North Carolinians Should Pay Extra to "Help" Texas
Posted by Daren Bakst at 5:54 PM
Two years ago, I wrote the following (slightly edited):
SB 3, the hastily enacted energy bill would require state citizens to help pay the electricity bill for Texans, Californians, or other out-of-state individuals.
Since there is not enough renewable energy in the state, SB 3 allows utilities to buy what are called renewable energy certificates that promote investment in renewable energy in other states, without providing electricity to North Carolinians.
In today's Raleigh News & Observer, an article discusses this issue:
With the first deadlines fast approaching for North Carolina's
renewable energy targets, power companies in this state are snapping up
green certificates from out-of-state wind farms. The certificates don't
buy electricity, but pay for credits needed to meet state targets....
Texas is the nation's leading state in wind energy development, and
provides some of the cheapest renewable certificates in the nation.
Progress Energy, Duke Energy and a group of 19 municipal power agencies
have already bought certificates from Texas wind farms to help meet
North Carolina's green energy mandates, which start phasing in in 2012
and increase through 2021...
They [Renewable energy credits] are a subsidy to help clean energy producers make a profit.
You are reading this right. The legislature is forcing North Carolinians to pay extra for electricity so that we can make sure renewable energy providers make a profit and we can subsidize the electricity of Texans.
I concluded my report in 2007 by writing:
North Carolinians will be mandated by its own legislature to pay for public services in other states. In the future, one has to wonder if North Carolinians will be paying for roads in Wyoming, schools in Tennessee, and other public projects that do not benefit the state.
I want to clarify something: SB 3 allows utilities to meet 25% of the 12.5% renewable energy and energy efficiency mandate (REPS) through these certificates.
The renewable energy requirement is 7.5%. This means that about 42% of the renewable energy requirement can be met through these certificates. The following is confusing, but to show my work: 25% of 12.5% is 3.125%. 3.125% is 41.7% of 7.5%.
So about 42% of the renewable energy requirement can be met by paying for the electricity of Texans.
Hurts Renewable Energy Development in the States
The N & O article discusses how some argue that these out-of-state electricity purchases may hurt the development of the renewable energy industry in NC.
1) The certificates exist because we don't have the renewable energy resources to meet a 7.5% requirement. LaCapra, the Utility Commission's own consultant, recommended a 5% requirement, but the legislature ignored this.
2) The implied argument is we should pay as much as necessary to help the renewable energy industry. Utilities aren't buying out-of-state electricity for the heck of it. The electricity outside the state is being purchased because it is less expensive than the alternatives and this is the only way not to further crush the finances of North Carolinians.
It isn't like out-of-state renewable electricity is a bargain. The out-of-state purchases already are very expensive! "On its contracts with renewable generators here [Texas], Progress pays about 6
cents a kilowatt hour for the electricity, and a premium ranging from 6
cents to 18 cents for the green credit, depending on the project."
3) If I own a business and make a really bad widget that is far costlier than my competition, I should go out of business. But what if I get the government to mandate that people buy my lousy product--that would be a great business model.
That's exactly what is happening with renewable energy. The state legislature is mandating that citizens pay a lot more for electricity (including the poor) so that some rent-seekers can make a profit.
This mandate, which already is the biggest subsidy of them all, doesn't even include the massive federal subsidies that renewable resources like wind and solar already receive.
This apparently still isn't good enough to help the renewable energy industry.
From the article: "If we're burning coal in our power plants and buying wind credits in
the prairie states, that doesn't give us any environmental advantage,"
said Rosalie Day, policy director at the N.C. Sustainable Energy
Association in Raleigh. "The purpose is to create jobs and
environmental benefits in our state."
I could write a book about this quote, but let me say that on Monday, the John Locke Foundation will be releasing a report that will make it very clear that it is absurd to suggest that SB 3 would create jobs.
Stay tuned for this critical report.
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