States that Fail to Invest in Clean Energy Pay in Higher Electricity Costs

Nov. 16, 2016
A new NRDC study finds that higher electricity costs occur in states that fail to invest in clean energy. NRDC’s Ralph Cavanagh describes the study.

A new NRDC study finds that higher electricity costs occur in states that fail to invest in clean energy. NRDC’s Ralph Cavanagh describes the study.

Ralph Cavanagh, NRDC

For years, the skeptics warned that a clean energy transition would drive up costs and make consumers’ energy bills unaffordable. They were wrong. Despite wild swings in fossil fuel prices, America’s electricity bills and the per-kilowatt-hour rates recorded on them have been relatively stable and affordable for decades, thanks in good part to leadership at the state level in support of energy efficiency and renewable resources, as a new NRDC report published today shows.

In fact, after adjusting for inflation, U.S. electricity is cheaper today than it was more than a quarter-century ago, in 1990. At the same time, wind and solar energy—which are immune to the periodic surges that fossil fuel prices experience—raised their market share from virtually nothing to 7 percent of U.S. electricity supply in 2015.

Some have contended that driving down climate-altering carbon pollution inevitably means hefty cost penalties for utility customers, as renewable energy and energy efficiency replace fossil-fueled power plants (many on the verge of extreme old age), but my former NRDC colleague Sierra Martinez’s just-published study, Cleaning Up Our Act on Energy and Reaping the Benefits, shows the exact opposite.

The report finds that the states that most conspicuously failed to invest in clean energy, including renewable energy and energy efficiency, are paying for it with both higher electricity bills and greater amounts of power plant pollution emissions from fossil fuel-fired electricity generation.

Using data on electricity rates, utility bills, and state-by-state investment in energy efficiency and renewable energy resources, the report shows that “leadership” states—measured in terms of overall investment and independent national rankings–consistently outperformed “laggard” states over time, measured in terms of both changes in customers’ monthly bills and trends in average rates per unit of electricity used.

The effects are most dramatic when the strongest “leaders” (top five and top ten states) are compared with the worst of the “laggards” (bottom five and ten), as shown in the renewable energy and energy efficiency charts below.

The results don’t change when the scope of the comparison broadens from residential customers to all customers in these states.

Martinez also reminds readers that average U.S. electricity rates dropped slightly, from 1990 to 2015 which was a period of dramatic clean energy progress for the nation as a whole (including overall reductions in U.S. carbon pollution).

These findings are good news for everyone with a stake in accelerated utility support for energy efficiency and renewable energy like wind and solar, and a wake-up call for states that have been slow to act.

They also should be required reading for critics of the Environmental Protection Agency’s Clean Power Plan to limit carbon pollution from power plants, the single largest source of U.S. greenhouse gas emissions.

A Closer Look

According to the data, the least-renewable friendly states saw bigger residential per kilowatt-hour rate increases from 2000 to 2015 than states that increased their clean energy portfolios.

For example, residents of Iowa, which has increased its percentage of generation from renewable sources more than any state since 2000, pay only 0.6 cents more per kilowatt hour, adjusted for inflation, than they did in 2000, when renewable energy development was still in its infancy.

Meanwhile, energy efficiency played a starring role in keeping down total electricity bills with the states that have most aggressively implemented energy-saving measures—California, Oregon, Massachusetts and New York—reaping the most benefits.

The impact of efficiency initiatives on utility bills between the most and least energy-efficient states is stark.

In Wyoming, which has invested very little in efficiency, monthly residential electricity bills have risen by more than $16, when adjusted for inflation, since 1990.

In California, a leader on energy efficiency, average electric bills increased by only $4.25 during the same 26-year period, when adjusted for inflation. (The Golden State now meets almost one-fourth of its electric needs through energy efficiency, and its residents have saved more than $75 billion since the first efficiency initiatives were launched four decades ago).

On average, residents of the five least-efficient states have seen electric bills increase twice as much as those in the five states that have most aggressively pursued smarter energy use.

The report’s findings jibe with the U.S. Department of Energy’s conclusion that efficiency is “one of the easiest and most cost effective ways to combat climate change, clean the air we breathe, improve the competitiveness of our businesses and reduce energy costs for consumers.”

Federal efficiency standards for more than 60 appliance and equipment product classes saved consumers $63 billion on their utility bills in 2015 alone. The DOE projects that these standards could pave the way to cumulative utility bill savings of nearly $2 trillion through 2030. These energy savings, along with those from building energy codes, have also cut the costs of constructing and running the electric grid.

Clean energy will help us avoid the devastating effects of climate change and clean the air of other harmful pollutants.

And contrary to what the naysayers say, it helps, not harms, our pocketbooks.

Ralph Cavanagh is co-director of the NRDC energy program. This article originated on the NRDC blog.

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