So, How Much Would That Mandate Really Cost You?

It’s long been the contention by critics that if the United States were to adopt a Renewable Energy Standard (RES) or a Clean Energy Standard (CES), electricity costs would skyrocket and our nation’s delicate economy would hang in the balance. Kind of a scary scenario, even if you love the idea of clean energy. But what’s the reality (as best as these kind of matters can be predicted) and what are the potential impacts — both good and bad — of changing how we do business? And how would an RES, defined as mandates to include renewable resources, compare to a CES, which could include the use of nuclear power and natural gas as well as future coal-based technologies? The bipartisan Congressional Budget Office recently released its findings on how various forms of either an RES or a CES would affect prices and carbon emissions.   The final ruling: Carbon emissions would go down and prices would indeed go up. That, however, is certainly not the bottom line. And it’s not the smoking gun the American Tradition Institute would lead you to believe it is. The conservative energy-focused think tank commissioned its own study and found some pretty harsh effects if federal renewable energy mandates were enacted. Their findings are vastly more dire than anything the CBO has projected. Let’s take a closer look at what the CBO actually found. As far as prices go, they would as a whole go up. According to the report, “Without such a standard, generators in competitive electricity markets would choose the mix of sources that maximized their profits, and in regulated markets, regulators would tend to require a mix that minimized the cost of electricity production. An RES or CES would induce them to alter that mix and produce electricity in a more costly manner (not accounting for any environmental or other benefits of changing the mix).” In other words, they’d choose coal and natural gas over wind, solar and other renewable sources because it’s cheaper. True enough in most cases, though it certainly doesn’t account for the prospects of grid parity. According to the report, if there were mandates to increase the amount of renewables introduced into the mix, the impact would increase rates by up to 5 percent in some states and decrease rates by up to 4 percent in others. In the Southeast, where power is traditionally cheaper, rates would go up 10 percent only under the most extreme scenario. The CBO chart below shows the potential impact on electricity prices assumed under seven possible scenarios. While the report gave plenty of details about cost structure, benefits and drawbacks of implementing a RES or CES, the most interesting find is that a national cap-and-trade program in which carbon credits would be bought and sold would be more successful than either an RES or a CES in curbing emissions. “Such a program would involve setting an overall cap on emissions and letting large sellers of emission-creating products (such as electricity generators, oil producers and importers, and natural gas processors) trade rights to those limited emissions,” said the report. “In that way, a cap-and-trade program would create a direct incentive to cut emissions; in contrast, an RES or CES would create a direct incentive to use more renewable or other types of clean electricity but would have only an indirect effect on emissions.”

Source: http://www.renewableenergyworld.com/rea/blog/post/2011/07/so-how-much-would-that-mandate-really-cost-you?cmpid=rss

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