Ohio’s Buckeye Institute, which has been funded by the fossil fuel and tobacco industries, has released a report that uses misleading and out-of-date information to attack clean energy.
Most notably, the report assumes the cost of renewable energy is five times higher than reality. In addition, the report ignores how renewable energy benefits consumers by reducing the cost of electricity. Once those errors are corrected, the report’s method actually shows that renewable energy creates jobs and is a net benefit for Ohio consumers.
Report uses misleading, obsolete data on renewable costs
If the Buckeye report’s claims about the GDP and job impacts of the Ohio renewable standard seem absurdly large, that’s because they are.
Hidden in an asterisked footnote in the appendix, the report acknowledges that it uses 2011 data to assume the cost of renewable energy credits to comply with the state renewable standard will increase over time, reaching $59/MWh (a MegaWatt-hour is enough electricity to power a typical home for a month). The report’s argument that renewable energy will increase costs is therefore based on six-year-old data, even though it acknowledges that the cost of a renewable energy credit had fallen to under $15/MWh by 2014.
In fact, the cost of a renewable credit had fallen further to around $12/MWh by last year, making the report’s assumption five times too high. This is because wind and solar costs have fallen 66 percent and 85 percent respectively since 2009, and those costs continue to decline. There is no justification for the report’s assumption that renewable costs will now start to increase.
Making matters worse, the 2011 renewable cost data is misleadingly cherry-picked. It’s from a time period when the Public Utilities Commission of Ohio found that the state’s utilities were overpaying for renewable credits, and it ordered one utility to refund its customers $43 million.
Not only is the Buckeye report’s $59/MWh cost assumption not representative of current or future renewable costs, it is not even representative of what renewable energy actually cost in 2011. As a national laboratory report on renewable energy credit prices explained, “In the case of Ohio, the discrepancy was most pronounced in 2011 when the state’s distribution utilities paid an average of $110.55/MWh for in-state non-solar RECs [renewable energy credits] compared to spot market prices ranging from roughly $10-$30/MWh and ACP [Alternative Compliance Payment] rates of $46/MWh. The PUC [Public Utilities Commission] subsequently ruled that one of the state’s utilities, FirstEnergy, substantially overpaid for RECs, and ordered the utility to refund its customers $43.3 million for excess REC purchase costs over the 2009-2011 period.”
Finally, the Buckeye report ignores the fact that Ohio law caps the costs associated with the state renewable standard at a level well below the cost increases they assume. In fact, the appendix to the Buckeye report directly admits that it ignores that state law, admitting “we assume the full price increase goes into effect without any cost cap restriction.” This causes electricity prices to increase by as much as 8 percent in one scenario, several times higher than the legally-binding cap. In reality, renewable standard costs account for less than 1 percent of retail electric rates in Ohio according to analysis of state data by a national laboratory.
Given the great lengths to which the Buckeye Institute goes to inflate the cost of renewable energy, it is not surprising that it comes up with outlandishly large results for the impact of the renewable standard on GDP and jobs. As the old maxim goes, “garbage in, garbage out.”
Report ignores consumer benefits of renewable energy
The other major flaw in the Buckeye report is that it does not account for the benefits of renewable energy. The Public Utilities Commission of Ohio, the regulatory entity tasked with keeping electric rates low for Ohio customers, has calculated that adding renewable energy tends to reduce electricity prices. Specifically, it found that the 450 MW of wind projects operating in Ohio reduced electricity prices by nearly $17 million in the year 2014 alone. That benefit could grow to $57 million annually if all of Ohio’s approved wind projects were brought online.
The Public Utilities Commission of Ohio calculated that each MWh of wind energy reduces electricity costs by $16.25. At the current price for a renewable energy credit of $12/MWh, each MWh of wind energy procured under the renewable standard therefore provides $4.25 in net benefits to Ohio consumers. The benefits will become even larger as the cost of renewable energy continues to decline and prices for other forms of energy increase.
Other analyses have found similarly large net consumer savings from wind energy, particularly given the role of zero-fuel price wind in protecting consumers from prices spikes for electricity and natural gas. Of course, that does not even account for the benefits of wind energy in providing cleaner air and water.
When corrected, Buckeye report shows the renewable standard drives consumer benefits, job creation and economic growth
Once the Buckeye report is corrected to show that Ohio’s renewable standard benefits consumers on net, their method shows the renewable standard drives job creation and economic growth. Working backward from the Buckeye report’s results, one can calculate what the findings would have been if the report had used accurate renewable energy costs and accounted for how renewable energy reduces consumers’ cost of electricity.
The report would have found the renewable standard creates tens of thousands of jobs by reducing the cost of electricity for Ohio’s commercial and industrial customers, while driving billions in additional economic activity. Conservatively using today’s renewable energy costs, the report should have found that by 2026, the standard would create 77,000 jobs and drive nearly $9 billion in economic activity.
Those impacts would be even larger if one accounts for continued declines in the cost of wind energy and expected cost increases for other forms of energy as fuel prices fluctuate. That also does not account for the direct jobs and economic activity the wind industry’s manufacturing and supply chain and wind project construction, operations and maintenance activities bring to the state. The wind industry already has over 1,000 employees in Ohio, with 62 manufacturing facilities in the state building key components for wind turbines.