Other States Balk at Multibillion Dollar Cost While Illinois Spends Blindly on Energy Alternatives – In Depth – WP Original

By: Mark Glennon*

“Wait a minute,” I said to an Illinois House member at a recent forum, and repeated the question to be sure I had her answer right: “You’re a leading sponsor of a massive rewrite of our energy policy that may cost billions of dollars, but you’re telling me you have no idea how much it costs?

“Yes,” she answered.

She is not alone and that was no isolated incident about one bill. Cost to consumers for sustainable energy is rarely measured and made available to voters, in contrast to other states. Nobody in Illinois seems to care. That comment was from from Robyn Gabel (D- Evanston) and her specific answer was about the Clean Jobs Act now pending in the legislature, but the same indifference to cost has applied to program after program for years in Illinois’ approach to sustainable energy.

Let’s first be absolutely clear: This is not about the global warming debate or the clean energy industry. On the contrary, if you want to reduce carbon emissions, knowing which methods achieve the most reduction per dollar spent should be a key policy determinant. If you don’t think carbon emissions are a problem, you should know how much money is wasted on it. If you are not sure about it, price should be part of getting the answer right.

Obvious as that should be, cost to consumers is disguised or entirely disregarded. Blank checks are fine, as long as they are green. Illinois legislators often either don’t know or don’t care about cost.

The biggest example yet of blank check energy thinking may be that Clean Jobs Bill (HB 2607, SB 1485) now pending in the Illinois legislature.  It would likely be the most ambitious and expensive carbon reduction initiative in the Illinois’ history. Because so much money is at stake, let’s look in detail at it first.

The Clean Jobs Bill would raise the target for renewable energy consumption in Illinois from the current goal of 25% by 2025 to 35% by 2030. It would use what’s claimed to be a market-based approach by creating a framework for emissions coupled with an auction of carbon dioxide emission allowances. It’s backed by a long list of sponsors in both the Illinois House and Senate, as well as the Sierra Club, the Citizens Utility Board, the Environmental Defense Fund and plenty of others. It’s chief sponsor in the Senate is Don Harmon (D-Oak Park).

You’ll find plenty of research from those backers about the jobs the bill would create, as well as claims of reductions in overall bills consumers would pay as a result of the bill in its entirety, all of which may well be accurate.

But here’s the thing: You will not find, broken out, the cost to consumers that results from shifting to sustainable energy sources instead of the cheapest available alternatives. That’s because the 271 page bill includes many other things distinct from that number, including extensive measures to encourage energy conservation. It also includes authorization for utilities to charge more during periods of peak usage, something they have long sought, which allows them to reduce average rates for consumers. Perhaps those other provisions are good for consumers and reduce rates. If so, they stand on their merit alone, but they do not bear on the cost of favoring one energy source over another.

Even if you oppose fossil fuel consumption so strongly that you don’t care about cost, the particular cost of each form of renewable energy should matter because, only with that information can you get the most bang for the buck. But that, too, is nowhere to be found. It’s important because the Clean Jobs Bill isn’t really the market-based solution it’s advertised to be. Within the 35% target for renewable energy are mandated, specific allocations for solar, wind and clean coal. What’s the cost rationale behind those mandated allocations? Don’t expect to find an answer.

Try to find a reasonable cost analysis of any of the myriad sustainable energy laws and programs now in place. A list of those laws and programs is reproduced at the end of this article. You’ll find virtually nothing. I’ve made a point of asking supporters of some of those initiatives about cost. They have no answer. I’ve asked Senator Don Harmon (D-Oak Park), lead sponsor of the Clean Jobs Bill, about it’s cost. No response. I followed up with Rep. Gabel several weeks ago after her promise to “get back to me” about the cost the bill she is sponsoring. Nothing. There is nothing to offer.

The Clean Jobs Bill does contain a provision supposedly capping rate increases for consumers, but it’s extremely high. Rates could rise 35% in just 15 years, solely by reason of the increased cost of using more expensive energy sources (in addition to other reasons for higher rates). That cap is stated in annual terms — no more than a 2.015% increase each year. (SB1485, page 50). Sounds harmless unless you remember the power of compounding. Plus, there’s allowance for another 35% over 15 years for higher prices for clean coal facilities, which are also favored under the bill (page 72).

It’s easy to find other states that, unlike Illinois, are asking, “how much will this cost?” Michigan voters rejected a more modest 25% standard by a referendum vote in 2012 of 63% to 27%, opponents having claimed it would cost Michigan $12 billion. Today, it’s a common question because of a pending attempt by the Obama administration to reduce carbon emissions through a national standard, against which the states would have to average out.

Wisconsin, for example, is considering a proposal to reduce coal plant emissions 34% by 2030. That would cost Wisconsin, which is less than half our size, $3 billion to $13 billion, according to the chair of Wisconsin’s Public Service Commission. Indiana has asked the EPA to withdraw Obama’s proposal, predicting an electricity price increase of more than 60 percent. The Public Utility Commission of Texas estimated compliance costs at over $20 billion and that Texas electricity prices would rise by more than 20 percent by 2020.

