Energy Policies and Electricity Prices: Cautionary Tales From Europe
The Bottom Line: Seemingly ceaseless regulation and renewable energy mandates have meant surging energy and electricity prices in Europe. This is a clear warning to heed in the U.S. and around the world. Those pushing similar European-like energy policies on climate grounds must be forced to demonstrate how those policies would impact global CO2 emissions and future temperatures.
Europe’s energy policy lessons are obvious: regulations and renewable mandates lead to significantly higher prices for both households and industry. In contrast to what we keep hearing, the case of Europe shows that the large-scale integration of renewable power does not provide net savings to consumers, but rather a net increase in costs to consumers and other stakeholders.
Further, large-scale integration of renewables into the electric power system ultimately leads to disequilibrium in the market, as well as value destruction to both renewable companies and utilities, and to their respective investors.
Led by New York and California, there are unfortunately a growing number of U.S. states and policymakers that continue to ignore the warnings from Europe. It is no coincidence then that California and New York have electricity prices more than 50% higher than the national average.
To avoid the kinds of mistakes seen in Europe, U.S. policymakers should be required to conduct rigorous cost-benefit analyses before imposing renewable energy mandates and CO2 emissions reductions on families and businesses.
This must include estimates of the total cost of the mandates, as well as estimates of the effect that the resulting emissions reductions efforts will have on global CO2 emissions, and therefore, on future global temperatures.
Finally, U.S. policymakers must always keep their efforts to reduce CO2 emissions in global perspective. Reductions made in Europe and the U.S. cannot stop the growth of emissions in the developing world. Renewable mandates may simply end up costing consumers a lot of money while doing effectively nothing for the global climate.
The vast majority of incremental energy demand will take place in the still developing countries that account for 85% of the global population. Given that climate change is a global issue, where emissions must be take in aggregate, the benefits of any domestic policy in the U.S. that seeks to abate it are questionable.
Read the full study here.
Residential Electricity Prices, 2005–14
- Europe's relentless pursuit of more regulation and renewable energy has surged energy prices.
- The U.S. must heed this warning for the betterment of America's families and businesses.
- Those pushing renewable mandates for climate reasons must demonstrate the impact of their policies on global CO2 emissions and future temperatures.
Read the full study here.