A Renewable Electricity Standard: What It Will Really Cost Americans

Congress is once again considering major energy legislation, focused largely on promotion of energy sources that produce few or no greenhouse gases. This current concentration on promoting so-called renewable energy sources assumes that congressional action now will lead to such significant growth in renewable energy sources that the use of carbon-based energy will subside, thus reducing the expansion of atmospheric carbon dioxide and other global warming gases.

Congress’s effort to expand renewable energy sources starts from a relatively meager production base. Nearly half of America’s electricity is generated from coal, with natural gas and nuclear energy adding about 20 percent each.[1] Most of the rest is provided by renewable sources, primarily hydroelectric energy at 6 percent. Non-hydro renewables like wind and solar energy and biomass total only 3 percent.

For many years, federal energy and environmental policy has nudged production of some electricity sources over others, either through “sticks,” such as costly air quality regulations targeting coal, or through “carrots” like tax credits and subsidies for wind. Proposed global warming legislation would alter the electricity mix to an unprecedented degree by putting a price on emissions of greenhouse gases, chiefly carbon dioxide from fossil fuel combustion. Coal is the most carbon-intensive energy source, and any stringent cap-and-trade provisions would significantly curtail its use in favor of other sources in the decades ahead. Such legislative measures, however, are very costly,[2] and the prospects for passage in 2010 are uncertain.

Congress is also considering achieving similar but less ambitious goals via a renewable electricity standard (RES). Twenty-nine states have versions of an RES, but Washington is considering a nationwide standard. Under this mandate, a growing percentage of electricity would have to be produced by approved renewable energy sources. Much of the RES would be met with increased energy generation from wind turbines.

It stands to reason that an RES would raise electricity prices. After all, if electricity created by wind and other renewables were cost competitive, consumers would use more of it without a federal law to force consumption. Recent experience with the mandate for renewable fuels like corn ethanol also suggests significant cost increases as well as technical shortcomings.

While proponents argue that wind is free, harnessing it into useful electricity certainly is not. However, the question of how much an RES will affect electric bills does not have a straightforward answer.

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This great article first appeared on the Heritage Foundation’s blog on May 5, 2010.