It's time to repeal Ohio's alternative energy mandate

I read an interesting article, "Obama Wants You to Use Less, Spend More," written by Marita Noon, Executive Director of Energy Makes America Great.

In one section, she talks about the prices for various types of energy. She writes:

That got me thinking, if a few cents, between $.07-.11, can make a $10 billion impact on a state’s economy, what difference will the higher costs of renewable energy do to these struggling cities?

Taylor referenced a study done by Tufts University economics professor Gilbert E. Metcalf, which provides the levelized costs of the various sources of electricity—meaning with the subsidies, preferences, and differential tax treatment removed. The “Federal Tax Policy Towards Energy” study was done in 2006 and reported on in 2007, so the numbers quoted here would not be the most recent, but they do provide real numbers for comparison. Metcalf found that coal was the least-cost method of electricity generation. Natural gas was next, the second least-cost, but was still 48% more than coal. Nuclear is 57% more than coal; wind, 75%; solar thermal, 570%; and solar photovoltaic, 887% more than coal. Of course, the price of natural gas is greatly reduced due to its newfound abundance and, yes, the costs of wind and solar have come down—but they’d have to come way down even to be close to competitive to coal or natural gas.

Here’s another way to look at the numbers. The US Energy Information Administration (EIA) produced a report that shows the same basic ideas from a different angle. The 2010 report attempted to project out what future energy costs would be. Like the Metcalf study, the EIA report offers levelized numbers. They assume that natural gas costs will remain low and even give some benefits to the prices of renewable energy. In their projections, natural gas is the least-cost, with coal being 50% more. Nuclear is 81% more expensive than natural gas; onshore wind, 131% more; offshore wind, 470%; solar thermal, 394%; and solar photovoltaic, 234%.

No matter which way you look at the numbers, coal and natural gas are the least-cost ways to generate electricity, with wind and solar, the most expensive.

Ohio has a law, passed in 2008, requiring that at least 25% of all electricity sold in the state by 2025 come from alternative energy. Half of the mandated 25% must come from renewable sources like solar, wind, hydro power, geothermal or biomass. The other half can be met by instituting energy-efficiency programs, clean coal technology or using fuel cells. But the kicker is the requirement to use solar and wind as we really don't have the capacity for hydro power nor the facilities for geothermal or biomass (at least - not yet).

Municipalities and governmental entities are purchasers of electricity just as you and I are. Most of the alternative energy sources in the Toledo area are from solar photovoltaic. If we use the lowest number from the above data, we're paying 234% more for the solar-generated energy than we would if we used natural gas and 56% more than we would if we used coal.

This means that we are paying significantly more for our energy than we need to (absent a government order). This also means that our limited tax dollars are being spent to pay for increased energy costs, rather than for other, necessary government services like roads, police and fire.

I can only wonder how much that additional cost equates to for the city of Toledo and whether or not, considering the number of buildings, they'd have the money for their desired recreation levy they just voted to put on the ballot.

We already know that eliminating the biodiesel fuel requirement for the Ohio Department of Transportation would save taxpayers millions of dollars.

Toledo - and all cities in the state - should immediately express support for S.B. 216, which would repeal the 25% mandate, and insist that the bill be passed.

It's about time all politicians stopped worrying about catering to the environmental lobby and started worrying about catering to the taxpayers.

Guest Post: Investment Best Left to Private Sector, Not Government

The following is a guest post by William O’Keefe, chief executive officer of the George C. Marshall Institute, and president of Solutions Consulting Inc.

Investment Best Left to Private Sector, Not Government

Al Gore’s self-aggrandizing claim that he “took the initiative in creating the Internet” has haunted him since he first uttered it during a 1999 interview. Newt Gingrich has taken a good deal of flack since claiming “helped lead the effort to defeat communism” late last year. It makes sense. In a society where people expect to be rewarded for their hard work and good ideas, the public generally abhors those who take credit where it’s not due. Self-promotion is what hucksters do.

For those reasons and others, politicians—especially those seeking reelection—should avoid engaging in unwarranted swagger. President Obama has not.

In his State of the Union address and campaign ads, Obama attempts to credit his administration with the recent boom in U.S. oil and gas production. Yet the facts don’t bear this out.

Obama has been more of an obstacle than an enabler to growth in America’s energy industry: straddling the fence over his support for development, targeting the sector for punitive tax hikes, and failing to issue a single new offshore permit in fiscal year 2011. So what are we to make of the President’s sudden embracing of traditional fuels and the more than 9 million workers whose jobs are supported by this industry? Why, election year politics, of course.

The President has already kicked off his swing state tour, traveling across the U.S. touting the need to create manufacturing jobs throughout 2012. Manufacturing is an important part of the Ohio economy, making this a politically savvy move to ensure his rhetoric resonates in the state. The manufacturing sector is the largest contributor to Ohio GDP at over 17 percent, and employs over 600,000 workers in the state. Nationally, the sector represents 11 percent of GDP.

But has the Obama administration really played the role in boosting manufacturing in the energy industry as he claims? In a word, no.

