Repeal of Ohio RPS is Bad for the State in the Short and Long Run

Ohio State Senator Kris Jordan (R-Powell)  introduced Senate Bill 216 which would repeal Ohio's renewable portfolio standard ("RPS").  The RPS requires  that the state's electric utilities provide 25% of their retail energy supply from advanced and renewable energy sources such as clean coal, wind, and solar energy by 2025.  

Ohio enacted the RPS in 2009.  Each year the percentage of electricity to come from renewable or advanced energy sources gradually  increases until you reach the maximum of 25%. 

The bill is co-sponsored by Senators Tom Patton (R-Strongsville) and Bill Seitz (R-Cincinnati). The Senators argue that the RPS requirement is driving up electricity prices during a tough economy which is bad for economic development. 

The proposal comes as Governor Kasich is hosting a two-day energy summit to discuss Ohio's energy policy.

Short Term Job Gains

When Ohio enacted the RPS, the proponents argued that it would lead to job growth.  First, jobs would be added as projects were developed to meet the RPS requirements.  Second, manufacturers of renewable energy parts and equipment are more likely to locate in a state that shows support for its industry through passage of an RPS.

A recent study discussed in a prior post suggests those arguments have validity. 

  • Ohio ranks 6th in the country in total clean energy related jobs with a total of 105,306.
  • Ohio also ranked 12th in total clean energy jobs added between 2003-2010.

Long Term an Over-Reliance on Coal Hurts Ohio

Ohio still gets approximately 90% of its power generation from coal-fired power plants.  There is no argument that coal power has been subject to a flood of new and proposed regulations.  Those regulations include the following:

  • Mercury limits
  • Greenhouse gas regulations
  • NOx SIP Call- cap and trade for power plants
  • Cross-State Air Pollution Rule- greater reductions from power plant emissions enacted this year

This is just a partial list of the regulations facing coal power.  With all these regulations forcing more controls the cost of coal power is going to continue to rise.  It is not too difficult to see Ohio would be very wise to diversify its power portfolio or face future price shocks from these new regulations.

Not to overly simplify, but any good stock broker tells its customers to diversify their portfolio to reduce risk.  In particular, a broker will advise their client to reduce their investment in companies/stocks that are facing "head winds" or challenges in the future.

This is exactly the position the state is in when it relies almost exclusively on coal power.  The RPS serves as a tool to diversify its energy portfolio prior to experiencing these future price shocks.

 

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