Neighboring states shed harsh light on Silver State’s policy ambitions
While higher unemployment numbers usually gain more attention than higher electricity rates, two new policy studies indicate Nevada's renewable portfolio standards may increase both rates.
Suffolk University's Beacon Hill Institute studied renewable portfolio standards (RPS) in New Mexico and Oregon and projected that, as a result of those standards, both states can expect to lose more than 15,000 jobs and have electricity prices rise by 20 percent.
Since Nevada's electricity rates are the second highest in the West, the studies' authors said Nevada could face a similar economic forecast.
"Most renewables in Nevada and across the country need heavy taxpayer subsidies to survive, because they aren't cost competitive," said Paul Bachman, Beacon Hill's director of research. "As long as renewables aren't cost competitive — and the EIA [Energy Information Administration] shows they won't be for the foreseeable future — RPS standards will weigh down states."
The harm projected for the Oregon economy is highly relevant for Nevada because Nevada and Oregon have the same demanding RPS — "25 by 25," meaning that 25 percent of all energy must be generated by renewable sources by 2025. According to Beacon Hill's study, by that date Oregon's portfolio standard will have cost the state's taxpayers $992 million and residential electricity prices will have risen 24 percent.
"The devil's in the details [of Nevada's RPS]," said Assemblyman John Ellison, R-Elko, a member of the Assembly Commerce and Labor Committee. "We can't have bills that select favorites and put more of a burden on our state."
Supporting Ellison's claim, the Oregon study noted the reduction in greenhouse-gas emissions available from solar and wind energies — the two green technologies that politicians most favor — does not justify their additional economic cost.
"One could justify the higher electricity costs if the environmental benefits, in terms of reduced greenhouse gas (GHG) emissions, outweigh the costs," the authors wrote. "However, it is unclear that the use of renewable energy resources, especially wind and solar, actually reduce GHG emissions."
According to federal EIA data, Nevada's residential electricity prices are already rising more than 5 percent per year, dating back to 1997 when the state passed its first RPS. At this pace, Nevadans will be paying more than 30 cents per kilowatt hour by 2025.
Prior to the Nevada Legislature's imposition of the portfolio standards, state residential electricity prices only increased by 3 percent per year, according to EIA data.
Source: US Energy Information Administration
California's renewable portfolio standards and electricity prices are both higher than Nevada's, and like Nevada, California is in an economic mess. In 2009, then-governor Arnold Schwarzenegger, a Republican, issued Executive Order S-21-09, mandating a California RPS of 33 percent by 2020. Schwarzenegger's executive order expands state Senate Bill 107, passed in 2006, which established a 20 percent RPS by 2010.
Notwithstanding the official standards, however, data from California's Public Utilities Commission shows the state's three largest energy companies all had RPS deficits dating back to 2008, and missed the 2010 RPS as well. Additionally, consulting company Black and Veatch projects California utilities will only meet the RPS requirement once in the next 15 years.
"California's going to have some challenges with their [energy] prices," said Nevada Assemblyman Ed Goedhart, R-Amargosa Valley, a member of the Assembly Commerce and Labor Committee. "If prices get to a point where they discourage business, you've got problems."
Energy legislation from lawmakers already discourages business. Along with RPS mandates and the resulting higher electricity rates, legislation expanding government control in the energy sector has prevented businesses from hiring new workers.
An example is the recently passed AB432. Sponsored by Assemblywomen Marilyn Kirkpatrick, D-North Las Vegas, and Teresa Benitez-Thompson, D-Reno, AB432 revised the qualifications for state home energy auditors and shifted auditing oversight from the Nevada Energy Commission to the state's Real Estate Division within the Department of Business and Industry.
The bill's new requirements, according to Paul Taylor, owner of Sierra Green Builders, a home energy auditing company in Reno, means auditors licensed under the old regulations could lose their jobs. Companies will spend more money training employees to meet the new state requirements.
"With the new regulation as it is written, I feel confident that I will not be hiring any more employees in the foreseeable future," Taylor wrote in a letter to the Nevada Renewable Energy and Energy Efficiency Authority last fall.
"I may even have to let go my current employees," he wrote, protesting the bill draft request that became AB432. "Like many of my former competitors, this may be the last straw and I may have to close my business all together."
Taylor estimated two-thirds of home energy auditors lost work due to the housing crisis. The new regulation will prevent that number from recovering, he said.
"I still haven't hired any new employees," said Taylor. "Realtors who can afford lobbyists like the bill, but people who do this [home energy auditing] for a living weren't asked to weigh in."
California politicians are also willing to sacrifice economic growth to score green points, sparking a ballot initiative — Prop 23 — from those wishing to push back. The measure would have suspended the California Global Warming Solutions Act of 2006 (AB32) until unemployment fell to 5.5 percent. The "Solutions Act" is essentially California's version of the Kyoto Protocol, and requires greenhouse-gas emissions to fall to 1990 levels.
Because Prop 23 failed, the "Solutions Act" is projected to slow economic growth and cost the Golden State nearly 1 million jobs, according to Benjamin Zycher. He's an economist at the Pacific Research Institute, a Palo Alto-based think tank.
While such ballot initiatives attempt to take energy decisions out of politicians' hands, eventually energy economics will have to be returned to the dynamics of the market, says Goedhart.
"We can't go any higher than 25," the assemblyman said, referring to Nevada's RPS. "More and more efficient technologies will come along, and if they're cost-competitive they'll help, but we need to step into it [renewable energy] cautiously."