Wind Power Subsidies Crushing Families & Killing Thousands of Real Jobs

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The wind industry’s fortunes are waning all over the globe.

As politicians face the wrath of furious voters lumbered with the ludicrous costs of backing an entirely meaningless power generation source – subsidies are being slashed; investors are grabbing their money on the way out, before the whole Ponzi scheme inevitably collapses; and wind power outfits are struggling to simply stay afloat.

Being hammered by legislators keen to bring the rort to an end, the last redoubt for the wind industry’s parasites are claims that it can defy every last rule and principle of economics; and increase employment in an economy where a key input cost – ie electricity – is being driven through the roof, by ludicrous and wholly unnecessary producer subsidy schemes.

Here’s a study on Michigan’s wind power driven economic debacle, which suggests the contrary.

Michigan’s Wind Energy Mandate Costs Each Family Nearly $4,000
Michigan Capitol Confidential
Jack Spencer
2 October 2015

Renewable energy law means 24,000 fewer jobs

A new study from Utah State University found that, as of 2013, Michigan’s renewable energy mandate, enacted in 2008, has cost families and businesses here a bundle: $15.1 billion overall, or $3,830 per family, compared to what we would have experienced without the mandate.

According to the study, the economies of all states with a renewable portfolio standard, or RPS, have suffered harm. Among the negative effects are a nearly 14 percent decrease in industrial electricity sales, plus losses in both personal income and employment. A key finding was that an estimated 24,369 jobs have been lost in Michigan because of the mandate, which is in effect a mandate for wind energy.

The study concluded: “Our analysis of the legal rules surrounding RPS in Michigan suggests that the regulatory climate is burdensome for both utilities and bureaucracies, making RPS an even worse venture for taxpayers than the tax-based or empirical analyses suggest.”

This week Michigan Capitol Confidential conducted a telephone interview with Utah State University professor Ryan Yonk, one of the investigators who contributed to the study. Some excerpts:

CapCon: What’s the best way to explain how an RPS causes increased costs?

Yonk: An RPS is an example of picking one policy track and going down it. When you do that, you lose the opportunity for lower direct costs on electric rates and investment opportunities because investments are influenced and rearranged by the decisions of central planners instead of the market.

CapCon: When we say RPS, what we’re mostly talking about is wind energy, right?

Yonk: The majority of it is wind. Second would be solar, but the bulk of it is wind. Most states set their RPSs on wind.

CapCon: In Michigan, even though we have a 10 percent wind power mandate, the law did not require that emissions be monitored to see how much emissions are actually being reduced or if emissions are being reduced at all. Is that the way it was done in most other states that set wind power mandates?

Yonk: I can’t speak to that because I’ve never looked into it. What I can say is that very often the benefit claims for these tend to be esoteric; that is to say, they’re all about what’s supposed to happen in the future while disregarding what the effects are now.

CapCon: According to the study, as of 2013 Michigan’s RPS had resulted in a loss of 24,369 jobs in the state. How was that measured?

Yonk: It doesn’t mean that there were 24,369 jobs that just went away. It’s the additional number of jobs that would have been created had the RPS not been enacted. An advantage of the macroeconomic model we use is that it can be applied to multiple states to measure the impact of an RPS on costs, real income and unemployment.

CapCon: Did you notice any elements of Michigan’s RPS or the way it is implemented or regulated that are unique?

Yonk: Not particularly, other than that it’s more rigid in Michigan than in some other states because in Michigan you have a mandate as opposed to some states that only have goals. As a result, it is more of a regulatory burden.

The study was conducted by the Institute of Political Economy at Utah State University, using a model that applies state-specific data and characteristics to the long-term cumulative effects of an RPS policy. These effects include:

• State electricity sales declined by 13.075 percent.
• Real personal income declined by 3.6 percent.
• Nonfarm employment decreased by 2.8 percent.
• Manufacturing employment decreased by 3.7 percent.
• The unemployment rate was 9.6 percent higher.

All figures are measurements of the difference between the status quo and what the state would have experienced without the mandate. Michigan Capitol Confidential

Here’s a more detailed synopsis of the same report from the Utah State University.

Renewable Portfolio Standards: Michigan
Utah State University
27 September 2015

The United States has no federal mandate for “renewable” power production, so a majority of states, including Michigan, have created their own state laws called Renewable Portfolio Standards (RPS). These laws require certain renewable sources be included among the overall menu of options from which electricity companies produce power.

In October 2008, Public Act 295, also known as the Clean, Renewable and Efficient Energy Act, was enacted in Michigan, which called for utilities to generate 10 percent of retail electricity sales from renewable energy sources by 2015. In 2015, Michigan legislators and the governor propose differing bills dealing with the future of the RPS, ranging from doubling the standard to repealing it entirely.

