Renewable Energy Portfolio Standards Mandates: What Gives?

The basic question for proponents of Renewable Portfolio Standards (RPS) is this:

                What exactly are you trying to accomplish?

                Are you trying to reduce carbon emissions? 

You might reduce them some by generating electricity from wind and solar but clearly it’s a poor technique.  Back-up electricity sources may mean emissions are reduced little, or as some claim, not at all. The way to reduce carbon emissions is to put a price on carbon (either through taxes or cap and trade) not through mandates of alternative energy technologies.

Are you trying to keep future electric rates affordable?

At the present time when natural gas is cheap, it sound strange that an RPS would be intended to keep electric rates low. But when most state RPS mandates were enacted the prices of oil and gas were high, and forecasts for the future of fossil fuels were bleak (from around 2000 to 2008). In 2005, for example, we were in, many members of Congress, “a natural gas crisis,” and rising gas prices led the New York Times to opine that wind had become “a better bargain.” Legislatorsâ€"federal, state and localâ€"have a long history of not understanding energy resources or technology, but nonetheless reacting precipitously when constituents complain about high prices. How ironic then, that ratepayers in states with RPS mandates are likely to pay significantly higher electricity prices than those in states without an RPS.    

Are to you trying to spur commercialization of renewables?

Then you are pursuing a poor strategy. If anything, RPS and other alternative energy mandates have, to date, demonstrated the opposite of what you intend. Renewables are not cost competitive with conventional resources. Natural â€"gas-fueled combined-cycle electric generation is much less costly than any renewable generation except perhaps hydro powerâ€"which is often excluded from RPS consideration.  

Commercial viability has never been (and cannot be) mandated by government.  An RPS replaces marketability with bureaucratic coercion.  That gets companies and individuals to erect windmills and solar installations but doesn’t make them cost effective.  Moreover, as examples like ethanol demonstrate, there are often unfortunate spillovers that are hard to correct because policy creates winners who will fight to preserve their benefits at the expense of the rest of us.

RPS mandates have shown that large-scale solar and wind generation have been brought to market well before they are ready.  As things stand, the expanded use of renewables will be dependent on subsidies and feed-in-tariffs for the foreseeable future. Absent this artificial support solar and wind would return to niche markets but since subsidies presently drive incentives, if the subsides are removed, many companies would fail. 

Like so many energy policies, RPS mandates sound like a good idea but are incompletely understood by the politicians that pass them.  And they will either endure for political reasons to the detriment of our economy or they will be reversed distressing whole industries that depend on them.

RPS mandates are one more example of energy policies that fail.

Image: Green Finance via Shutterstock

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Peter Z. Grossman

Peter Z. Grossman is the Clarence Efroymson Professor of Economics at Butler University.  He is the author of US Energy Policy and the Pursuit of Failure, which will be published in February 2013 by Cambridge University Press.  Links to more of his work can be found at: http://peterzgrossman.wordpress.com/.

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