"Renewable" energy is all the rage in the halls of Congress and the Nevada Legislature. Lawmakers are pushing for higher and higher production quotas for the centrally planned electric utility industry. They would require government-controlled electric utility monopolies to produce greater shares of electricity through renewable energy sources such as wind or solar power.
The problem with this so-called "visionary" approach to energy policy is that it isn't visionary at all. Its advocates fail to "envision" the consequences of their policies. Wind and solar power are largely unproven technologies for generating electricity and suffer significant deficiencies in the two most important aspects of electric supply: cost-competitiveness and reliability.
While the cost of electricity generation from each resource varies significantly by location, one thing is clear: Even after decades of taxpayer-funded research, wind and solar power still are not cost-competitive with traditional power sources. A study by the U.S. Department of Energy itself, last year, showed that wind and solar power both currently require federal subsidies in excess of $23 per megawatt hour — compared to less than $1 for coal, natural gas and hydroelectric facilities. Given this continuing competitive failure of wind and solar power, state lawmakers have resorted to directly mandating that utilities use wind and solar power to create electricity through production quotas — so-called "renewable portfolio standards."
Such mandates yield other problems beyond the higher cost, however. The usefulness of electricity produced through wind and solar power is extremely limited due to its sporadic nature of production. Well-placed wind turbines typically only generate about 30 percent of "nameplate capacity" — what the manufacturer says the turbine is capable of generating under ideal conditions — because of seasonal, daily and even minute-to-minute variations in wind speeds. The production of wind turbines is a function of the wind speed cubed, meaning that a 2 percent spike or drop in wind speeds leads to a sudden 8 percent drop or spike in production. While solar power is less volatile than wind power, it also suffers from similar reliability problems (and is much more costly).
This sporadic nature of production introduces instability into the electric grid system and has directly produced power surges and rolling blackouts on grids with higher concentrations of wind or solar power, such as Texas has. Denmark exports electricity produced from wind power to neighboring grids at a financial loss just to protect the Danish grid from wind-related instability.
What makes these factors even worse is that production quotas for solar and wind power fail to achieve the supposed environmental benefits that prompt policymakers to create them in the first place. In order to ensure some measure of stability on the electric grid, grid managers are forced to back up solar and wind power generators by placing traditional power plants on "spinning reserve." This means that the traditional coal or natural gas-fired power plant continues to burn fuel on a constant basis so that the grid manager can switch over to the traditional power plant as output from solar and wind generators ramps up and down. What's more, this ramping up and down of output from the traditional power plant actually produces even more emissions than normal because the plant is not operating at maximum efficiency. Hence, production quotas for solar and wind power not only impose additional costs on utility customers, but also lead to even greater environmental degradation.
Unintended consequences such as these are typical when policymakers attempt to substitute their own politically driven decision-making for the much wider and deeper intelligence already incarnate in the marketplace. While lawmakers like to think that legislation alone is enough to drive innovation and "create jobs" in a "new-energy economy," the hard truth is that viable new technologies cannot simply be legislated into existence. If there are to be breakthroughs in energy-production technologies, they will occur through the ingenuity of individuals working to fulfill the needs of others in a market setting.
Legislative initiatives such as renewable portfolio standards frustrate this process by needlessly diverting capital and labor away from the entrepreneurs who make the real progress in energy production — locking up that capital and labor, instead, in government-sponsored boondoggles.
Geoffrey Lawrence is a fiscal policy analyst at the Nevada Policy Research Institute. This article originally appeared in the May 2009 edition of the Nevada Business Journal.