The Wonk Room

Reports: A Strong Federal Renewable Electricity Standard Would Save Over $200 Billion While Raising Rates Less Than One Percent

Our guest blogger is Tom Kenworthy, a Senior Fellow at the Center for American Progress.

A new study by a Department of Energy laboratory predicts that consumers would see a negligible increase in their electricity costs if Congress requires utilities to produce up to a quarter of their power from renewable sources. The analysis of three Democratic proposals to impose a national renewable energy standard (RES) of 20 to 25 percent concludes that electric rates would increase less than one percent under any of the plans proposed by Sen. Jeff Bingaman (D-NM) and Reps. Henry Waxman (D-CA) and Edward Markey (D-MA). The report by the National Renewable Energy Laboratory (NREL) in Golden, CO. concludes:

None of the RES bills modeled have a significant impact on consumer electricity prices at the national level.

During Senate debate on a 15 percent RES in late 2007, utilities including Southern Co. and American Electric Power Co. claimed the measure could cost $67 billion or more. The NREL study is the latest analysis to rebut arguments from some utility companies that a national RES would impose high costs on consumers. On the Waxman-Markey proposal of 25 percent RES by 2025 and a 15 percent electricity and 10 percent natural gas EERS by 2020:

“Given the amount of eligible renewable generation projected in the reference case, the RES is not expected to affect national average electricity prices until after 2020. . . By 2030, electricity prices are projected to be little changed from the reference case in both RES cases, with 2030 prices less than 1 percent higher than in the reference case.” [Energy Information Administration, April 2009]

“By 2030 the aggressive EERS and RES policies in the draft bill would save consumers over $200 billion dollars per year compared to the costs that would be incurred if investor-owned utilities are left to pursue their preference for expensive central station generation units.” [Consumer Federation of America, 5/21/09]

The Union of Concerned Scientists found that a 25 percent RES by 2025: “would create more than three times as many jobs as producing an equivalent amount of electricity from fossil fuels — resulting in a net benefit of 202,000 new jobs in 2025.”

The comprehensive energy and climate change legislation sponsored by Waxman and Markey and now being debated by the House Energy and Commerce Committee would establish a national RES of 15% by 2020. It would also require utilities to reduce electricity demand by another five percent through efficiency measures.

The NREL study, like earlier ones, forecasts significant regional differences in how states would be able to meet a national RES. Western states, which have abundant wind and solar resources, would likely exceed the national requirement and be able to sell renewable energy credits. Southern states would rely more on purchased credits and electricity produced by biomass.