Isaac Orr: Lower Electricity Costs From Going Carbon-Free? Wanna Bet, Gov. Walz?
The following article originally appeared in the St. Paul Pioneer Press:
Gov. Tim Walz recently announced his plan to make Minnesota’s electricity 100 percent carbon-free by 2050, and while the governor claims his plan will reduce energy costs for Minnesota families due to improvements in energy efficiency, I could not disagree more with his assessment. Therefore, I am willing to bet the governor a month’s salary that his claim is incorrect and that electricity costs will skyrocket under his plan.
Increasing quantities of renewable energy result in increasing electricity prices because they are more expensive than conventional sources of electricity, like coal. Additionally Minnesota would still need backup sources of electricity, like coal and natural gas plants, to be available when the wind is not blowing, like during the Polar Vortex, or when the sun is not shining. As a result, Minnesotans must pay twice for electricity they use once.
Furthermore, despite the governor’s claims, energy efficiency will not reduce customer payments because Minnesota’s government-approved monopoly utility companies, like Xcel Energy, are guaranteed to make a profit, no matter what.
Therefore, utility companies will simply raise their prices to make up for selling less electricity. This is why electricity bills in Minnesota have risen 8 percent (in inflation-adjusted dollars) since 2008, the year after Minnesota enacted its 25 percent renewable energy mandate, even though electricity consumption has fallen by 10 percent. In short, Minnesotans will pay more for less.
Even increasing Minnesota’s renewable energy mandate from 25 percent to 50 percent will inflict massive economic costs on the state for immeasurably small reductions in carbon dioxide emissions, according to a new study by Center of the American Experiment.
Such an increase in Minnesota’s renewable energy mandate would cost an additional $80.2 billion through 2050, relative to 2016 costs, and research from M.I.T. has concluded a system built on 100 percent wind, solar, and battery storage would be exponentially more expensive.
This mandate would cause electricity rates to increase by more than 40 percent, relative to 2018 prices, and impose an additional $1,200 burden on each Minnesota household, on average, every single year through 2050. This burden would be borne in the form of higher electricity bills for families, hospitals, schools, restaurants and other businesses.
For example, the Minneapolis Public School system would see its electric bill increase by $1.87 million per year. MPS would have to lay off 33 teachers making $56,000 per year to pay these higher costs, or raise property taxes to keep them on staff.
Increasing electricity costs would also make it more difficult for businesses to hire and retain employees. Using the economic modeling software IMPLAN, we found that higher electricity prices would destroy 20,950 jobs, and these job losses would likely be highest in energy-intensive industries such as manufacturing and mining.
Despite the massive costs associated with obtaining 50 percent of our energy from wind and solar, it would have negligible environmental benefits. Carbon dioxide emissions from Minnesota power plants accounted for 0.0075 of global emissions in 2018. Complying with this mandate would reduce our share of emissions by 0.0006, which would potentially avert 0.0006 degrees C of future global warming by 2100, based on the methodology used by the Obama Administration to calculate the impact of the Clean Power Plan.
Minnesotans are well meaning and environmentally conscious people, but they are also pragmatic. Forcing each household to shoulder a burden of $1,200 per year to avert an amount of global warming that is too small to measure is a massive opportunity cost that simply fails a proper cost-benefit analysis.
This proposal is all pain and no gain, and I would be more than happy to meet the governor at the Capitol, or a local watering hole, to shake hands on this bet. I’ll bring my paystub.
Isaac Orr is a policy fellow specializing in energy and environmental policy at Center of the American Experiment, a think tank located in Golden Valley, Minnesota.