High Industrial Electricity Prices Harm Manufacturing Sector

We often hear from so-called progressives that we must fight income inequality and move toward renewable energy, but the problem is these two goals are incompatible with each other. This is because intermittent sources of renewable energy like wind and solar make electricity more expensive, and expensive electricity hurts the blue-collar industries like manufacturing and mining, which use an enormous amount of electricity.

Just look at California, which has enacted a 100 percent carbon-free energy mandate that will continue to send electricity prices soaring. In fact, industrial electricity prices in California are nearly twice as high as in the rest of the country, and this is a major reason manufacturing job growth in California has increased by 5 percent since 2010, while manufacturing jobs growth in the rest of the country grew at more than 11 percent.

High energy costs and a struggling manufacturing sector are enormous problems because manufacturing has the highest economic multiplier of any economic sector. Each dollar’s worth of manufactured goods generates $1.40 in output from other sectors of the economy, according to Forbes. Furthermore, according to data from the Bureau of Labor Statistics, the average wage for manufacturing was $56,799 per year, much higher than other working-class fields like health care and education (averaging $45,676 annually) and leisure and hospitality ($20,879).

Manufacturing has long been an important pathway to the American middle class, and fewer manufacturing jobs play a role in increasing income inequality.

In Minnesota, the stakes are even higher. According to the National Association of Manufacturers, the manufacturing sector accounts for 14 percent of the state’s GDP and employs 10.94 percent of the state’s workforce, and jobs in Minnesota’s manufacturing sector pay an average $75,940 per year.

Unfortunately, Minnesota’s renewable energy mandates have caused industrial electricity prices to grow 33.58 percent faster than the national average since 2007. This timeline should sound familiar because it’s the year Minnesota’s renewable energy mandate was signed into law. While the rest of the country saw industrial electricity prices level out due to an abundance of natural gas provided by the fracking boom, Minnesota’s $15 billion spending spree on wind caused electricity prices to continue to rise.

Thankfully, Minnesota has preferable tax treatment for manufacturing, which is likely helping to offset the high cost of electricity. But as more and more wind and solar are added to the grid, it will be more difficult for Minnesota’s manufacturers to stay competitive with other companies that have lower energy and employment costs both in the United States and in countries like China.

This is an inconvenient truth that is often ignored by renewable energy advocates. By increasing the cost of doing business in Minnesota, they make it easier for companies to outsource their work to developing countries that have far fewer environmental protections than in the United States. In short, outsourcing results in a net negative environmental gain for the planet.

California should be an example of what not to do. Minnesota, and the planet, would be better served by repealing the laws mandating the use of inefficient and expensive wind and solar and using a blend of natural gas, nuclear, and coal to provide clean, efficient, and affordable electricity, thereby bolstering our economy and reducing the overall impact of manufacturing on the environment.