University Of Chicago Reports That Renewables Are A Luxury No Man Can Afford

Apr. 26, 2019 1:46 PM ETFSLR, TSLA, VWDRY446 Comments
John Petersen profile picture
John Petersen
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Summary

  • On April 21st, the University of Chicago's Energy Policy Institute (EPIC) released the results of a comprehensive study comparing states that have renewable portfolio standards (RPS) with states that don’t.
  • It reported that seven years after passage of an RPS program, renewable power generation was, on average, 1.8% higher and retail electricity prices were, on average, 11% higher.
  • It reported that 12 years after passage of an RPS program, renewable power generation was, on average, 4.2% higher and retail electricity prices were, on average, 17% higher.
  • It also reported an all-in cost of $130 to $460 per metric ton for CO2 abatement.
  • When RPS programs that favor less than 10% of annual electricity production drive average retail electricity prices up by 11% to 17%, something is desperately wrong.

Introduction

The nation's first RPS program was implemented by Iowa in 1983. Over the last 35 years, RPS programs have become a favorite policy lever for renewable energy advocates and politicians alike. Through 2015, RPS programs had been adopted in 29 states and the District of Columbia, which collectively account for 62% of electric power generation in the United States. In the early years, RPS targets were modest. Recently, some states have grown bolder and policy targets of 40% to 60% are not unusual while happy-talk of a 100% renewable grid is commonplace.

On April 21st, the University of Chicago's Energy Policy Institute released a research report titled "Do Renewable Portfolio Standards Deliver?" It describes the methodology used and conclusions reached in a comprehensive study that compared retail electricity prices in states that have renewable portfolio standards with states that don't. The study was the most granular analysis ever undertaken and based on comprehensive state-level data from 1990 through 2015. Instead of focusing on highly optimistic assumptions about what renewable energy should cost, the EPIC study was based on granular hard data that shows the impact of RPS implementation on retail electricity costs.

The core conclusions were simple. Adding renewables to the electric power grid increases electric costs to ratepayers while providing very costly CO2 abatement. I wasn't surprised by the EPIC study's conclusions since I've long believed that renewable energy advocates understate the costs and overstate the benefits of their preferred technologies. I was, however, surprised by EPIC's willingness to discuss the thoroughly inconvenient truths. It is, after all, a unit of the University of Chicago and a sister institution to Argonne National Laboratories. So, tossing a wet blanket over the entire renewable energy sector must have been a political minefield.

Since EPIC's conclusions are 180 degrees out of

This article was written by

John Petersen profile picture
55.88K Followers
I'm a lawyer and accountant who's devoted the last four decades to advising entrepreneurs on corporate finance, SEC registration and reporting, and corporate governance matters. All of my client projects have involved high levels of uncertainty, compressed timelines, and urgent financial needs that demanded unparalleled responsiveness. I know how to get major projects completed on time and within budget. I'm a 1979 graduate of the Notre Dame Law School and a 1976 graduate of the W.P. Carey School of Business at Arizona State University. I was admitted to the State Bar of Texas in 1980 and subsequently licensed to practice as a CPA in 1981. While I don't hold myself out as a practicing accountant, I regularly use my in-depth knowledge of accounting methods, processes, and procedures to offer nuts and bolts counsel to clients who need integrated advice on finance-driven legal matters.As general counsel for the C Change Group, I'm involved in all of that company's domestic and international initiatives.

Disclosure: I am/we are short TSLA THROUGH LONG-DATED PUT OPTIONS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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