Regulatory Reform

Freedom Not Force in the North Carolina Renewable Energy Debate

Imagine checking out at your local grocery store and being told that, due to a recently imposed government mandate, you must make sure at least 12.5 percent of your groceries are derived from organic sources. Most shoppers would be outraged if their choice of groceries was limited and many, particularly those with low and fixed-incomes, would be equally upset about the impact more expensive organic foods would have on their budgets.

This organic mandate doesn’t currently exist in North Carolina. But there is a similar mandate in the state that generally goes unnoticed by citizens as the cost is hidden in their bills. In August of 2007, the North Carolina General Assembly established a Renewable Energy Portfolio Standard which requires investor-owned electric utilities in the state to generate 12.5 percent of electricity from certain renewable energy sources by 2021. The standard forces citizens, businesses, and industry to purchase what the state defines as renewable energy.

According to the U.S. Energy Information Administration, renewable energy sources such as solar and wind are more expensive than traditional, more reliable electricity generation sources like coal and natural gas. The higher costs associated with renewable energy will inevitably be passed along to electricity ratepayers in the form of higher power bills.

These mandates do not take into consideration whether citizens value or can afford more expensive electricity, nor whether business and industry in the state are going to be affected by higher electricity rates—just as a mandate on organic food would not consider any of these concerns. Unfortunately higher electricity rates will affect families across the state differently as the mandate is essentially a highly regressive tax increase hitting the poor and those on fixed incomes the hardest as energy costs make up a larger share of their household expenditures

An economic analysis by the John Locke Foundation (JLF) reveals just how harmful North Carolina’s renewable energy mandate will be in the near future.  JLF reports that from 2008 through 2021 the cost of the mandate for electricity ratepayers will total $1.845 billion. By 2021, real disposable income of North Carolinians will decrease by $56.8 million and over 3,500 will be out of a job even after accounting for any jobs created by the renewable energy industry. With increasing electricity costs decreasing the profit margins of businesses in North Carolina, the state will see a reduction in private investment by up to $43.2 million.

The free market stance presents an alternative approach based on choice. Renewable energy can become a major player in the energy market absent government involvement. It isn’t a novel approach: Renewable energy should expand according to voluntary consumer demand. In fact, an analogy already exists. According to the Organic Trade Association, sales of organic food and beverages have grown from $1 billion in 1990 to $26.7 billion in 2010. This was accomplished without restrictive government mandates, generous corporate handouts, or crony capitalism that the renewable energy industry has benefited from at the expense of taxpayers and ratepayers. Organic food has done fantastically well in the free market, even at premium pricing.

Ultimately, renewable energy should succeed or fail through voluntary purchases. The free market has worked for organic food and can work for renewable energy. Despite what special interests claim, freedom–not force–should be paramount in the debate over renewable energy policy in North Carolina.


In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and…

+ Regulatory Reform In Depth