Does Renewable Energy Raise Electric Prices?

Since the big push from the U.S. government for investment in renewable energy in 2009, we’ve had the opportunity to see how prices have changed between states that have made large investments in renewable energy, and those that have not. Critics of renewable energy investment say that renewable energy will never be as cost-effective as fossil fuels and could give customers sticker shock.

But is that the case?

To make the comparison, I took a sampling of 40 states; 20 states that have clearly invested heavily in increasing generation from renewable energy, and 20 states that have clearly been lagging behind on investment. I left out Alaska and Hawaii, where electricity prices are affected by different market forces than in the lower 48 states. I focused on the increased generation from geothermal, solar, and wind energy. Biomass has only grown measurably in New Hampshire and Virginia over the past several years.
I focused on generation rather than consumption, since the practice of actually constructing and operating these facilities within the state is more of an “investment” than buying power from hundreds of miles away. To do this, I compared the average price of power provided by the Energy Information Agency (EIA) for each of these states from 2010 through 2015 with the approximate average price over the last 18 months.

What Did I Find?

The average increase in prices between the 20 states that had the most investment in renewable energy was 4.3 percent, when comparing the average from 2010 to 2015 with the average over the last 18 months. However, for the 20 states that had the least investment in renewable energy, the average increase was 4.6 percent.**
Therefore, the impact of renewable energy on the price of power appears to be statistically insignificant. Sticking with fossil fuels has not been a pathway to lower energy prices. And this result challenges critics’ assertions that renewable energy is simply too expensive, while fossil fuels will maintain reliable, inexpensive electricity prices.
Critics lament the loss of jobs in the coal industry and are concerned with the economic fallout from policies designed to promote cleaner forms of energy. There has been particular concern that the intermittent nature of wind and solar energy can cause issues within the electric grid, and increase ramping of natural gas for back-up power. Critics often leave out the fact that studies show renewable energy development creates more jobs and the fact that fossil fuels create far more pollution from their extraction and combustion.
But despite these concerns, there still does not appear to be a statistical correlation with increasing renewable energy on the electric grid and higher prices. Texas financed massive build outs in infrastructure to bring wind energy from rural areas to urban areas and yet its average electricity prices went down. California has had the most extensive, prolific renewable energy program in the country, and prices increased on average by only 7.9 percent. While higher than the average, this is not significantly higher given the magnitude of renewable energy development.
What’s probably most promising about these figures is that states that have increased renewable energy generation up until now relied on higher priced contracts to get there. Projects recently completed or currently under construction have far lower prices. Therefore, it is more likely that renewable energy will produce lower prices in years to come.
Naturally states with superior wind, solar, or geothermal resources can benefit from the lower cost of those resources. But with prices falling, particularly for wind and solar energy, even states without great solar or wind resources are able to benefit from low prices. The states with the lowest solar radiation are located in the northeast, which also has the highest price for electricity. So solar energy is now becoming cost-competitive in those markets. Meanwhile, states in the southeastern U.S. are accelerating development of solar energy dramatically, including in Alabama and Mississippi, which are currently at the bottom of the list for renewable energy generation.
Clearly, there are always going to be challenges when integrating new energy resources into the electric grid. However, 21st century technology produced from renewable energy clearly is succeeding in meeting the challenge of providing low-cost energy to the consumer.

 

Originally published on Global Geothermal News

This entry was posted on Sunday, October 23rd, 2016 at 5:20 pm. Both comments and pings are currently closed.

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