Shedding Light on the Unseen Costs of “Renewable” Electricity

 April 23, 2024

On rare occasions, the callous disregard for the less fortunate on the part of climate zealots within New England state governments can be frighteningly blatant.

Such as in 2021, when Massachusetts undersecretary of climate change David Ismay resigned from his post after testifying before Vermont’s Climate Council. Ismay noted that most of Massachusetts’ (and New England) emissions come from residential heating and passenger vehicles. Which means, according to Ismay, “you, the person on the street, the senior on fixed income…. there is no bad guy left, at least in Massachusetts, to point the finger at, turn the screws on, and break their will, so they stop emitting. That's you, we have to break your will, right. I can't even say that publicly.”

But climate zealots are never so honest as Ismay when the tape is rolling. How else can they keep legislators, friendly to proposals that frequently punish the poor, in power? When the costs are too obvious, Americans everywhere overwhelmingly oppose them, as was the case when the reliably left-leaning East Coast citizenry came together to defeat the Transportation Climate Initiative.

Connecticut’s Department of Environmental Protection (DEEP) offers the frequent rejoinder that “Renewable Energy is important to lower our carbon footprint,” before introducing Connecticut’s Renewable Portfolio Standard (RPS) as one mechanism to achieve this goal. Unlike Ismay, DEEP ignores the question of costs to lower-income residents for pursuing such policies.

Indeed, the only way climate-centric proposals like the RPS can pass political muster anywhere in America is if they rely on “unseen taxes,” which takes fine-toothed analysis to uncover. That is what Yankee Institute, in cooperation with Dr. David Tuerck and Paul Bachman, set out to accomplish in our new paper, Re-Energize Connecticut: Toward Affordable Electricity for All.

Connecticut’s RPS forces electricity providers to pay millions more each year for expensive solar and wind-generated electricity, mostly originating outside Connecticut.

Connecticut has one of the highest U.S. rates for electricity outside of California and Hawaii, mostly stemming from mandated attempts to prop up green energy and a failure to make common sense energy investments.

With four nuclear plants closing for political reasons since the 1990’s, New England has come to rely on natural gas for most of its annual electricity diet, importing nearly twice as many gigawatt-hours per month from New York and Quebec for electricity as it did before Vermont Yankee nuclear plant closed in 2014. This wouldn’t be a stifling problem if natural gas prices weren’t artificially exorbitant due to poor federal, regional and state government planning.

Meanwhile, plans to build a natural gas pipeline to New England — that would have provided reliable heat and electricity during the winter — have stalled for a decade due to legislative and legal challenges. But not all of the blame for high electric rates can be shifted out-of-state.

In 1998, Connecticut adopted a RPS which forces all suppliers to purchase a certain percentage of their energy used to generate electricity from renewable sources. Like many other states nationwide, this involves purchasing pricey wind and solar renewable energy credits from eligible sources (usually wind and solar from other states and hydro from Canada) and passing these costs on to state ratepayers.  Subsequent legislation has raised the RPS to 28% in 2024, with a mandate to reach 40% by 2030.

To meet the RPS mandate, most Connecticut electricity suppliers have, until recently, purchased an RPS-mandated number of RECs (Renewable Energy Credits) in a dizzying array of regional REC markets each year. A REC that qualifies in one New England state may qualify differently in another, or not at all.

In-state and out-of-state owners of electricity generation projects that qualify as renewable receive one REC for every megawatt-hour (mWh) of renewable electricity they produce, which can be sold to electricity providers that don’t meet the minimum Class I threshold. But there just isn’t enough renewable affordable electricity generated in Connecticut to fulfill the mandate, since Connecticut consumes nearly 30 million mWh annually.

Despite the 28% “large number” meant to exhibit Connecticut’s commitment to renewables, only 4.7% of the electricity generated in-state was from RPS-eligible sources in 2021, a few ticks up from a decade ago, according to Energy Information Administration data. This lackluster record comes despite over $363 million in taxpayer dollars invested in Connecticut’s “green economy” from 2012-23. Relying on in-state renewables to power Connecticut is simply impossible right now and is improbable in the decades to come (as it is for most states with an RPS).

The Energy Information Administration tells us that the average Connecticut household uses about 8,600 kWh of electricity each year. With this in mind, Re-Energize Connecticut shows that the typical Connecticut household can expect to pay an additional $542 with the RPS in place from 2024-30 (businesses will pay even more).

To meet this arbitrary restriction without leveling Connecticut greenspace with wind turbines and solar panels to make renewable electricity, the state’s utility companies frequently purchase RECs from New York and Maine (which burns wood to generate that “renewable” electricity).

The government-market price of RECs rose sharply in 2020 as RPS mandates across New England grew stricter, forcing Connecticut’s electricity suppliers to pay the REC “price ceiling” rate called an Alternative Compliance Payment (ACP) to electric distribution companies like Eversource. From 2019 to 2021, the most recent data available, Connecticut electricity suppliers paid PURA more than five times for ACPs what they paid in 2019 ($8.4 million, up from $1.6 million).

There is no way to officially “pass through” the ACP costs to ratepayers (as REC costs can be), but ratepayers will pay for it anyway. It will be buried in an overhead account, but it will be there.  

All told, Re-Energize Connecticut estimates this arrangement will result in 1,930 fewer jobs in Connecticut, and a net loss of $1.535 billion from a loss of income, higher prices and lower sales of electricity.

If Connecticut’s RPS mandate was eliminated, Connecticut residents would collectively save millions. While some below-median-income households qualify for federal and state dollars to alleviate their electricity burden, Connecticut’s General Assembly is essentially allocating funds to increase electric rates under the RPS and then cushioning the blow with money collected from higher income ratepayers.

Overall, electricity expenses for lower-income Connecticut households that benefit from these redistribution programs are still higher than what lower-income residents pay in states with more reasonable electric rates that do less to prop up green energy. Getting rid of the RPS would benefit all Connecticut households, especially the ones with tighter budgets. 

David Flemming is the Director of Policy & Research at the Yankee Institute.

Shedding Light on the Unseen Costs of “Renewable” Electricity | RealClearEnergy