Alternative energy

Introduction

Pennsylvania lawmakers have approved over $2 billion in taxpayer subsidies for alternative energy since 1999. In addition to subsidies, Pennsylvania has Alternative Energy Portfolio Standards (AEPS) that require electric utilities to provide an increasing proportion of their energy from alternative sources. This creates an artificial market for alternative energy producers that taxpayers are forced to fund.

The motivation for creating renewable energy and green jobs is well intentioned, but harmful to the economy -- it drives up electricity prices, resulting in a net loss of jobs. Rather than create jobs, policies (subsidies and mandates) to encourage alternative energies merely shift jobs from one industry to another. A Spanish study concluded that subsidizing renewable energy leads to a loss of 2.2 jobs for every one green job created.

Pending legislation in Pennsylvania would increase the state's alternative energy requirements. It is important Pennsylvanians understand how these proposed policies negatively affect the Commonwealth.

Alternative Energy Facts

Renewable energy is heavily subsidized. The truth is solar and wind energy have an abundance of government support -- alternative energy receives considerably more subsidy per consumption than oil and natural gas. According to the most up-to-date information from the Energy Information Administration; solar energy receives 55 times more subsidies per MWH than coal, likewise, wind receives 52 times more than coal. Currently, these sources aren't economically viable, and shoveling more taxpayer subsidies their way will not stimulate the economy.

Subsidies undermine the overall economy. Subsidies distort the market by encouraging more investment than otherwise would occur, causing overproduction. No power source should be receiving any special treatment, including renewable energy.

Alternative energy mandates raise energy prices. Mandates drive up the cost of electricity. The Pennsylvania Public Utility Commission estimates the annual cost of solar ownership is 700% more expensive than the cost of coal, and wind is almost 23% more expensive than coal. Much like the failure of the corn ethanol mandates, the government should not be picking winners and losers in the energy market; unfortunately that is what these alternative energy standards do. Retail energy suppliers will inevitably pass the additional costs on to the consumers as they are required to use more expensive alternative sources.

'Green jobs' is no panacea. The problem with government efforts to create "green jobs" is threefold. First, subsidies and mandate create perverse incentives for alternative energy providers. Alternative energy companies are rewarded according to their lobbying skill instead of their ability to develop more reliable and affordable energy. Second, the cost of subsidizing green jobs takes money out of the private sector and allocates it according to politicians' whims. Finally, mandates and regulations make traditional energy, and electricity more expensive, burdening businesses and residents with higher costs. States with binding renewable portfolio standards, like Pennsylvania, have electricity rates that are nearly 40 percent higher than states with no mandates.

Cap and Trade would harm Pennsylvania. While states will be affected differently by cap and trade legislation, Pennsylvania's economy would fare among the worst, because over 50% of the state's energy comes from coal. The Heritage Foundation estimated the Commonwealth would lose 46,762 jobs between 2012 and 2035, and electricity costs would increase $608 per household, if the Waxman-Markey bill were approved.

Research