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Pennsylvania’s New Destructive Energy Policies

Gas Exports - GordonTomb Reports Gordon Tomb
Senior Fellow, Commonwealth Foundation for Public Policy Alternatives

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The new energy policies of Pennsylvania include forced renewables that will take billions of dollars to support and destroy the economy and jobs as a by-product.

Government policies that direct the production and use of energy are a disaster for Pennsylvania. They have been a disaster, they are a disaster, and unless something changes, they will be a disaster.

energy policies

Take as an example the state’s renewable portfolio standards — a version of programs that have been implemented in 30 other states to force people to use so-called renewable sources of energy such as windmills and solar panels. These are technologies that cannot succeed on a large scale in a free market so champions of these forms of energy call on government to jam them down the throats of otherwise free people.

Enacted in 2004 as the Alternative Energy Portfolio Standard, Pennsylvania’s program requires that 18.5 percent of electric utilities’ sales come from alternative sources by 2021. The program includes more than a dozen sources of so-called alternative energy ranging from solar photovoltaic to waste coal and methane gas.

So what have Pennsylvanians gotten from this energy program? The Institute of Political Economy at Utah State University has looked at the alternative energy programs of the 31 states that have them — including Pennsylvania. To quote the study: “There can be no doubt that the combined effect of an RPS enactment…is a severe decline in the Pennsylvania economy.”

The institute reports that industrial electricity sales in the 31 states have declined by almost 14 percent. This is not surprising because government energy programs routinely increase electricity prices. The institute also reports that real personal income has fallen by almost four percent. For Pennsylvania, that translates to a loss of $19.8 billion in 2009, or $4,002 less per family.

The institute correlates Pennsylvania’s standards to a 10 percent increase in the state’s unemployment rate, which means a loss of 49,898 jobs. Pennsylvania had more than 41,000 people leave the state last year and has had a loss of population for every of the last several years. I cannot help but wonder whether some of those people might have stayed in the state if we had not had an energy policy that destroys jobs.

The Pennsylvania Public Utility Commission projects that the alternative energy program will cost the state’s utilities $165 million to comply in 2021. A Beacon Hill Institute estimate of the costs is $2.55 billion, while a Penn State report puts the costs at $434 million. $165 million, $2.55 billion, $434 million. What’s the difference as long as by 2021 Pennsylvanians are getting 18.5 percent of their electricity from alternative energy.

Apparently this is the only thing that matters because economics surely don’t.

But what about environmental benefits? After all, there are those who would readily sacrifice the economy for environmental benefits. The Institute of Political Economy says Pennsylvania’s program has no such benefits because “it sanctions electricity generation from sources that are more environmentally detrimental than conventional fossil fuels.

The institute notes that while eight percent of Pennsylvania’s electricity by 2021 must come from sources which are themselves not the cleanest, 10 percent must come from even dirtier sources such as waste coal. In what may be the understatement of the report, the institute says, “For those who wish to combat global warming or air pollution in general, the AEPS may be unsatisfactory.”

Another study by the Rhode Island Center for Freedom & Prosperity compared the cost of CO2 reductions through renewable portfolio standards against EPA’s own estimate of the social costs of not abating CO2 emissions. The center found the cost of abatement to be two to eight times the social costs of not controlling CO2 emissions in 2015.

The Alternative Energy Portfolio Standard is complicated, expensive and useless. Actually worse than useless. The standard is destructive. When it comes to stupid government programs, there is nothing new here. To make that point, let us visit the 18th century for a couple of minutes:

Under the Georgia Charter of 1732, London philanthropists established a colony in the New World that they envisioned would flourish through the production of silk. The enterprise, as described in Daniel Boorstin’s “The Americans: The Colonial Experience”, is an 18th century version of the vision that alternative energy will lead to an economic renaissance.