The Utah State University’s Institute of Political Economy report analyzes how the changes in electricity markets caused by RPS alter the functioning of a state’s economy and institutions, with a specific focus on Michigan. The report uses a tax-based model, an empirical analysis, and a survey of legal rules to determine final conclusions.

View the Report here: RENEWABLE PORTFOLIO STANDARDS: MICHIGAN (September 2015)

Common Questions About Renewable Portfolio Standards (RPS)
Updated 27 September 27, 2015

Q1. What is a renewable portfolio standard?

Simply put, an RPS is a state law that mandates a certain percentage of statewide electricity be provided by various government-subsidized, alternative sources of energy production – also known as “renewables.” Many states, like Michigan, Kansas, North Carolina, Ohio and Colorado have created their own mandate. Most of these laws require that states attain target percentages of electricity that must be utilized by a certain date.

Q2. Why research renewable portfolio standards (RPS)?

Strata, in conjunction with Utah State University Institute of Political Economy (IPE), does research on a variety of subjects related to energy, environmental and land topics. A number of states have recently implemented their own RPS, which uses a combination of mandates and subsidies to promote renewable energy resources. The study looks at real costs and the impact of economic incentives within the states where RPS has been implemented.

We examine the impact on consumers and the prices they pay for energy, the impact on jobs, and other economic consequences of these mandated standards. Our academic focus and standard is to examine a spectrum of economic factors and provide information based on verifiable academic data. We also have ongoing research on a variety of energy sources, including coal, wind, solar, bio-mass, natural gas, and others.

Q3. Where do you find data to use in your research?

The RPS study is an academic, peer-reviewed research report intended for public consumption. The bulk of data for our RPS analysis comes from the federal Energy Information Administration (EIA), which is considered the most reliable data publicly available.

Q4. How is your research funded?

Strata receives funding from a variety of sources including individuals, foundations, corporations, and government grants. It is our mission to explore the issues with a strict focus on empirical, honest academic research of the highest quality. Our scholars do not conduct directed research or research for hire.

Our research process is the same, regardless of the funder or topic of our research. Strata’s team comes up with premises for a research idea with areas we hope to further explore, then the concepts are presented to our broad network of funding groups through a grant request process.

Organizations who provide funding, for this or any of our studies, are completely walled-off from the research and the process for the study’s completion. Funding sources do not provide input into how the study is conducted or what conclusions are reached. Our researchers and their teams come up with their own projects and follow a strict focus on empirical, straightforward academic research of the highest quality.

Q5. What is your publication process?

Utah State University’s Institute of Political Economy develops questions and ideas that are relevant to the public and policymakers. These questions and ideas are tested according to academic rigor using both time-tested and innovative methodologies. In order to achieve the greatest accuracy and insight, the methods are peer-reviewed and fact checked for accuracy. Our research is intended to be timely and responsive to current issues and trends.

Q6. What are the major takeaways of the RPS studies?

The RPS study findings utilize an innovative method of analysis originally developed by the Federal Reserve Bank of Philadelphia.

Through econometric analysis and modeling, the methodology isolates the effects of policy mandates like RPS and outputs general impacts.

Our findings show that states with RPS have a significantly higher set of negative economic impacts than states without RPS.

Specifically, our research shows that across RPS states, industrial production (measured by electricity sales) is greater than a 13% decline. Additionally, real personal income declines in RPS states by almost 4 percent.

In Michigan, for a typical household, this translates to about $3,800 per family, and about the same in North Carolina in 2013 alone. As a result, our analysis shows that Michigan has forgone over 24,000 jobs and other states like North Carolina has 23,769 fewer employed positions as a result of RPS mandates to date.

Q7. How do you respond to your critics who characterize your findings as well funded, special interest bought and paid for attacks on renewable energy?

The data from our study opens a critique about the real costs to organizations, individuals and families and highlights how Michigan’s RPS impacts the current economy and ratepayers today, and if not repealed, how these mandates will impact the future.

We are aware the pro-RPS mandate lobby would not take this negative news without a fight. The industries with a financial interest in maintaining the RPS mandates stand to lose millions of dollars in government subsidies and market access.

They are somewhat predictably countering our conclusions with their own data (which deserves scrutiny given it’s source and motivation) and doing whatever they can to discredit us as academics. We stand by our data and the conclusions.

Q8. Why do you oppose renewable energy?

We don’t. We champion any new ideas and innovation in the energy sector, and consider ourselves to be environmental economists. That said, we also think that government energy policy should also be good for the economy, for the environment and for ratepayers.

The evidence from Michigan and other states across the country demonstrates that existing RPS mandates are falling short of their promise, and as a result are harming both state economies and families in the process.

Q9. What is the Institute of Political Economy (IPE)?

Originally founded by Professor Randy Simmons at Utah State University, The Institute of Political Economy is a think-tank and policy analysis center.

