March 15, 2012
The media have been claiming so for years. And in 2011, their
assertion was finally accurate.
Last year’s average gasoline price surpassed the
record set, in real dollars, in 1981. And at $3.83
per gallon today, the cost of getting around has gotten grislier.
(Sticklers will insist that the peak remains to be reached, given income growth
and improvement in fuel economy, but that’s small comfort to motorists facing
fill-ups north of 50 bucks.)
Unfortunately, consumers may soon confront another energy atrocity.
If dunderheaded policies implemented at the state and federal levels are
allowed to continue, electricity will likely mirror petroleum-based fuels’ extraordinary
First a little history. In the ‘60s, ‘70s, and first half of the
‘80s, homeowners’ inflation-adjusted power bills seesawed -- falling by 35
percent during the early portion of the period, then reversing course in the
Nixon/Ford/Carter years. It was chaotic era, with price fluctuations driven by
multiple factors, including pollution regulations, federal market-meddling, OPEC
chicanery, and the arrival of nuclear reactors.
In the mid-‘80s, though, the average, real cost of a residential
kilowatt-hour began a glorious, 15-year fall:
Rates pulled an about-face in the new century. In 2010, homeowners
paid 12.30¢ per kilowatt-hour. That was an increase of 9.3 percent from 2000. Not much of an added burden. But greater hikes are almost certainly on the way.
One of the key causes of pricey electricity, according to a February analysis
by energy journalist Robert Bryce, is “renewables” requirements.
Twenty-nine states mandate that utilities generate -- or purchase --
politically correct power. California’s
dictate is the worst, at 33 percent by 2020. But many large states aren’t far
behind, including New York (29 percent by
2015), Ohio (25 percent by 2025), Texas (5,880 megawatts by 2015) and Pennsylvania (18 percent by 2021).
Ditching coal, nuclear, and natural gas for solar, wind, and
biomass is no bargain. A renewable portfolio standard (RPS), Bryce found, is
correlated with rising rates. He conducted an apples-to-apples survey of states
that are reliant on coal. Bryce found that in “2001, the average price of
residential electricity in the ... RPS states was 10.9 percent higher than the
average price in the … non-RPS states. By 2010, that differential had more than
tripled, to … 37.6 percent.”
And with so many RPS goals far from attained, the pain has only
just begun. Bryce cited estimates by the Electric Power Research Institute: “In
2015, generating a megawatt-hour of electricity with natural gas will cost
between $49 and $79 … . That same quantity of energy produced from onshore wind
will cost between $75 and $138, while generating it with solar photovoltaic
will cost at least $242 and as much as $455.”
Homeowners are free to flee states with RPSs. But stay in the U.S.,
and they’ll be subject to what
the American Legislative Exchange Council called “one of the most breathtaking
and hostile regulatory assaults on energy affordability and electric
reliability in our nation’s history.”
Barack Obama’s Environmental Protection Agency, to put it
bluntly, is out of control. It’s concocted a raft of assaults that will dramatically
boost the price of juice. The EPA’s crusade against “greenhouse gases,” if not
stopped by Congress and/or the federal courts, is sure to bite -- in
2010, 96 of the 100 largest climate-change “polluters” were power plants.
The EPA’s “Mercury
and Air Toxics Standards” rule, according to the Committee on Energy and
Commerce of the U.S. House of Representatives, “has been characterized as the
most expensive rule ever imposed by the agency on the power sector.” Along with
the “Cross State Air Pollution” rule,
another agency overreach, it’s shuttering plants from Oregon
for Energy Research has documented the impending withdrawal of an alarming 33
gigawatts of generating capacity “as a result of EPA’s regulations.” (Rules that
were promulgated, it’s worth noting, despite remarkable
gains in air quality, with across-the-board drops in the “big six”
pollutants during the last few decades.) In addition, new water-intake mandates
loom for electricity producers -- many could be forced to construct cooling
towers with price tags in the hundreds of millions of dollars.
There was a time when the machinations of eco-Luddite activists,
bureaucrats, and politicians could be ignored. But as the real-world
consequences of their economically calamitous schemes become clearer, attention
must be paid.
The goal of historically costly gasoline has been accomplished. The
next item on radical environmentalists’ to-do list? Raising power bills. A lot.
Don’t say you weren’t warned.
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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