Georgia’s trustees poured private and public money into the colony that they had populated with England’s poor. Projections were that the 500,000 English pounds spent annually on Italian, French, Dutch, Indian and Chinese silk would be supplanted by revenue from the new Georgian silk industry. Silk production “would provide employment for at least 20,000 people in the colony during the four months of the silk season and for at least 20,000 more in England the year round,” reports Boorstin.

energy policies

There were a lot of theories why this scheme would work. However, as it turned out, Georgia had the wrong kind of mulberry trees to feed silk worms, the climate was not particularly friendly to silk worms and New World labor was too expensive. The London financiers gave up on the project 20 years after starting it, blaming not adverse economics and climate for the failure of Georgia’s silk industry but rather the lack of enough money.

Ah yes — the universal cause for the failure of government programs — not enough money.

So it is with the utopian dream of solar panels and windmills pristinely supplying the good people of America with electricity as they silently transport themselves in battery-powered vehicles to eat veggies and drink smoothies at organic bistros. Billions of dollars are drawn from the private sector through taxation and directed from Harrisburg, Washington and other seats of wisdom to alternative energy providers whose business plans have no chance of winning in a free market.

And when a solar energy company fails, the complaint is that somebody else is making a cheaper product. How dare they! Or that even more public money needs to be invested. Of course!

Ending his chapter on Georgia, Daniel Boorstin writes, “By the time of the (American) Revolution, Georgia – the darling of philanthropists, the spoiled child of charitable London – was the least prosperous and least populous of the colonies.”

Oh, that politicians and philanthropists would read more history!

To close, let’s return to the present and examine a paragraph in Pennsylvania’s most recent update of its Climate Action Plan. This is a document published by the state Department of Environmental Protection and presented to the governor.

Published just this past August, the report states the following:

“Based on the costs and savings analysis developed by DEP for (12) work plans the macroeconomic analysis of those work plans shows that the majority have real potential to generate not only GHG reductions but also significant improvements in total employment, total income and real disposable personal income.”

Oh my goodness!! Finally government programs that do some good. How can this be? Well, let’s read the next sentence of the Pennsylvania document:

“The results suggest that implementing all 12 work plans would result in significant employment gains, while reducing energy use enough to actually lower total gross domestic product (GDP).”

I will read that again:

“The results suggest that implementing all 12 work plans would result in significant employment gains, while reducing energy use enough to actually lower total gross domestic product (GDP).”

You do not have to be an economist to know that lowering GDP is calamitous for an economy. It is impossible to lower GDP and have a net gain in employment. No further analysis of the matter is necessary. The simple fact is that the people pushing these destructive energy programs on us do not know what they are talking about.

They are ignorant of basic economics. They are deluded about their ability to manage energy markets that are best left to producers and consumers to shape. A kilowatt-hour of electricity cost an hour of work in 1900. One hour of labor to burn a 100-watt light bulb for 10 hours. A kilowatt-hour costs five minutes today. My friends, today’s energy policies are pushing us back to 1900. Taken to the extreme billions of us would be dead and the rest would be living in caves.

My message to those of you who are pursuing engineering and other disciplines designed to produce value is one of encouragement. Go into the world and stand up for your industries. Fight for your freedom to create wealth and prosperity for our society with your technologies, your talents and your commitment. In the face of the ignorance and misguided policies being pressed upon us, we need your positive — and informed — contributions.

Editor’s Note: The above is a presentation given by Gordon as part of a panel discussion sponsored by the Texas Public Policy Foundation and Penn State petroleum and mining engineering student groups.  Also speaking, were representatives of the Heritage Foundation and the Manhattan Institute and a Penn State professor of energy economics. Gordon represented the Commonwealth Foundation. Below is a video of the presentation:

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2 thoughts on “Pennsylvania’s New Destructive Energy Policies

    • Robert, as a 16-year-old, I held hands with a blonde prior to meeting the girl who would become my wife of nearly 50 years. Can you imagine what the mainstream media would make of that!!

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