Renewable Energy Requirement Would Not Significantly Raise Electricity Prices

“Advanced energy portfolio standard” seen as critical to economic development in Ohio

Release Date: 05.31.2007

Requiring Ohio utilities to obtain some of their electricity from renewable energy resources would have a very small effect on the price that Ohio consumers and businesses pay for electricity, according to results of an economic analysis released today.

The study was commissioned by The Cleveland Foundation and conducted by the consulting firm ICF International, based on assumptions and inputs developed by The Cleveland Foundation.

Known as an “advanced energy portfolio standard” (AEPS), the policy would call for a portion of the state’s electricity supply to come from renewable energy sources such as wind or solar power.  Similar portfolio standard requirements are in effect in more than 20 states across the country, though not currently in Ohio. It is widely acknowledged that the existence of a portfolio standard can stimulate economic development by encouraging renewable energy companies to establish operations in a particular state.

”This study is an important contribution to energy policy discussions underway in Ohio,” said Richard Stuebi, BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation. “Along with many other parties across the state, we believe that an advanced energy portfolio standard is a must for Ohio’s future economic growth. However, some concerns have been expressed that it would significantly raise electricity prices. The results of this study should allay these concerns and enable policymakers to move promptly on an advanced energy portfolio standard for Ohio.”

The ICF study projects that requiring Ohio utility companies to meet requirements similar to those presently in place in Pennsylvania and under the assumptions used would result in virtually no increase in wholesale electricity prices over the next several years, and an increase of only 0.2 cents (that is, about 1/5th of a cent) per kilowatt-hour by 2020.  By comparison, the average retail price of electricity in Ohio is about 7.1 cents per kilowatt-hour, and is widely expected to rise in coming years.

Furthermore, if the federal government addresses the increasing concern over global climate change by implementing policies to reduce carbon emissions, the incremental impact of an AEPS on electricity prices is assessed to be even lower, with projected increases of only 0.02 cents per kilowatt-hour by 2020.

The study also suggests that statewide renewable energy requirements would not materially affect Ohio coal production.

Juanita Haydel, Senior Vice President, Energy and Resources for ICF International commented upon the study:  “The relatively small estimated impacts on retail rates and the power system in Ohio reflects a number of factors, including the relatively modest requirement of the AEPS as modeled and, in the early years, the co-benefits of the AEPS policy with respect to compliance with the CAIR and CAMR rules. Coal production impacts are limited as Ohio coal-fired generation is only moderately affected by the increase in renewable resources driven by the AEPS policy.”

The study can be downloaded from The Cleveland Foundation web site (ClevelandFoundation.org). A link is provided in the “What’s New” section on the home page.

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Established in 1914, The Cleveland Foundation is the world’s first community foundation and the nation’s third-largest today, with assets of $1.9 billion and annual grants surpassing $85 million. The Foundation improves the lives of Greater Clevelanders in perpetuity by building community endowments, addressing needs through grantmaking, and providing leadership on vital issues. Currently the Foundation proactively directs two-thirds of its flexible grant dollars to the community’s greatest needs: economic transformation, public school improvement, globalization, early childhood and youth development, neighborhoods and housing, and arts advancement.
 
For more information on The Cleveland Foundation, please visit ClevelandFoundation.org.