Private sector engineers invented hydraulic fracturing, the process responsible for the boom we’re witnessing in domestic natural gas production, back in 1947—over a decade before the President was even born. This innovation has enabled U.S. firms to unlock resources never before accessible and invest billions in our economy in the process. Far from encouraging this success, the President has singled out this sector for massive tax hikes—jeopardizing our already shaky position in the global energy market (not one U.S. company is in the top 15 largest energy companies worldwide).

In effect, by increasing taxes on U.S. companies, this desired policy would send more jobs and revenue abroad. This is a far cry from creating needed manufacturing jobs domestically. While domestic employment has been declining during the president’s tenure, employment in the oil industry has grown over 20%.

While gunning for oil and gas, the White House is playing favorites with the renewable lobby. Currently, about $11.3 billion taxpayer dollars are directed toward “green” energy annually. Despite decades of massive subsidization, the industry still accounts for only eight percent of U.S. energy demand. Heavily subsidized failures like the botched $500 million Solyndra loan are just the tip of the iceberg when it comes to government failures at picking winners and losers in the energy sector.

Ohio needs jobs, and that will require a plan to make our state and nation as a whole more attractive to investment and innovation. The President’s continued pursuit of job killing punitive tax hikes on manufacturers puts off investors and is contradictory to his campaign message touting the need for job creation. If Obama is serious about job creation, he must move to leave capital in the hands of proven private sector innovators, and stop trying to increase taxes to fund failed pet projects.

If you think Solyndra is bad, wait until you see this

We've all heard about the Solyndra scandal, but that may pale in comparison to what is being described as America's Worst Wind Energy Project.

The article takes a look at General Electric's (GE) Shepherds Flat project in northern Oregon - which the author says "is a real stinker."

The majority of the funding for the $1.9 billion, 845-megawatt Shepherds Flat wind project in Oregon is coming courtesy of federal taxpayers. And that largesse will provide a windfall for General Electric and its partners on the deal who include Google, Sumitomo, and Caithness Energy. Not only is the Energy Department giving GE and its partners a $1.06 billion loan guarantee, but as soon as GE’s 338 turbines start turning at Shepherds Flat, the Treasury Department will send the project developers a cash grant of $490 million.

The deal was so lucrative for the project developers that last October, some of Obama’s top advisers, including energy-policy czar Carol Browner and economic adviser Larry Summers, wrote a memo saying that the project’s backers had “little skin in the game” while the government would be providing “a significant subsidy (65+ percent).”
...
The memo continues, explaining that the carbon dioxide reductions associated with the project “would have to be valued at nearly $130 per ton for CO2 for the climate benefits to equal the subsidies.” The memo continues, saying that that per-ton cost is “more than 6 times the primary estimate used by the government in evaluating rules.”

Never mind that GE made $5.1 billion (yes - with a 'B') from their U.S. operations last year without paying any taxes. Never mind that GE clearly has the capital/financial ability to finance this project on their own. Never mind that GE's CEO, Jeffrey Immelt, is the head of the President's Council on Jobs and Competitiveness.

No, those facts are irrelevant. Our tax dollars are going to pay for this 'little' project and then to reward the 'investors' who have no skin in the game.

And the worst part about all of this is that these billions (yes - again with a 'B') are being taken from you and me and all Americans (probably borrowed from China) to reward campaign donors and promote a false idea that wind energy is a viable choice.

So just how many jobs will this little project create? Only 35 permanent positions. As the article says:

How much will those “green energy” jobs cost? Well, if we ignore the value of the federal loan guarantee and only focus on the $490 million cash grant that will be given to GE and its partners when Shepherds Flat gets finished, the cost of those “green energy” jobs will be about $16.3 million each.

Really?!? $16.3 million to 'create' a job?!? And that is excluding the billion in loan guarantees!!!

Where is the outrage?

The article does have some good news though. It appears that the more people learn about wind energy, the less they like it. Not because they don't want to have an alternative form of energy, but because they realize that the industry isn't viable without huge subsidies of their dollars, which they know diverts limited funds from other purposes.

During the webinar, Justin Rolfe-Redding, a doctoral student from the Center for Climate Change Communication at George Mason University, discussed ways for wind-energy proponents to get their message out to the public. Rolfe-Redding said that polling data showed that “after reading arguments for and against wind, wind lost support.” He went on to say that concerns about wind energy’s cost and its effect on property values “crowded out climate change” among those surveyed.

The most astounding thing to come out of Rolfe-Redding’s mouth — and yes, I heard him say it myself — was this: “The things people are educated about are a real deficit for us.” After the briefings on the pros and cons of wind, said Rolfe-Redding, “enthusiasm decreased for wind. That’s a troubling finding.” The solution to these problems, said Rolfe-Redding, was to “weaken counterarguments” against wind as much as possible. He suggested using “inoculation theory” by telling people that “wind is a clean source, it provides jobs” and adding that “it’s an investment in the future.” He also said that proponents should weaken objections by “saying prices are coming down every day.”

