however enticing the call of green cronyism may be.

Electricity rates in North Carolina are have been going up and up, and because of the state’s RPS the monopoly utilities continue to pound the drums for higher residential rates:

If the effort to rethink North Carolina’s outdated, irresponsible RPS is over this year, then responsible legislators — by which I mean legislators who answer to the people who elected them and represent their interests in the halls of government, you know, the very assumption upon which the entire system of representative government is based — should revisit the issue the next chance they get.

Electricity consumers in North Carolina are given no choice in electricity providers. For that reason they should be provided the least-cost, most reliable, and most efficient electricity possible. They deserve representatives who recognize that basic need.

Click here for the Rights & Regulation Update archive.

 

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As Director of Regulatory Studies at the John Locke Foundation, Jon gets into the weeds in all kinds of policy areas, including electricity, occupational licensing, hydraulic… ...

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