Earlier this week the Rhode Island Office of Energy Resources (OER) rolled out the results of a report, commissioned by the OER and written by outside consultants, on the economic impacts of the proposal to significantly expand Rhode Island’s so-called Distributed Generation renewable energy program. The report was mandated by an amendment to the state’s DG program enacted by the General Assembly in 2013; the study cost $95,000. OER hired the internationally respected energy consulting firm, The Brattle Group, to do the report. You can see the text of the full report, here.
By way of background, the state’s current DG program, enacted in 2011, is for 40 megawatts (MW) of local renewable energy over four years; bills currently pending in the General Assembly, would expand the program to an additional 160 MW over the next 5 years. You can read more about the pending DG bills in my earlier blog posts, here, here, and here.
Environmental groups like CLF support renewable energy because of the environmental benefits (such as reduced carbon pollution); and opponents of renewable energy often argue that renewable energy is just not worth the added cost. The reason the Brattle Study is so important is that it meets the renewable energy opponents on their preferred turf – the supposedly unacceptably high “costs” of renewable energy.
There are many ways to produce electricity, and every one has costs and benefits. For example, coal is relatively cheap in dollars but very (very!) costly in pollution. Renewable energy costs a little bit more, but helps to create local jobs, benefits the local economy, and is much less polluting.
The results of the Brattle Study is nicely summed up in one sentence in the Executive Summary:
The study finds that the [DG program] . . . will result in net positive economic output, job gains, criteria pollutant emissions reductions, carbon emissions reductions, and positive state revenues over the period 2014-2038.
And when you dig down into the fine print of the Brattle Report, the numbers are even more impressive:
- Local economic output increases by $30.65 million per year for 25 years, or a total of $556 million over the 25-year life of the program (And this aggregate figure, like all the aggregate figures that follow, are discounted to present value!)
- The program will create an average of 246 jobs in Rhode Island – and these jobs will last the 25-year life of the project, not just go away in a year or two.
- Increase state tax revenue by over $1 million per annum, or $13 million over the project.
- Reduce carbon pollution, SOx, NOx, PM-2.5, and PM-10 pollution worth an aggregate of about $35 million over the life of the program – and that is by valuing carbon pollution very (very!) conservatively
As I said, all ways to produce electricity have costs and benefits. The Brattle Study says this plainly: “These positive impacts do, however, come at a cost to ratepayers . . . the average annual increase to ratepayers is $17 million. . . .”
Thus, one fair way to view the DG program is to say that it brings over $30 million of direct economic benefits at a cost of about $17 million – and that is not counting the benefits of in creased tax revenue, job creation, or reduced carbon pollution!
Another fair way to say this is: the cost of the program works out to about 95¢ per month in crease on the bill of the “average” ratepayer. (For studies like this one, the “average” ratepayer uses 500 kilowatt hours of electricity per month. I myself use somewhat more than this average, and my friend Sheila uses a bit less.) For purposes of comparison, a medium cup of ordinary coffee at the Dunkin Donuts near my office goes for $1.89. (Just to be fair, that is before tax; with tax, it is $2.02; and the Starbucks near my office, of course, charges more.)
So, the state reaps economic benefits of $30.65 million per annum, or $556 million over the life of the program (discounted to present value!) at per-ratepayer cost that is almost exactly half of the price of one cup of coffee per month! (And who drinks one cup of coffee per month?)
In this context, it is not at all surprising that the lead sponsors of the 2013 bill that mandated that this study be done (Representatives Handy and Ruggiero on the House side and Senators Sosnowski and Walaska on the Senate side) are also the lead sponsors of this year’s DG bill to expand the program significantly! These Representatives (and many others) recognize the many economic benefits of renewable energy and so they want to expand the current, very successful, program.