It's Time for North Carolina to Scuttle Its Renewable-Energy Mandate
by Bonner R. Cohen, Ph.D.
With its April 24 vote rejecting legislation to repeal North Carolina’s renewable-energy mandate, the House Public Utilities Committee has dealt a temporary setback to efforts to undo the state's ill-conceived and self-defeating law requiring utilities to produce a certain percentage of their electricity from wind, solar or biomass.
The current law has failed to spur the long-overdue turnaround in the Tar Heel State's sluggish economy, and, as long as it's on the books, North Carolina will be competing for new business with one hand tied behind its back.
In 2007, North Carolina became the first and only southeastern state to enact a Renewable Portfolio Standard, or RPS. Under the statute, renewable energy was to account for three percent of the state's electricity by 2012, rising to six percent in 2016, 10 percent in 2018, and 12.5 percent in 2021.1 Hydropower, produced by several reservoirs in North Carolina, predates enactment of the RPS and is not included in the law. The bill voted down by the Public Utilities Committee would have phased out the 2007 law and terminated its mandates altogether by 2021.2
The outcome of the ongoing North Carolina debate will have far-reaching consequences for energy policy nationwide. If North Carolina parts company with its 2007 law, other states saddled with similar mandates may follow suit and free themselves from the shackles of their renewable portfolio standards.
Resistance to Unsightly Wind Turbines
When the RPS went into effect, its supporters said it would make North Carolina a leader in renewable energy, but the law has fallen far short of its proponents' expectations. Resistance to wind farms has been particularly fierce. Proposed wind farms in Eastern North Carolina, for example, have been put on hold due to public concerns over giant turbines blighting the landscape and posing a threat to birds, bats and other wildlife.3
Like other southeastern states, North Carolina is "wind poor." What wind with any consistency there is comes from the ocean to the east or the mountains to the west. Putting up towering wind turbines in either picturesque location is repugnant to most North Carolinians. In the mountains, commercial wind farms have run headlong into North Carolina's 1983 Mountain Range Protection Act, known as the Ridge Law. The statute prohibits construction of buildings and other structures higher than 40 feet along the state's ridgelines. An exemption is made for pre-existing traditional windmills.4 With wind development stymied, several large solar farms have sprouted up as a result of the RPS, but they take up a huge amount of land and produce little electricity.
The RPS Undermines North Carolina's Competitiveness
With an unemployment rate of 9.2 percent, well above the nationwide figure of 7.6 percent,5 North Carolina can ill-afford a regulatory structure that discourages businesses from relocating to the state. But that's exactly what North Carolina's renewable-energy mandate does. What manufacturer, whose business requires an affordable and reliable source of electricity, would open a plant in North Carolina and subject the facility to the state's artificially high cost of power? Far better to choose Tennessee, Georgia or some other neighboring state where free markets, not government mandates, determine the energy mix.
And while the current three percent renewable-energy mandate may be manageable, what happens when the mandate rises to 12.5 percent in a few years? Because wind turbines generate electricity only when the wind blows and solar arrays produce power only when the sun shines, both are intermittent and thus inherently unreliable sources of energy. Both require back-up systems of power when the weather is uncooperative, adding considerably to their cost.
The Mandate's Regressive Effect on Lower-Income Households
What's more, the higher rates that inevitably result from increased dependency on renewable energy will disproportionally affect people with lower incomes. Electricity is a necessity, and higher utility rates are regressive. Households with annual incomes of $30,000 or less spend as much as one-third of their after-tax income on power bills. Duke Energy and its subsidiary, Progress Energy, the state's two largest utilities, recently sought rate increases for residential customers from the NC Utility Commission of 14.2 and 11.7 percent, respectively.6 As North Carolina's RPS requirement is ratcheted up in the years to come, ratepayers can expect more of the same as utilities are forced to buy more expensive renewable power.
North Carolina's RPS: A Magnet for Rent-Seekers
Like a magnet, North Carolina's RPS attracts rent-seeking developers, eager to take advantage of the state's renewable-energy mandate and the federal subsidies that prop up their otherwise uncompetitive industries. But with the future of the wind industry's 21-year-old federal subsidy, the Production Tax Credit (PTC), very much in doubt,7 North Carolinians should be wary of committing themselves to a source of energy that is unduly dependent on Washington's political whims.
North Carolina's renewable-energy mandates have made the state's residents captives of Soviet-style production quotas that should have gone out of fashion with the fall of the Berlin Wall.
By force-feeding North Carolinians a steady diet of unaffordable and unreliable energy, the current law is tailor-made to prolong the state's economic doldrums.
Bonner R. Cohen, Ph. D., is a senior fellow at the National Center for Public Policy Research.
1 Database of State Incentives for Renewables & Efficiency, North Carolina State University, 2012, available at http://www.dsireusa.org/ as of April 30, 2013.
2 Gary D. Robertson, "NC House Panel Halts Renewable Energy Law Repeal," Bloomberg Businessweek News, April 25, 2013, available at http://www.businessweek.com/ap/2013-04-25/nc-house-panel-halts-renewable-energy-law-repeal as of April 30, 2013.
3 Jeff Hampton, "N.C. Wind Projects Stalled; Buyers, Activists Blamed," The Virginia Pilot, August 4, 2012, available at http://www.hamptonroads.com/2012/08/nc-wind-projects-stalled-buyers-activists-blamed as of April 30, 2013; John Murawski, "Another Wind Farm in Pipeline for Eastern N.C." Raleigh News-Observer, April 14, 2012, available at http://www.newsobserver.com/2012/04/14/1999554/another-major-wind-farm-in-pipeline.html as of April 30, 2013; Bruce Henderson, "Freeze N.C. Green Energy Law, a GOP Leader Says," Charlotte Observer, December 30, 2012, available at http://www.charlotteobserver.com/2012/12/30/3755431/freeze-nc-green-energy-law-a-gop.html as of April 30, 2013; John Murawski, "House Bill Would End State's Renewable Energy Program," Raleigh News & Observer, March 13,2013, available at http://www.newsobserver.com/2013/03/13/2747182/house-bill-would-kill-states-renewable.html as of April 30, 2013.
4 Bonner R. Cohen, "North Carolina Senate Rejects Mountaintop Wind Farms," Environment & Climate News, November 1, 2009, available at http://www.heartland.org/newspaper-article/2009/11/01/north-carolina-senate-rejects-mountaintop-wind-farms as of April 30, 2013.
5 "Regional and State Employment and Unemployment — March 2013," Bureau of Labor Statistics, U.S. Department of Labor, Washington, D.C., April 19, 2013, available at http://www.bls.gov/news.release/laus.nr0.htm as of April 30, 2013.
6 Jon Sanders, "Power to the People: End SB 3 with its Expensive, Regressive Renewable Energy Portfolio Standard," Spotlight #434, March 29, 2013, p. 7, available at http://www.scribd.com/doc/132825562/Spotlight-434-Power-to-the-People-End-SB-3-with-its-expensive-regressive-renewable-energy-portfolio-standard as of April 30, 2013; Bruce Henderson, "Freeze N.C. Green-Energy Law, a GOP Leader Says," Charlotte Observer, December 30, 2012, available at http://www.charlotteobserver.com/2012/12/30/3755431/freeze-nc-green-energy-law-a-gop.html as of April 30, 2013.
7 Bonner R. Cohen, "The Wind Production Tax Credit: Corporate Welfare at its Worst," National Center for Public Policy Research, National Policy Analysis #644, December 2012. Available at http://www.nationalcenter.org/NPA644.html as as of April 30, 2013.