Renewable Energy Portfolios May Lead to Stronger State Economies

 

Opponents of renewable energy claim that adoption of a portfolio weakens a state’s economy [1, 2]. They support this claim with calculations of the effects of increased electric rates on economic activity.  Although the level of rates used in these calculations are subject to question, this particular issue is beyond the scope of this note.

Their procedure is to treat increases in electric rates as taxes and insert them into a computer program that predicts the effect of state-tax increases on economic activity. The resulting predictions extend a decade, or more, into the future and cannot be verified by hard data. It would be more reasonable for the opponents to attempt to calculate present-day harm. After all, more than half the states have renewable-energy portfolios (and half of these have been in effect for more than ten years [2]). If renewable energy impedes a state’s economy, there should be evidence to demonstrate it.

The State Coincidence Index (SCI [3]) provides an opportunity to compare states. SCI is a recognized indictor of the strength of a state’s economy; it has been used by renewable-energy opponents [2], who, surprisingly, did not compare states with, and without, portfolios. I used SCI data to evaluate the strength of the recovery by comparing increases from September 2009 (the bottom of the recession) to December 2015 (latest data available). The result was that the economies of states with portfolios grew an average of 19.6%, while those without grew almost one percent less (18.8%). Since the difference in averages is small and the variation among states is large, it is safer to conclude that portfolios do no harm and may do some good. It is satisfying to use a tool recommended by opponents to disprove their case.

Also on this blog: : Renewable Energy has Little Impact on a State’s Economy (November 3, 2015): Renewable Energy Does not Hurt Economically (September 16, 2015)

Sources:

[1] Energy and Environmental  Legal Institute, True Cost Of Renewable Portfolio Standards, http://eelegal.org/policy-2/, accessed 24 March 2016

[2] Randy T Simmons, et al. Renewable Portfolio Standards: Ohio, April 2015, http://emsc.legislature.ohio.gov/Assets/Testimony/72015-dr-ryan-yonk-report.pdf

[3] Federal Reserve Bank of St. Louis. Coincident Economic Activity Index for the United States (29 Jan 2016) https://research.stlouisfed.org/fred2/series/USPHCI

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