Posted by: Frank Eakin | March 9, 2020

Subsidies are going away for green energy, but a solution emerges

The idea behind using renewable green energy plans is to reduce our dependence on fossil fuels such as oil, coal, and natural gas. Renewable energy production has increased significantly over the past decade, overtaking coal, providing new energy options for consumers.

Green energy comes from natural resources such as sunlight (solar energy), wind, and biological and geothermal sources. These sources are renewable, unlike fossil fuel, which has a limited quantity that will eventually run out. Federal subsidies and state-created standards have required the production of specific percentages of electricity produced from green energy generation. This requirement has had an impact on the electricity provider and utility industry. In response, many electricity providers offer plan options that have partial to 100% green-sourced energy.

Renewable Portfolio Standards

Renewable energy mandates are known as Renewable Portfolio Standards (RPS). These policy standards vary widely from state to state. Some states measure standards by the percentage of retail electric sales of green energy. In Texas, the largest de-regulated energy state, the RPS is related to specific amounts of renewable energy capacity, and Renewable Energy Credits (RPC) are used for compliance. These mandates are an important step toward reducing dependency on fossil fuels.

Increased Cost for Green Energy

There are some drawbacks to the mandates. A study by the Energy Policy Institute at the University of Chicago (EPIC) notes that there are costs associated with reducing carbon dioxide emissions through renewable energy mandates. The EPIC Study found an increase in energy prices by as much as 17% as a result of some state-level programs.

Since the passage of the initiation of RPS, consumers in the states studied paid more for their electricity over the seven-year period than they would have without an RPS policy in place. However, importantly, the higher costs resulted in a reduction in carbon dioxide rates.

Increased Green Generation

To replace fossil-sourced electricity in the nation’s electric grid, significant new generation capacity of green energy must come online. While RPS programs may increase the cost of energy for consumers, in places with RPS programs, the rate of generation by renewable energy sources has increased. In seven years after the passage of RPS programs, there was an increase of 1.8 percentage points. At the 12-year mark, the rate had increased by 4.2 percentage points. According to the EPIC paper, it is estimated that the increase in renewable generation reduced the carbon intensity, such as less carbon emission per unit of electricity. In turn, states with RPS programs in place decreased their carbon dioxide emissions.

Tax Subsidies in Decline

One reason for an increase in the cost of green energy options may be the decline in tax subsidies for the industry. In the fiscal year 2013, renewable electricity-related tax expenditures were 70% of subsidies. By the fiscal year 2016, the subsidies fell to about half of that. This decline can be attributed to the expired American Recovery and Reinvestment Act (ARRA) of 2009 that had helped provide subsidies for renewable sources. ARRA was a broad-based program, which, in part, funded renewable energy products. Direct expenditures for renewable energy products declined by 90% in that three-year period. Less money from subsidies means more money is needed from consumers.

A Market-driven Solution in Texas

Federal subsidies have allowed renewable energy sources to prosper in Texas. The state is now the largest producer of wind energy in the nation, lowering energy costs for Texas households and businesses. In April of 2019, state lawmakers were examining ways to eliminate government-driven advantages wind and solar industries have had that were created by federal subsidies.

Wind energy produces nearly 20% of the state’s electricity today, which is taking market share from the fossil fuel industry. Legislators are also considering whether tax abatements for renewable projects should be stopped. Fewer tax incentives and subsidies would no doubt raise prices.

However, there’s light at the end of the tunnel for consumers and the environment. Electricity Club, the leading digital marketer of electricity and pioneer in green energy marketing, developed the first-ever grid parity platform called Get Green Energy, through which most major energy providers will offer 100% green energy plans for less than fossil-sourced plans. And its Home Energy Club comparison platform is offering cheap electricity rates in Texas featuring green energy at lower rates than fossil plans now.

The platform is expected to create mass adoption of residential green energy to combat climate change. Providers’ cost of offering their green energy plans via GetGreenEnergy.com is projected to be about 10 times less than tradition channels, allowing energy companies to offset the higher wholesale cost of green energy they will likely pay if subsidies cease, with lower marketing costs. The company believes that its model will allow providers to sustainably charge consumers less for green energy than fossil. The platform’s debut will be in Texas and some northeastern states in 2020.

 

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