They can spin it any way they want, but the truth came directly from a wind supporter:

As Rolfe-Redding said, the more people know about the wind business, the less they like it.

Why you should pay attention to the Midwest ISO plans

Ever hear of Midwest Independent Transmission System Operator (Midwest ISO)? Me neither - at least, not until a few days ago - but they're likely to have a huge impact on Midwest utility bills, including ours and those paid by people just across the state line in Michigan.

According to their website, Midwest ISO is "an essential link in the safe, cost-effective delivery of electric power across much of North America. The Midwest ISO is committed to reliability, the nondiscriminatory operation of the bulk power transmission system, and to working with all stakeholders to create cost-effective and innovative solutions for our changing industry." Tells you a lot, huh?

The Midwest ISO brags that it "was approved as the nation's first regional transmission organization (RTO) in 2001." They say they're "an independent, nonprofit organization that supports the reliable delivery of electricity in 13 U.S. states and the Canadian province of Manitoba."

As one of their press releases described:

The Midwest ISO ensures reliable operation of, and equal access to power lines in 13 U.S. states and the Canadian province of Manitoba. The Midwest ISO manages one of the world's largest energy markets, clearing nearly $23 billion in energy transactions annually. ... The non-profit 501(C)(4) organization is governed by an independent Board of Directors, and is headquartered in Carmel, Indiana, with operations centers in Carmel and St. Paul, Minnesota. Membership in the organization is voluntary.

This map shows their 'regional reliability' area and this link lists their members, which includes the City of Cleveland, Consumers Energy Company, DTE Energy and FirstEnergy (which includes Toledo Edison).

So now that you know what Midwest ISO is, why is it relevant? Well, because they've recently received approval from the Federal Energy Regulatory Commission (FERC) to share the millions of dollars of cost to connect wind power to the transmission grid across all their member areas. In effect, they're going to allocate the transmission costs across their entire member area, even if a particular area isn't receiving any benefit from the particular source of energy.

As the Wall Street Journal explained (subscription may be required to read entire article):

"You'd think poor Michigan has enough economic troubles without the Federal Energy Regulatory Commission placing a $300 million to $500 million annual surtax on the state's electric utility bills. But on December 16 FERC Chairman Jon Wellinghoff announced new rules that would essentially socialize the cost of transmission lines across 13 states in the Midwest.

That region-wide pricing scheme, according to a study commissioned by utility companies, will force Michigan to pay about 20% of as much as $20 billion in new high-voltage transmission lines—though Michigan businesses and homeowners will get little benefit. Thanks to FERC's new tariff, nearly everything in Michigan—from cars and trucks to Frosted Flakes—will be more expensive to make. Indiana will also absorb new costs, as will industrial users and utility rate payers in Illinois, Minnesota and Wisconsin.

This is another discriminatory subsidy for wind energy that will raise electricity prices on everyone, notably on those who don't rely on wind for electric power. FERC's grand vision is to build hundreds of miles of transmission lines across the Midwest, linked to windmills in Iowa and the Dakotas. Mr. Wellinghoff says this new ruling "is the next step in the evolution of its transmission and cost allocation process."

In fact, this is the first step in a FERC scheme to socialize transmission costs nationwide."

While the article doesn't mention Ohio, we are included as well.

The WSJ details other problems with the FERC ruling, including that it breaks with the tradition and law of users paying for the cost of the electricity they use, and that it establishes "by regulatory fiat a national energy policy that Congress has refused to endorse."

The article continues:

The wind industry has essentially conceded that without the ability to socialize the cost of multibillion dollar transmission lines, its projects can't compete with coal, natural gas and nuclear power.

The FERC pricing scheme is politically insidious, and arguably unconstitutional, because it enables states with renewable standards to export the costs of those policies to other states without these laws. Why should a factory in Pontiac, Michigan subsidize the wind energy costs of a plant in Elgin, Illinois? Michigan has a renewable energy standard, but it is already complying through instate renewables.

The governors of at least 15 Western and Northeastern states have sent a letter to Congress objecting to the socializing of costs, complaining that the pricing plans would make electricity more expensive. But Mr. Wellinghoff rebuffed Michigan's plea to exclude the state from the cost-sharing plan.

Good questions to ask, but apparently the FERC doesn't care about what you or I think of additional costs for electricity we don't use.

Beginning on page 23 of this document, you can read for yourself some of the concerns about the plan approved by the FERC, including a too-broad definition, the allocation of costs to consumers who see no benefit, the lack of requirements for the need for new transmission lines, the potential for wasteful capital investment to the detriment of cost to the consumer, how projects qualify for meeting 'public policy' mandates, and a lack of definition for "regional public policy benefits."

Fortunately, Fred Upton (R), incomeing chairman of the House Energy and Commerce Committee, is from Michigan. It's bad policy to let politicians push for energy sources that cost more than consumers are willing to pay. I hope Rep. Upton look at what this means to consumers rather than to policy makers and let the market - rather than the government - decide.