Does the push for renewable energy increase electricity bills? The Manhattan Institute says yes. A new study by Robert Bryce finds electricity prices are breaking a decades-long trend of decline, rising in states with and without a competitive market.
The main culprit, according to the study, is the patchwork of renewable energy mandates across 29 states, D.C. and Puerto Rico. These states require a percent of their electricity to be generated from various renewable sources by a certain year. For example, New York requires 29 percent of electricity to be generated by renewable sources in 2015, Texas requires 5,880 MW by 2015, while Rhode Island requires 16 percent by 2020. The definition of renewable resource can vary but most states include solar, wind, and biomass sources.
In 2010, the average price of residential electricity in states with Renewable Portfolio Standards (RPS) was 31.9 percent higher than rates in non-RPS states. Commercial electricity rates were 27.4 percent higher, and industrial rates were 30.7 percent higher. Of the ten states with the highest electricity prices, eight have RPS mandates.
The recent surge in rates reverses a decades-long trend. In 1960, the inflation-adjusted cost of residential electricity was $0.14 per kilowatt-hour. By 2005, the average cost of a kilowatt-hour was down to $0.09, but by October 2011 the average cost climbed to more than $0.12.
However, RPS mandates aren?t the only force pushing up electricity rates. Increasingly stringent federal environmental rules are forcing dozens of coal-fired power plants, recently the cheapest form of electricity, to retire. Bryce finds coal-dependent states with RPS mandates have residential rates 37.6 percent higher than those in coal-dependent non-RPS states.
Another source of higher rates is the installation of ?smart? meters in distribution networks. Residential consumers in the Houston area are getting smart meters that will cost an additional $3 per month for the next 12 years. In Pittsburgh, smart meters are costing consumers about $5 a year for at least five years.
Expansion of transmission lines is also responsible for higher costs. According to the Edison Electric Institute, companies will spend about $61 billion on transmission projects from 2010 through 2021. Some of that money is being spent to accommodate renewable energy. For instance, wind power in west Texas is far away from the urban areas in need of power, requiring companies to run long lines to transmit the power. The cost of the new transmission lines for renewable energy projects will be about $126 for each American, but Texans will pay about $270 each because the cowboy state has more wind-generation capacity than any other state.
While many factors are contributing to rising electricity prices, it appears RPS mandates are the main factor. While outright appeal isn?t likely, reforming the standards to account for recent developments like the shale boom, or publicizing their contribution to higher electric rates can go a long way towards preventing future mandates and cost spikes.