Biden’s “Clean Energy” Means Higher Electricity Bills for Consumers

by | Sep 19, 2021 | Energy

Germany’s similar experiment with an energy transition has been going on much longer than the time period under President Biden’s proposal, and that has led to skyrocketing electricity prices for residential users equal to three times what Americans pay.

President Joe Biden wants an 80 percent “clean energy” grid by 2030 and a 100 percent “clean energy” grid by 2035. One way to force this onto consumers is through a so-called federal “clean energy standard,” which in fact would be a mandate.  But such a mandate would mean higher electricity bills for consumers because 60 percent of the electricity generated in the United States today is produced using fossil energy and thus two-thirds of that generation would have to be replaced by 2030 and all of it by 2035. Enormous new generating capacity would need to be built to replace the fossil fuel capacity and to meet future increases in electricity demand. Consumers and taxpayers (if federal subsidies are involved) will have to pay for the new construction costs and batteries to store back-up power if the replacement technologies are intermittent wind and solar power.  This will be hugely expensive for consumers.

A “clean energy standard” would require utilities to cut greenhouse gas emissions and produce a certain amount of their power from renewable sources at specified times. It is an alternative to pricing carbon dioxide through a tax or cap-and-trade (also known as “cap and tax”) program and focuses on reducing greenhouse gas emissions produced during electricity generation by establishing targets. Technically, a clean energy technology could be fueled by natural gas or coal if all of their carbon emissions are captured. Since carbon capture and sequestration technology is not currently commercially economic and nuclear power is expensive and has extensive construction lead times, most view the mandate producing massive numbers of wind and solar farms.

The question, of course, is how to pay for the standard. Taxpayers could fund it through subsidies and consumers through rates or a combination of the two. Certain past proposed bills along with establishing a “clean energy” standard also created a credit system where clean sources of electricity as determined by a benchmark (e.g. carbon dioxide emitted per kilowatt-hour) receive credits, which may be transferred, sold, and auctioned so utilities that fail to meet targets can procure credits from others. A similar approach tied to a cap-and-trade program failed in Congress a decade ago because of concerns of skyrocketing electricity costs, which President Obama admitted would be the result of such policies.

Some politicians see the standard as an investment program by providing federal resources to utilities that increase their “clean energy.” In that respect, Democrats may be able to push it through their reconciliation bill, where legislation in the bill must be related to taxes, spending or debt policy. The “Byrd Rule” regarding reconciliation also mandates that any legislation cannot add to the national deficit after 10 years. But, regardless, someone has to pay for the unneeded capacity replacement were this requirement to move forward.

Cost of “Clean Energy”

Last year, Virginia’s Governor Northam signed a bill that established a 100 percent carbon-free clean energy standard for Dominion VA Power by 2045. Dominion Power forecasted that compliance with the regulation could increase residential bills by an average 2.9 percent per year through 2030. Virginia generates 57 percent of its electricity from fossil fuels (51. percent from natural gas, 5.1 percent from coal, and 0.3 percent from petroleum), 37 percent nuclear and 6 percent from renewables.

In 1983, Iowa became the first state to set a renewable portfolio standard. Iowans paid 6.14 cents per kilowatt-hour for electricity in 2001 when 1.2 percent of the state’s electricity was generated by wind power and 85.2 percent was generated by coal. Last year, Iowans paid 9.28 cents per kilowatt hour for electricity when 57.5 percent of their power was generated by wind and 23.8 percent by coal—over a 50 percent increase.

West Virginia currently generates 90 percent of its power from coal. To replace 70 percent of its capacity in 8 or 9 years to meet Biden’s 2030 goal is simply not feasible and it would be very detrimental to the economy of the state. According to Attorney General Morrisey, “They’re setting up completely unrealistic goals. You can’t diversify your way into a new world in an eight-and-a half-year period. It’s completely unrealistic unless you just don’t care about the level of pain that you’re going to be imposing on Appalachia and many energy-producing states.” Other states with relatively high shares of fossil fuels in their electric generating mix are Pennsylvania (54 percent fossil fuels), Wisconsin (73 percent), Ohio (81 percent), Wyoming (89 percent), and Kentucky (95 percent).

Wyoming Utility Closes Coal Plants

PacifiCorp, the parent company to Rocky Mountain Power, Wyoming’s biggest electric utility, intends to retire 14 of its 22 active coal units by 2030 and another five by 2040, with the remaining three shuttered shortly thereafter. It plans to convert two coal units at Wyoming’s Jim Bridger power plant to natural gas peaking units in 2024. By the end of 2040, the company’s coal-fueled generation capacity would be reduced by more than 4,000 megawatts and its natural gas capacity reduced by 1,500 megawatts.

Over the next two decades, PacifiCorp plans to build over 3,600 megawatts of new wind, over 5,600 megawatts of new solar, about 6,700 megawatts of storage capacity and hundreds of miles of transmission to accommodate the additional resources. A 500-megawatt advanced nuclear reactor proposed for one of four retiring Wyoming coal plants is part of 2,700 megawatts of “advanced nuclear and non-emitting peaking resources” that the company plans to bring online by 2040. This would be the first advanced nuclear reactor to be constructed in the United States. Along with other nuclear units,  China announced it would construct an advanced nuclear reactor to be brought online in 5 years.

Conclusion

Several states properly worry about the feasibility of a “clean energy” standard, which would force them to radically change their generating mix in just 8 and a half years to meet President Biden’s 80 percent “clean energy” goal by 2030 and 100 percent “clean energy” goal by 2035. The time is too short to make the massive changes that could hurt the economies of these states. It not only means replacing existing capacity that, in most cases, is producing electricity efficiently, but it also requires storage capacity (batteries) and additional transmission lines to reach solar and wind farms. The reconciliation bill currently being written in Congress could tackle this issue if it deals with investment that would be paid for through taxes, spending or debt policy. However, if that fails, Biden could push a “clean energy” standard forward through regulation. Regardless, it is likely to result in higher energy bills for consumers.  Germany’s similar experiment with an energy transition has been going on much longer than the time period under President Biden’s proposal, and that has led to skyrocketing electricity prices for residential users equal to three times what Americans pay.

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

Voice of Capitalism

Our weekly email newsletter.

We respect your privacy. Unsubscribe anytime.

Pin It on Pinterest