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Peer Review of “The Economic, Utility Portfolio, and Rate Impact of Clean Energy Development in North Carolina”

posted on in Energy & Environment
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A recent report from RTI International and La Capra Associates claims to find net economic benefits for North Carolina’s renewable energy policies, but these benefits are mismeasured and spurious. Orthodox cost-benefit analysis will not find anything like what the report’s authors estimate. Many claims are difficult to directly evaluate given the opacity of the report, despite the report’s length. Elsewhere, confusing terminology conceals the lack of any evidence that subsidizing green energy will reduce the cost of power in North Carolina.

The primary benefits the report puts forth are an increase in spending in North Carolina. It implies that a $72 million increase directly led to an increase in total spending in North Carolina by $1.4 billion. This is absurd, even when using a Keynesian model of the economy. Since the report assumes that the programs were paid for by reducing other government spending, the best guess is that they had no impact on spending in North Carolina.

The report also projects how much these investments save citizens of North Carolina. It first argues, with an arbitrary calculation methodology, that the measures have already saved North Carolina hundreds of millions of dollars, which implies that energy businesses were too irrational to have taken advantage of such a profit opportunity on their own. Later, the authors of the report assume with certainty that renewable energy will be cheaper in the future than traditional sources of energy, without even allowing for the possibility that similar technological breakthroughs may happen for traditional sources of energy as well (as has happened recently with natural gas). Markets would need to be wrong – not just wrong, but terribly wrong and terribly dysfunctional – in order for any of these assumptions to make any sense.

Hidden in the text, tables, and charts is that there is little to be said for the renewable energy subsidies themselves. The cost savings will be the result of “energy efficiency,” not renewable energy. Everything else is trivial. But by giving the impression that “not using energy” counts towards “renewable energy,” they claim renewable energy is cheaper.

This “energy efficiency,” which will supposedly lead to so many cost-savings amounts to little more than energy efficiency programs in government buildings and mandates in building codes. Cost cutting measures in government buildings are admirable should they follow orthodox cost-benefit analysis, but that has everything to do with cost-benefit analysis and nothing to do with energy. The private market mandates, however, are at best superfluous.

The government does not need to instruct a business owner to install cost-saving measures that will save the business owner money, because the business owner is in a better position to judge what measures will be worth it. The “cost-savings” that take place only as a result of the mandates are unlikely to be worth it.

Peer Review of “The Economic, Utility Portfolio, and Rate Impact of Clean Energy Development in North Carolina”

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We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

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