Michigan’s Renewable Energy Mandate Is Bad for the Economy

The government and environmental allies shouldn't try to strong arm people into consuming renewable energy.

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Invenergy's Buffalo Mountain wind farm wind turbines near Oak Ridge, TN.

Politicians at various levels, along with environmental allies, are promoting clean tech as a way to create jobs. In Michigan, recently, a new study argued that mandating utility purchases of renewables would create 94,000 jobs and give the renewables industry a boost.  

This philosophy of creating jobs with government money reminds me of the tale of the village chief in the early modern era who, meeting a government representative who was explaining the benefits of paying taxes, immediately understood. "It is as if I go to my dog, who is hungry, and I say, I will feed you, dog. Then I cut off his tail and offer it to him." 

[See a collection of political cartoons on energy policy.]

Most people don't oppose the construction of wind towers or installation of solar power panels, but that is not the issue which this policy is addressing. Money is being taken from the entire body of consumers and/or taxpayers and funneled to a few companies to subsidize their operations and, yes, job creation. Because the average person only pays a small amount, it appears to be a net win.

But this is partly because the effects of higher taxes are diffuse; no individual is hit hard enough to suffer obvious losses. However, by reducing consumer disposable income, the economy as a whole takes a hit, and there is an employment effect. Because this can only be measured by sophisticated analysis, which is rarely done, it is often treated as nonexistent, especially by those wanting the funds. Vague estimates of job losses from higher taxes can't compete with the more concrete numbers for job hires, but they are just as real.

Of course, Michigan is trying something even more misleading. By trying to mandate purchases of renewable energy, the entire question of costs is hidden from the consumer. Utilities must meet the requirements any way possible; left unsaid is that they will have to pay for the higher cost of renewable energy—and pass those costs on to consumers. This is even worse than taxpayer subsidies in the sense that consumers are not even informed during the policy debate that they will be paying higher prices.

[See a slide show of 10 cities adopting smart grid technology.]

And supporters go even further. The Citizens Research Council addresses the issues of cost—without supplying numbers. Their analysis notes that fossil fuels require expenditures for plants, plus the fuels, while renewables don't require any fuels, just the plant.

But the problem of expensive renewables raising electricity prices is dealt with by forbidding utilities from raising prices faster than 1 percent per year. Kind of like solving the healthcare crisis by ordering doctors not to charge more. 

[See a slide show of a reality check on U.S. energy sources.]

If these technologies are so wonderful, as supporters often assert, it would seem people would not have to be forced to buy them, but also, the proponents would be upfront about the costs—and who's paying them. Instead, they attempt to disguise the cost, partly by not disclosing them, but also by spreading them across the entire customer base. 

There have been attempts to get consumers to agree to buy renewable-generated electricity directly, accepting the higher prices directly, but these must have not been successful enough, given the attempt to mandate indirectly consumer purchases of expensive renewable. 

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