Take rooftop solar panels, for example. The idea is to generate electricity by harnessing the sun and, thus, to require less production of electricity from non-renewable sources, like coal-fired electric plants.
What a great idea, no?
The trouble is that ideas--like solar power--have consequences, both intended and unintended. Those consequences should always be accounted for as best as is humanly possible prior to implementing those ideas in the form of government policy.
Take the idea of the excess energy produced by consumers who use small-scale power systems like solar power (know as "distribution generation"). Why not have the electric companies purchase it back and credit the bill of those who produced the power?
Tom Tanton of the American Legislative Exchange Council has examined what implementing that policy actually means for consumers. Tanton found that 43 states and the District of Columbia have implemented "net metering" to do just that. Here's how net metering works:
- Electric companies purchase any excess power at the retail rate when it is sent to the electric grid. Seems like a fair deal for the customer utilizing distribution generation, no?
- However, electric companies can produce the electricity at much lower cost...below wholesale. So, why not purchase the excess electricity produced by customers who utilize distribution generation at the wholesale price?
Consider these facts:
- In Wisconsin, the average retail price of electricity is 400% more than the wholesale price.
- In Arizona, the amount paid by net metered customers is below the utilities' costs of serving those customers. As a result, non-net metered customers must pay higher prices to cover those costs. Arizona utilities pay 300% the cost of electricity under net metering than in the competitive market.
- By 2020, customers in California who do not install net metering devices will pay an extra $1.1B in shifted costs every year by 2020.
These cost-shifting policies also mean that net metered customers do not pay the costs associated with supporing the power grid. Moreover, to accommodate for net metered customers, these cost-shifting policies impose additional costs on the system because the electric network has to handle power moving in two directions--to the customers as well as from the customers.
The "take away"? Requiring utilities to purchase the distributed generation power at retail is a subsidy to the producers. These $$$s are transferred from ordinary customers--mostly the middle class and poor who cannot afford to install distributed generation power systems--to net metered customers.
To resolve this inequity, Tanton argues that states need to do two things: 1) restructure their net metering policies so that electricity rates are fair and affordable for all customers and 2) require all who use the electric grid to pay for it.
Fine. But, that avoids the real issue that Tanton's study has exposed.
The trouble with most of the ideas touted by those who worship at the altar of environmentalism--like solar energy--is that they don't consider the economic consequencesof their policies, only the advancement of their ideology. They'll champion anything that furthers their cause, even if it means letting the 1% off the hook of having to pay anything for electricity and making the 99% pay more for electricity.
Why the consequences of ideas are not carefully examined by legislators prior to implementing those ideas as policy is the issue. Those who worship at the altar of ideology are manipulating legislators to further their dogma. Do those legislators care more about what dogmatic ideologues think about them than those who elected them?
Could it possibly be that President Obama was aware of these consequences even as he touted renewable sources of electricity and derided coal producers?
Let the discussion begin...
Source: Tom Tanton, "Reforming Net Metering: Providing a Bright and Equitable Future," American Legislative Exchange Council, March 2014.