Is Illinois also to pay billions, but without voters knowing the cost?

Exelon has an alternative bill  pending, commonly called the Low Carbon Portfolio Standard (HB3293 and SB1585). Don’t mistake this article for a backhanded endorsement of that bill. It’s similar in some respects to the Clean Jobs Bill but heavily favors nuclear generation, in which Exelon is heavily invested, which the Clean Jobs Bill disfavors. A pitched battle is underway between supporters of the two bills, but the nuclear debate is a different story. This story is just about price tags that nobody can seem to find, including the Chicago Tribune, which put it this way: “About the only guarantee in these bills is that the cost to customers will go up.”

Supporters of the Clean Jobs Bill have other reasons to like the bill besides carbon reduction. Non-carbon emissions would be reduced, too, which is important. Jobs would result (although jobs would also be lost in disfavored sectors, which supporters disregard). And at least one state senator was very clear about still another reason to like it — union jobs in solar and wind installation. Dave Koehler (D-Peoria) said, “The chance to create tens of thousands of new jobs—and add to the ranks of organized labor—is one that we shouldn’t pass up, and that is why I support this bill.”

Whatever the benefits, indifference to cost permeates other Illinois government renewable energy initiatives as well. Try to find anything on point about the original ‘25% by 2025′ statutory standard that’s now in place. You won’t find much if anything. You won’t get it from Senator Harmon, who also sponsored that.  I’ve tried to find that, too. The Illinois Power Agency is charged with providing an annual report about the costs of complying with the ’25 by 25’ standard. Its last report is linked here. Its unintelligible, and makes public pension accounting look transparent. Few if any voters or legislators could decipher it.

And this story is certainly not meant as criticism of the renewable energy business in general. On the contrary, that’s big business now and represents a huge part of the technology community that’s thriving in Illinois. It’s not going away. Illinois should strive for leadership in it, but leadership will not be attained by blind spending. Plenty of us are in the camp with an open mind about much of the science on global warming. Many of us prefer to let the market figure out the cheapest alternatives instead of hundreds of pages of regulation written by legislators who think they can pick the winners and losers, unburdened by price tags. But the market has largely already spoken: Countless investors are prepared to bet hundreds of millions of dollars on clean tech, which Illinois should welcome. That, too, is a different story.

Critics of market solutions in energy say, with plenty of good reason, that energy prices are already hopelessly distorted every which way by all kinds of regulation pulling in different direction. Oil has been subsidized for decades through lives and treasure lost in the Middle East. But that calculation is changing. Energy independence is now realistic, though a balance with fossil fuels would remain needed, hopefully including relatively clean natural gas. Illinois is at the center of that revolution. CNBC not long ago ran a rather extraordinary interview showing the unlikely agreement between Rahm Emanuel and Steven Forbes that Chicago can be at the epicenter of the energy revolution. Should Illinois reject that opportunity without even knowing the cost of the alternative?

Don Harmon, a Clean Jobs Bill sponsor, says “Illinois is at a tipping point. There is no time to waste.”

He may actually be right, but tipping towards what? Please, just show us the price tags.

*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.

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List of Illinois state and local global warming programs:

Green Building Incentive

Industry Recruitment/Support

Local Grant Program

Non-Profit Grant Program

PACE Financing

Performance-Based Incentive

Property Tax Incentive

Sales Tax Incentive

State Bond Program

State Grant Program

State Loan Program

State Rebate Program

Utility Loan Program

Utility Rebate Program

Rules, Regulations & Policies

Building Energy Code

Energy Efficiency Resource Standard

Energy Standards for Public Buildings

Generation Disclosure

Green Power Purchasing

Interconnection

Net Metering

Public Benefits Fund

Renewables Portfolio Standard

Solar/Wind Access Policy

Solar/Wind Permitting Standards

 

 

 

 

 

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Mike
8 years ago

Illinois Power Agency

2015 Annual Report: The Costs and Benefits of Renewable Resource Procurement in Illinois Under the Illinois Power Agency and Illinois Public Utilities Acts

Submitted to the Illinois General Assembly and the Illinois Commerce Commission Pursuant to PA 97-0658

April 1, 2015

http://www.illinois.gov/ipa/Documents/IPA-2015-Cost-Benefits-Renewables-Report-4-1-15.pdf

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mark glennon
8 years ago
Reply to  Mike

Mike – That’s just the updated version of the one I linked to. The new one apparently just came out and I will change the link to it. But it’s the same — an unintelligible crock. It does not provide the numbers I am saying we need.

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Mike
8 years ago

Another lack of leadership in that once again, just like pensions, the State Legislature does not present meaningful long term cost estimates or analysis to taxpayers. The Springfield Legislature didn’t look at long term pension costs for 40 Years when passing benefit hikes to underfunded pensions. Ditto retiree healthcare. Not looking at long term costs is an ingrained culture in Springfield. Managing the flow of campaign contributions and votes seems to be a higher priority. If costs become unmanageable, just pass more legislation, because the Springfield Sausage Factory cannot close. Whatever rules are in place to scrutinize costs seem to… Read more »

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