North Carolina Energy Mandate Hurts Real Job Growth

On top of federal support for renewable energy, a number of states have implemented Renewable Portfolio Standards (RPS), which require utilities to purchase a certain portion of their electricity from renewable sources. In North Carolina, a push to freeze the state’s Renewable Energy and Energy Efficiency Portfolio Standard (REPS) at 6 percent of retail sales has been met by opposition. One common argument in defense of North Carolina’s REPS is that it—like other renewable energy mandates—creates jobs. In reality, this argument falls flat. Policies like the REPS hurt North Carolinians by increasing energy prices, decreasing household incomes, and stagnating job growth.

REPS Favors Special Interests over Families and Businesses

Renewable energy mandates force utilities to purchase a certain amount of their electricity from renewable sources like wind and solar. A key problem is that the cost of renewable energy is more expensive, but utilities must purchase it anyway. Since electricity from renewable energy sources like wind power is nearly three times more expensive than electricity from existing coal and four times higher than existing nuclear, energy prices end up being higher under RPS laws. As the Environmental Protection Agency has previously admitted, higher costs end up being passed on to households through rising residential electricity prices.[1]

A study conducted by Strata Policy, in conjunction with the Institute of Political Economy at Utah State University, analyzed North Carolina’s RPS and found that it “will raise electricity prices significantly across all sectors, with the brunt of the costs falling upon the commercial sector.”[2] That means that the REPS will weaken the competitiveness of North Carolina’s commercial base and threaten small businesses that rely on affordable energy to power their economic activities.

The study also assessed that renewable energy mandates decrease real personal incomes in the long run by 3.6 percent. In 2013, the figure comes out to a $3,870 loss of income per family. In a letter to the North Carolina Utilities Commission, Gene Nichol, a University of North Carolina law professor, explained that higher residential electricity prices negatively impact poorer households and adversely affect their ability to afford necessities like utilities. In general, policies that raise electricity prices disproportionately harm low-income and minority communities, as even EPA Administrator Gina McCarthy recently admitted.

Renewable Mandates Damage Job Creation

Closely connected to the idea that the REPS will damage families and businesses in North Carolina, the renewable energy mandate will also have negative long-term employment impacts for the state. The Strata study’s empirical analysis determined that “North Carolina had 23,769 fewer jobs than it would have had without the RPS” through 2014.[4] In the long run, the state unemployment rate increases by 9.6 percent, according to the analysis.[5]

Even on a theoretical level, the argument that state RPS policies create jobs is dubious. Many of these claims narrowly focus on how many jobs are added but don’t consider what jobs are destroyed as a result of renewable energy mandates. For example, increasing electricity prices for businesses and decreasing families’ disposable incomes don’t occur in a vacuum—they have broader economic effects that impede job growth. Other studies have demonstrated that policies focused on creating “green jobs” rely on a number of myths and have unintended consequences.

Furthermore, merely enlarging the number of jobs does not necessarily increase productivity if the resources used to create those jobs are not allocated efficiently. In other words, a mandate that requires one industry to grow (particularly if it expands directly at the expense of another industry) will not create economic growth; but rather, siphon away resources from more productive activities. If the only thing of importance were the mere number of jobs, then “employing” people to dig ditches and fill them back up would be enough to grow the economy.

Conclusion

Since 2008, North Carolinians have been burdened by a state REPS, which props up renewable energy at the expense of households and businesses. Even though current efforts are attempting to minimize the negative effects by freezing the REPS levels, proponents of the law are claiming that it creates jobs and benefits the economy. Overall, North Carolina’s REPS—and renewable energy mandates in general—have a number of negative economic results, including stunted job growth. Energy mandates “create” jobs in unproductive industries at the expense of long-term, sustainable jobs that benefit both households and businesses. It’s time for North Carolina’s representatives to reject this harmful mandate once and for all.

[1] U.S. Environmental Protection Agency, Regulatory Impact Analysis for the Clean Power Plan Final Rule, EPA-452/R-15-003, August 2015, p. 3-36, http://www.epa.gov/airquality/cpp/cpp-final-rule-ria.pdf.

[2] Randy T. Simmons, Ryan M. Yonk, Tyler Brough, Ken Sim, and Jacob Fishbeck, Renewable Portfolio Standards: North Carolina, Strata Policy Final Report, February 2015, p. 3, http://www.strata.org/wp-content/uploads/2015/03/FINAL-RPS-North-Carolina.pdf.

[3] Simmons et al., p. 11.

[4] Simmons et al., p. 11.

[5] Simmons et al., p. 11.