Renewable Energy has Little Impact on a State’s Economy

Arguments against state-mandated renewable-energy goals usually focus on cost. The claim is that renewables are too expensive. But rapidly falling costs of wind and solar power have made this argument tenuous. Instead, attention is now shifting to claims that renewables somehow hurt a state’s economy.

Such arguments are difficult to credit, since renewable energy is a very small part of any state’s economy. Consider Iowa. Last year wind produced almost 30 percent of Iowa’s electricity, which sold at a total price of about $1.3 billion. This is a large sum, but Iowa’s gross domestic product was about $170 billion. Wind accounted for 0.8 percent of that total.

Put another way, a $1.3 billion impact on the Iowa economy is about the same as a fifty-cent change in the price of corn, well within its price variability.

Ohio, and neighboring states, have much smaller percentages of renewable energy. It is unlikely that estimating the effect of the mandate on state economies is within the range of economic analysis.

 

Electricity data from Electric Power Monthly for Feb. 2015;

GDP from http://www.tradingeconomics.com/united-states/total-gross-domestic-product-by-state-for-iowa-mil-of-$-a-na-fed-data.html

Corn production from http://www.iowacorn.org/en/corn_use_education/faq/

Corn prices from http://www.extension.iastate.edu/agdm/crops/pdf/a2-11.pdf

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