The Cost of Green Energy
State Representative Mike Huebsch
January 22, 2010 E-update
On Wednesday, legislative attorneys briefed 18 lawmakers who serve on the special committees charged with reviewing Governor Doyle’s global warming legislation (Assembly Bill 649 and Senate Bill 450) about its contents.
But after nearly two hours and 92 PowerPoint slides, a series of important questions were left unanswered, most notably - how much will the so-called Clean Energy Jobs Act cost Wisconsin consumers?
Senate author of the measure and co-chair of the Senate Select Committee on Clean Energy Mark Miller (D-Monona) advised the members of his committee and those of us serving on the Assembly Special Committee on Clean Energy Jobs to review the 2008 report of the Governor’s Global Warming Task Force for cost data.
What he didn’t tell us was that we wouldn’t find much there. The report contains only rudimentary cost estimates for a fraction of the proposals in AB 649 and SB 450. And it lacks a comprehensive analysis of anticipated electricity rate hikes and price increases for consumer goods.
Legislative Council attorneys identified 10 major policy areas within the legislation and dozens of proposals within each area, many of which diverge from the original task force recommendations.
Central to the 174-page bill is the requirement that 25% of the electricity used by Wisconsin consumers originate from renewable sources by 2025. Known as a Renewable Portfolio Standard (RPS), it requires a massive investment in the construction of renewable generation facilities, most likely wind farms.
This one proposal alone will cost electric customers more than $15 billion according to Public Service Commission (PSC) data. Economists at the Boston-based Beacon Hill Institute put the cost at $16.2 billion Authors of the task force report had this to offer on the topic: “A detailed analysis of the costs associated with this policy has not been completed.”
In anticipation of this week’s hearing, I joined fellow committee members Reps. Phil Montgomery (R-Ashwaubenon) and Scott Gunderson (R-Waterford) to request that the meeting be devoted to a cost-benefit analysis . We did not receive a response from committee co-chairs Reps. Spencer Black (D-Madison) and Jim Soletski (D-Green Bay) and our questions were not addressed during the hearing.
Global Warming Task Force co-chairs Tia Nelson of the Board of Commissioners of Public Lands and Roy Thilly of Wisconsin Public Power, Inc. spent a year writing the legislation in secret with Doyle Administration officials, Sen. Miller, Rep. Black and other Democrats. Yet when Ms. Nelson and Mr. Thilly testified at this week’s hearing, committee members were not permitted to ask them any questions. Sen. Miller advised lawmakers that we could discuss costs at a later date before tossing out that “the cost of doing nothing” is higher anyway.
Of course, there’s no cost estimate for “doing nothing” as he called it. But the argument goes that by protecting the financial well-being of families today, I’m somehow sacrificing the future of our grandchildren. In fact, my future grandchildren are in more danger from misguided policies that are pushing Wisconsin toward an unprecedented economic collapse. We can’t ask them to pay for policies when we don’t even know their price and I won’t ask them to pay for today’s mistakes.
The 25% by 2025 RPS means we’ll be paying for new generation we don’t need and that won’t significantly impact greenhouse gas emissions. According to the PSC, Wisconsin has an excess generation capacity of 30% meaning we have substantially more electricity available than we use.
Supporters of the RPS argue that renewable generation isn’t in addition to existing generation but instead of it. Yet, the task force’s own modeling indicates that this isn’t true.
The report shows that the 25% by '25 RPS won’t lower greenhouse gas emissions below 2005 levels when it is fully implemented because today’s renewables can’t decrease the need for base load (always available) generation.
Wind turbines generate electricity only 25-30 percent of the time and can’t be depended on to meet the 24/7/365 energy needs currently met in Wisconsin by fossil fuel and nuclear power.
The RPS also erases the current requirement that electric utilities identify the least cost alternatives when providing electricity according to the Legislative Council. Based on data in its most recent Strategic Energy Assessment, the PSC estimates that 400 megawatts of new renewable generation must come on-line every year for 16 years to meet the 25 by ‘25 mandate regardless of the cost or the need.
The PSC has identified wind as the best method for complying with the RPS and it’s likely to be where the vast majority of investments are made. With a price tag of $3.2 million per megawatt according to PSC data, wind power will cost electric customers $15 billion. If the state looks to other renewable sources, the cost will likely go up.
To date, most investment in wind energy has been made in other states more suited to this type of generation. If that continues, Wisconsin utility customers will be sending $15 billion to create temporary jobs in a handful of lucky states such as Iowa, South Dakota and Nebraska, but not in Wisconsin.
Neither Wisconsin families nor our state’s battered manufacturing base can afford this. For manufacturers, energy bills may account for as much as 25% of operating costs. Industrial electric rates rose 50% between 2000 and 2007 and soon it will be too much financial pressure to bear. They will have few choices: move their operations, cut their workforces, raise prices or devise some combination of the three. Wisconsin has lost 160,000 high wage manufacturing jobs since 2000 and 62,000 since the recession began. The Beacon Hill study found that the task force recommendations will cost us another 43,000 jobs. That is the wrong direction for the 232,000 Wisconsinites who are looking for work.
But, again, the 25 by ‘25 RPS is just one of dozens of provisions in the bill that also includes the adoption of California car emission standards, the creation of low carbon fuel standards and stricter energy efficiency mandates for appliances, houses and buildings. Adopting the California emissions standards increases the costs of cars and dictates what types will be sold in our state. Even worse, we turn our fate over to California since every time that state adopts new standards, they take will effect in Wisconsin without legislative action.
The low carbon fuel standard is designed to limit the use of 500 million gallons of biofuel currently produced here and of Canadian crude oil, which accounts for 50% of the oil used in Wisconsin. These fuel sources are critical to Wisconsin and to the Midwest. According to the Beacon Hill study, the new standards will cost Wisconsin consumers $ 3.2 billion overall or 61 cents per gallon in higher gas prices.
The energy efficiency standards mean the price of kitchen appliances, TVs and personal electronics will be higher than other states. It means paying more or crossing the border in search of deals while Wisconsin retailers suffer the consequences. It also increases the costs of new home construction at a time when home buyers can least afford it.
Before Wednesday’s hearing concluded, Legislative Council pointed out that the bill requires a review of the legislation’s goals and progress in reaching them once every four years. While the new law wouldn’t require it, the attorneys noted that the review might contain details about costs…four years after the bill becomes law. No lawmaker – no matter their hometown or their party affiliation – can be expected to vote on AB 649 and SB 450 before those costs are revealed. Committing Wisconsin families to policy changes that will impact generations to come without knowledge of the cost or economic impact is, in fact, worse than “doing nothing.”