Renewable Energy Mandates Have Negative Economic Consequences for Citizens
Higher electricity rates, job loss and investment decline predicted
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July 16, 2012 - Wichita - As a result of renewable energy mandates created by a 2009 Kansas law, electricity prices are predicted to jump 45 percent by 2020. This is just one of the negative economic effects Kansans can expect according to a new study, "The Economic Impact of the Kansas Renewable Portfolio Standard," issued by Kansas Policy Institute. A renewable portfolio standard (RPS) mandates that utility companies purchase certain amounts of their energy from renewable sources. In Kansas, that primarily means wind energy
Renewable energy is more expensive than conventional energy, so government mandates are necessary to ensure that more renewable energy is purchased. However, the unseen consequences of well-intended efforts to increase energy independence are rarely considered. The authors estimate that by 2020, the average household's electricity bill will increase by $660, approximately 12,000 fewer jobs will have been created, and business investment in the state will be $191 million less than without the mandate.
"It's easy to see windmills going up or an employer moving into town as a good thing. But it is often overlooked that they received a subsidy or incentive. No matter how well-intended these programs may be, taxpayers lose in the long run when government picks winners," said KPI President Dave Trabert. "We need a clean environment and diversified sources of energy will no doubt someday be an affordable alternative as entrepreneurs are free to experiment and invest in new technologies. Just they invested in new endeavors such as Penicillin, the personal computer, or the Internet. The incentive to innovate is stifled when government dictates the how and where to people."
The RPS signed into law by Gov. Mark Parkinson enshrined a previously voluntary effort into Kansas Statute. It says that between 2011 and 2015 at least ten percent of electricity generation must be from renewable sources with increases to 15 percent after 2016 and 20 percent after 2020. The impact of RPS mandates in Kansas will be somewhat less than other states due to the potential for wind energy, but the costs are still staggering.
 Paul Bachman, one of the paper's authors said, "Pain will be felt as fewer jobs are created, disposable income is reduced, and employers look to other states and countries without mandates to find cheaper energy."
Bachman is the director of research at the Beacon Hill Institute, a free market think tank based at Suffolk University in Massachusetts, which partnered with KPI to produce the paper.
Trabert concluded, "Mandates and subsidies aren't typically viewed as political handouts, but they impact individual decisions in the same way. No matter where these types of things originate or how well intended they may be, too often the best-laid plans end up hurting the people they are trying to help through fewer jobs and higher indirect costs." |
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Kansas Policy Institute is an independent think-tank that advocates for free market solutions and the protection of personal freedom for all Kansans. Our work centers on state and local economic policy with primary emphasis on education, fiscal policy and health care. We empower citizens, legislators and other government officials with objective research and creative ideas to promote a low-tax, pro-growth environment that preserves the ability of governments to provide high quality services. To speak with Kansas Policy Institute, please contact James Franko at (316) 634-0218.
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