In a legislative session featuring proposals to rewrite the tax code, take important next steps on regulatory reform, give parents more school choice, and restructure the state’s transportation and Medicaid programs, Rep. Mike Hager’s idea of putting a time limit on North Carolina’s renewable-energy mandate might seem comparatively inconsequential.
Although the bill is sometimes called a “repeal” of the 2007 mandate that electric utilities buy solar energy and other costly sources, Hager’s legislation was a compromise. It actually allowed the mandate — and thus its effect on our monthly electric bills — to grow over the next few years, not shrink. It also authorized a study commission to examine the issue in greater detail. What the solar industry and allied groups objected to was the provision that by the beginning of the next decade, the public would no longer be compelled to subsidize their industry by paying electricity surcharges.
In other words, a special-interest group is trying to use its political clout to preserve its stream of politically obtained largesse. The matter is really not much more complicated than that, although opponents of Hager’s bill have spent the past several months trying to make it so — and apparently snookering a few conservative lawmakers in the process.
When the energy bill creating the renewable-energy mandate was enacted in 2007, proponents sold it primarily as a means of combating air pollution and global warming. Given that North Carolina’s air-quality trends had been improving for decades and its emissions were too small to influence the world’s climate, however, the legislation was essentially symbolic as an environmental measure back in 2007. Today, with America’s carbon-dioxide emissions declining as the power grid transitions to an abundance of low-cost natural gas, North Carolina’s “blow, glow, and show” mandate is even less connected to reality.
Unless, of course, you happen to be in the business of importing solar panels, installing solar panels, or marketing land to those who install solar panels. To you, the mandate isn’t symbolic at all. It’s cash in your pocket.
Although the cost of solar energy has come down since 2007, so has natural gas. According to the U.S. Energy Information Administration, the full cost per megawatt-hour of electricity produced by a new natural-gas plant is between $66 and $105, depending on the type of plant. The full cost per-megawatt-hour of electricity produced by a new solar-power facility is $144.
The solar industry disputes its lack of cost-competitiveness, arguing that alternative calculations place its product closer to that of its non-mandated rivals. But that’s the point, isn’t it? If North Carolina ratepayers won’t pay more for solar, then there’s no need to mandate its purchase.
Stripped of its political camouflage, the solar-power industry is almost entirely a creation of government policy. While nearly all types of electricity generation benefit from some federal tax or expenditure policy, solar’s reliance on political patronage is way off the charts. The federal subsidy for solar amounts to nearly $800 per megawatt-hour, vs. about $3 for nuclear and less than $1 for natural gas.
Tax credits and grants cover a large chunk of the cost of building a solar farm. Then, in states such as North Carolina, government regulations require utilities to buy the resulting electricity production. Obviously this is a sweet deal for solar companies. What is not so obvious is why the rest of us should be compelled to finance their sweet deal.
I began by discussing consequences. I’m not going to claim that if North Carolina’s electricity mandate becomes permanent, our economy will be devastated. It won’t. We’ll pay higher electric rates than we need to, but they won’t soar. My chief concern, ironically, lies in symbolism.
The mandate has no quantifiable environmental benefits. Knowing this, its defenders resulted to fanciful estimates of job creation and consumer benefit. They used the same models, and even the same terminology, that the Obama administration employed to sell its silly stimulus package. If you truly think that digging a hole near your right foot and piling the dirt near your left foot results in a pile of previously nonexistent dirt, you’ll be easily bamboozled by such economic malpractice.
But conservative lawmakers are supposed to know better. Whose “job years” scheme will they fall for next? That’s my real concern, and why I hope cooler heads will prevail in the coming weeks.
Hood is president of the John Locke Foundation.