Washington's Renewable Energy Portfolio to Raise Energy Prices

April 19, 2013

Following California, Washington became the second state to institute a Renewable Portfolio Standard (RPS) in 2006. The RPS requires qualified utilities to pursue cost-effective conservation and mandates that 15 percent of the state's electricity generation must be produced from renewable sources by 2020. A new study by the Washington Policy Center and the Beacon Hill Institute analyzes the economic effect of RPS mandates and concludes that energy prices will rise.

  • The RPS mandates that providers must produce enough renewable energy or purchase Renewable Energy Credits to cover 3 percent of their electricity load by 2012, 9 percent by 2016 and 15 percent in 2020 and after.
  • The law states that it will promote hydroelectric generation but lawmakers specifically exempted energy produced by new hydroelectric plants from counting toward the RPS.
  • The law covers 17 utilities that serve 2.9 million customers and produce more than 80 percent of total electricity sales in the state.

The RPS mandate limits the impact to retail customers by implementing a cost cap, which allows a qualified utility to invest 4 percent of its total annual retail revenue on eligible renewable resources and not be subject to the required percentages.

  • If the 17 utilities spent 4 percent of their 2010 revenues, they would spend a combined $209 million on RPS.
  • Each utility is entitled to recuperate its incremental cost, which is the difference in cost between an eligible renewable energy and the cost of the conventional energy it is replacing.
  • To recover the difference, utilities will pass the higher cost to the consumer whose electricity rates are predicted to rise by 13.6 percent by 2020.

The law will raise the cost of electricity by a minimum of $675 million in 2020, which will hurt Washington's households and businesses.

  • A projected 8,650 fewer jobs are expected and real disposable income would fall by an estimated $1 billion as a result of Washington's RPS.
  • Investment would also fall by an estimated $147 million and the average electricity bill for a household would increase by $170 per year.
  • Commercial business should expect an electricity bill that is $1,135 higher per year and industrial businesses should expect a bill that is $13,225 higher per year.

An analysis of emissions suggests that the construction and decommission phases of renewable energy implementation may actually raise overall emissions.

Source: "The Economic Impact of Washington State's Renewable Portfolio Standard," Washington Policy Center and Beacon Hill Institute, April 2013.

 

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