IPE has grown to include several scholars interested the intersections between free markets, natural resources, public lands, and energy. Scholars also working with IPE include Dr. Chris Fawson, Dr. Ryan Yonk, and a variety of other professors and experts with expertise in our core areas.

Q10. When your first RPS study on the State of Kansas released, and then North Carolina and Ohio afterwards, the wind-industry trade group, AWEA, and others like the Sierra Club, said your methodology was flawed, is that true?

It is not surprising that an industry trade group that represents big wind interests would try to rebut the study, however we stand confident behind the study methodology and validity of the findings.

The RPS studies from Utah State University’s Institute of Political Economy use practices and processes that are the industry-standard in the academic research community.

The methodology used in each RPS study underwent a double-blind review process. During this verification process, anonymous and unbiased subject-matter experts provided challenges and feedback to study’s authors. Before the process concluded, the authors reconciled each individual challenge and piece of feedback before moving forward with the RPS studies.
Utah State University

So, there you have it: throw massive and endless subsidies to producers of an unreliable and, therefore, inferior product (with the superior product already in abundant supply and available on-demand at 1/3 the cost); add the entire cost of those subsidies to the price of a key input; sit back; and watch your economy wilt.

Any job that relies on a subsidy results in a loss of employment elsewhere in the economy.

In Germany, the subsidies for “green” jobs are paid for in rocketing power prices, which impacts on the profitability and competitiveness of all businesses and industries. German manufacturers – and other energy intensive industries – faced with escalating power bills are set to pack up and head to the USA – where power prices are 1/3 of Germany’s (see our posts here and here and here).

In the result, Germany faces a decline in industrial output and, therefore, declining employment.

And now that the Germans have started to wind back subsidies for renewables (see our post here), the “green” jobs that were built on them are disappearing fast (see our post here).

The renewables subsidy story in Spain is no different. The Spaniards have thrown 100s of billions of euros in subsidies at solar and wind power, and have achieved nothing but economic punishment in return.

The much touted promise of thousands of so-called “green” jobs never materialized. No surprises there. Instead, the insane cost of subsidising wind and solar power has helped to kill off productive industries, with the general unemployment rate rocketing from 8% to 26% – youth unemployment is nearer to 50% in many regions (see our post here). For an update on the Spanish renewables disaster see the study produced by the Institute for Energy Research available here.

In Spain, just as everywhere else, the great bulk of employment in the wind industry involves fleeting construction work (once the turbines are up, there’s nought to do) – of the jobs created:

“two-thirds of which came in construction, fabrication and installation, one quarter in administrative positions, marketing and projects engineering, and just one out of ten jobs has been created at the more permanent level of actual operation and maintenance”.

That the Spaniards had to stump up “subsidies of more than €1 million” to create each wind industry job; that each wind industry job thus created, killed off 2.2 jobs elsewhere in the economy; and that each MW of wind power capacity installed destroyed 4.27 jobs – is nothing short of an economic disaster (see our post here).

The handful of permanent jobs (as well as fleeting construction work) created in Australia’s wind industry were all the product the mandatory Large-Scale Renewable Energy Target (LRET) and the Renewable Energy Certificates (RECs) issued to wind power generators under it. The REC is a Federal Tax on all Australian power consumers paid as a direct subsidy to wind power outfits.

So far, the REC Tax has cost Australian power consumers well over $9 billion and – for as long as the LRET remains – will add a further $45 billion to power bills over the next 16 years (see our post here).

It’s the cost impact on power prices of that massive subsidy stream that has energy intensive industries – like aluminium processing and mining – lining up to ensure that the mandatory LRET gets scrapped (see our posts here and here). If the LRET is retained, expect to see more industrial outfits close their doors, killing off real jobs in the thousands (see our posts here and here).

When the “wind industry creates jobs” mantra is being chanted, what the Clean Energy Council and Infigen & Co don’t say is that every single wind industry job “created” depends entirely on the mandatory RET and the RECs issued to wind power outfits under it.

A subsidy – such as the REC – paid to “create” a job in one part of an economy, means that a job (or jobs) will, inevitably, be lost elsewhere. A study by UK Versa Economics found that for every job created in the wind industry 3.7 jobs are lost elsewhere in the UK economy (see our post here).

One Australian study has forecast that the mandatory LRET will kill over 6,000 jobs (see our post here).

The idea of wind industry job “creation” is like robbing Peter to pay Paul, except that the thief has to filch $4 from Peter to end up handing $1 to Paul.

As the Americans, Germans, Spaniards and Brits are learning fast, any policy that is unsustainable will, eventually, fail or compel its creators to scrap it. Australia’s mandatory LRET is no exception.

For anyone with a grain of High School economics in their intellectual arsenal, the results laid out above should come as no surprise; simply because they are precisely what the principles and laws of that dismal science dictate. And there’s no escaping them.