The effects of a national RPS on the Southeast
Posted by Rich Sweeney on January 11, 2008
I’m becoming increasingly concerned about the Union for Concerned Scientists. Its gone from simply raising awareness about global warming to strongly advocating very strong policy responses. I came across a UCS briefing the other day which typifies the lack of rigor and questionable logic that has come to define far too much of the organizations work in the past year.
The brief (PDF) is on the impact that a national RPS would have on the southeastern United States . It’s widely feared that the southeast has a lot to loose from an RPS because it does not have very much renewable energy to supply. Yet here are the UCS’s findings:
A national renewable electricity standard can help the Southeast:
• Reduce the billions of dollars spent every year importing fuels from other states and countries by developing local renewable energy resources;
• Create thousands of manufacturing jobs and increase global export opportunities;
• Reduce natural gas costs and reduce or stabilize electricity costs; and
• Purchase the least-expensive renewable energy available, anywhere in the country.
I don’t have time right now to go in to all the problems I have with this report, but I’ll give you some of the highlights. They’re also useful for thinking about RPS policies in general.
The authors are correct to point out that the southeast imports a lot of coal, and that it would import less coal under an RPS. However, this would not translate directly into saving “billions of dollars” as many, if not all, of those dollars would still go out of state and they would still be spent on energy. The only difference is that they would go to purchase renewable energy credits (RECs) as well as coal. The report goes on to say that the southeast has plenty of renewable resources to bring online to meet an RPS, yet I haven’t seen any evidence to support this. Power simply isn’t a major concern on the hydro front, and this will be even more true going forward given the recent water shortages. Wind and geothermal are essentially non-existent, much of the region is actually too hot for viable solar, and wive and tidal technologies are not even close to market fruition. That leaves biomass, which will most likely be dominated by fuel rather than electricity interests.
More generally the report claims that an RPS will reduce electricity prices. I simply don’t see how this is possible. As a general rule of thumb, an RPS will increase prices nationally. In deregulated regions, it’s possible that prices won’t increase, as an RPS essentially works as a transfer from inframarginal producers (like coal) to marginal renewable producers. In regulated regions, prices are equal to the average marginal cost of all producers (for the most part). It’s possible that a regulated state could see a decline in electricity prices under a national RPS, but only if it has a lot of renewable energy, in which it exports RECS and the revenue subsidizes in state prices. Since the southeast is entirely regulated, and is comparatively inefficient at generating electricity from renewables, it’s electricity prices will go up. End of story. (Or think of it this way: as the brief points out the southeast uses a lot of fossil fuels to generate electricity. Under an RPS, it’s still gonna use a lot of fossil fuels, only now its also gonna have to buy RECs to go along with all that coal).