Study: Green Energy Could Mean Higher Electric Bills

Industry experts say regulations and infrastructure investment could lead to price hikes for consumers.

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A seemingly positive development for energy security and the environment could be bad news for consumers' budgets, according to a new report.

More than 90 percent of energy executives surveyed in a poll conducted by engineering and construction consulting firm Black & Veatch believe that new regulations requiring the increased use of renewable energy and cleaner coal plants will increase consumer energy bills anywhere from 5 to 30 percent.

Currently, American households spend about $111 per month on utility bills on average, according to the Energy Information Administration.

But what does being "greener" have to do with higher energy bills?

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For starters, renewable energy at this point is just fundamentally more expensive than many other more traditional energy sources, says Mark Gabriel, senior vice president of strategy and business process at Black & Veatch.

That's especially true given the historically low natural gas prices of late, which have made essentially any other electricity source not competitive, at least for the time being, says Paul Bledsoe, senior adviser at the Bipartisan Policy Center.

Another part has to do with the infrastructure needed to take energy produced by renewable sources—solar and wind, for example—to the market. Many times wind fields and solar panel installations aren't near centers of demand, Gabriel says, which means some method of transporting the energy produced needs to be built.

"For wind resources to reach market, the best places for wind aren't necessarily near the load," Gabriel says. "So we need to make investments in transmission."

Those investments cost money and somewhere along the line utility companies might have to pass along the increased costs to consumers in the form of price hikes.

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The good news is that over time prices will "mellow out" as infrastructure projects are completed and energy can flow more efficiently and rapidly to centers of demand. Gabriel likens it to the development of the mobile phone industry where investment in towers and other infrastructure helped drive down cell phone bills relative to where they once were.

Nevertheless, the U.S. has a long way to go when it comes to the energy grid: "The U.S. industry has not invested in all sorts of infrastructure," he adds.

The prospect of more regulation also played a role in industry big-wigs' predicting higher energy bills, with 92 percent of those surveyed saying the cost of regulations will drive up prices for consumers. While it's not a surprise regulation is increasing, the industry still has to manage the cost fallout of stricter rules on coal-fired power plant production for instance.

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"The amount of regulation is increasing dramatically," Gabriel says. "That in itself drives costs. The industry is more than willing to bear those costs, but that in turn results in increasing rates for consumers. We all want to use electricity with lower carbon emissions but there's a cost to doing so. There's a trade-off."

But while the industry might not be surprised by the regulations coming down through the pipeline, the financial impact of the increased environmental regulations remains a big question mark.

"Once we know where the regulations come down as an industry, we can make decisions regarding investment and infrastructure, cleaning of coal plants," Gabriel says. "That cry for certainty continues based on the results of our survey."

Meg Handley is a business reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter at @mmhandley.