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Breaking Down REPS Misinformation

Posted By Emily Holmes, Monday, March 28, 2016

The attacks from those trying to slow the success of clean energy in North Carolina keep coming.  A key policy behind the growth of North Carolina’s clean energy economy, the Renewable Energy and Energy Efficiency Portfolio Standard (REPS) has been singled out time and time again by clean energy opponents. We expect the REPS, a bipartisan measure passed in 2007 that requires 12.5% of North Carolina’s electricity to come from renewable energy and energy efficiency by 2021, to remain under fire (but not from industry, ratepayers, or utilities) as we enter the upcoming 2016 short session.


Since 2007, the REPS has saved customers $162 million and will continue to save customers an estimated additional $489 million by 2029. Unfortunately, thanks to a well-funded misinformation campaign, there are many misconceptions surrounding REPS and its true impact on North Carolina. Case in point: In February 2015, the Institute of Political Economy (IPE) at Utah State University released an erroneous report that portrays the REPS as the cause of the state’s economic decline. However, one need not look far into this report to find many flaws with its theoretical model, empirical analysis, and key findings. NCSEA would like to clear up these misconceptions, and enable North Carolinians to make their own informed decisions about a law that has proven its value in the form of long standing electric infrastructure, job creation and economic development.


FLAW #1: A “STATE” REPORT THAT DRAWS FEDERAL CONCLUSIONS

A report analyzing the REPS in North Carolina should analyze North Carolina’s REPS only – not impacts of similar laws as generalized across the entire country. Unfortunately, this report creates a national average by comparing electricity sales, unemployment, and personal income among other factors in all states that have a REPS policy with all states that do not, and then attributes the differences to the presence (or absence) of a REPS policy. It should go without saying that because every state is different, it is irresponsible to attribute these differences to a policy that affects such a small part of the electricity production of any state. (1:57:40)


FLAW #2: CORRELATION ≠ CAUSATION

One of the report’s most egregious distortions is that it does not take into account the effects of the recession that struck the United States from December 2007 to June 2009. Instead, the report essentially blames the enactment of REPS for the 9.6% increase in unemployment during this time, and declares that “North Carolina had 23,769 fewer jobs than it would have had without RPS (Page 11).” The report continues, “There can be no doubt that the combined economic effect on RPS enactment, as measured by the structural panel VAR-X model, is a severe decline of the North Carolina economy.”


Except, this is not true. Clean Energy is working for North Carolina – to the tune of $6.9 billion in revenue generated since 2008 and more than 26,154 new jobs created. What the IPE report fails to understand is that correlation does not mean causation. Would we assume that if it was raining and gas prices went up in the same day, that precipitation caused the gas prices to rise? Of course not.


FLAW #3: INCORRECT TIME MEASUREMENT

The study compares economic conditions over a span of 48 months before to 48 months after the enactment date of the REPS. This is not an accurate means of measuring impact of the REPS. North Carolina signed the REPS into law in 2007; however, the law did not go into effect until 2008 and the first compliance date was not until 2010. Therefore, judging the effectiveness of REPS in the first 48 months does not paint an accurate picture. (1:58:26 - 2:01:00)


FLAW #4: EXPERTS OR NOT?

According to the IPE’s executive summary, the report set out to “[analyze] how the changes in electricity markets caused by RPS alter the functioning of a state’s economy and institutions” (Page 3). However, during a March 2015 NC Energy Policy Council meeting, one of the report’s authors, Dr. Ryan Yonk, appeared to walk back several of their key findings. Dr. Yonk explained early in his presentation that the study is not a cost-benefit analysis. It is their analysis on what the cost "could be,” and that their findings were rough because they are applying a national average to an individual state. Additionally, when asked directly whether the authors estimated the impact on the cost of electricity, Dr. Yonk acknowledged that they did not because they are “not expert enough.” Very curious that a group would claim to analyze “changes in the electricity market caused by RPS,” but admit they are not expert enough to determine the actual cost of electricity. Unless you can confidently analyze the cost of electricity rates in a state, it is irresponsible to draw conclusions for the economic impact of a key policy like REPS. (2:07:45)


FLAW #5: CONSIDER THE SOURCE

Before reading any publication, it is important to understand the background of the author of the study and their motivations for reporting the study’s findings. Utah State is the fifth-largest recipient of money from Koch brothers-linked foundations among all colleges since 2012, taking in $170,000, specifically sizeable donations to the Institute that authored this study, according to the Center for Public Integrity based on IRS tax return analysis. Charles and David Koch own Koch Industries, a multinational conglomerate with vast holdings in oil, chemicals and a host of other fossil-fuel producing industries. While an investment in clean energy might not be in the best interest of these billionaire brothers, it is in the best interest of North Carolinians across the state who have seen the 26,154 clean energy jobs created, especially in rural Tier 1 and Tier 2 counties, as a result of clean energy policies. The positive economic impact of clean energy on these rural areas is one of the Southeast’s biggest economic success stories – and it all started amid the economic downturn around the turn of the last decade.


THE FACTS: THE TRUE IMPACT OF REPS IS ONLY POSITIVE

Since the REPS has gone into effect, over $2.6 billion has been invested in renewable energy projects in the state. The utilities’ compliance with the REPS is expected to save ratepayers $651 million by 2029, and in 2014, the average residential customer saved over $8 due to REPS – a number that factors in the less than $1/average monthly REPS compliance fee on customers’ electric bills. As the price of clean energy continues to decrease, consumers will see substantial savings from this smart policy, which has established North Carolina as a business and industry leader in the Southeast. According to a 2015 economic and rate impact study authored by RTI International and ScottMadden, while rates have risen in the past decade, electricity rates for all customers are expected to be lower than they would have been had the state continued to only use existing, conventional generation sources.


North Carolina’s citizens and economy are the real winners under existing clean energy policies. Policymakers should continue to support the Renewable Energy and Energy Efficiency Portfolio Standard as a critical step to expanding North Carolina’s energy mix for a secure, affordable long-term energy future.

 





Tags:  REPS; policy; clean energy 

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