Beaverton’s Renewable Energy Purchase: Well Intentioned, Little Impact

By William Newell

The decisions we make are often greatly influenced by the information and advice we receive from other people. The same is true for elected officials, who generally seek the advice of experts in order to make important public policy decisions. Unfortunately, the system fails when decision makers receive information and advice that fail to tell the full story. By not taking into account all the necessary factors, policy makers can create unintended consequences that run counter to their intentions.

In 2007, the City of Beaverton began purchasing renewable energy “offsets” as a way to show the city’s commitment to sustainability and green energy. This year, Beaverton announced its success in purchasing renewable energy equivalents for all city operations. The city claims that its purchase offsets emissions from fossil fuel plants, thus providing a social and environmental benefit. Unfortunately, Beaverton’s well-intentioned policy has mixed results for the environment and the taxpayers.

The City of Beaverton purchases its renewable energy equivalents through Portland General Electric’s Green Power Program. The program charges a premium price for the purchase of renewable electricity. The cost on top of regular electric services goes to the purchase of renewable energy certificates, as well as program administration and marketing.

Purchasing RECs is intended to encourage the production of renewable energy, but RECs are too inexpensive to act as a real market incentive. The payments RECs generate aren’t required to be used for expanded production, either. Green energy producers themselves consider RECs to be little help in financing their green projects. RECs are largely a way for ratepayers to burnish their “green” credentials while paying power producers very little. Furthermore, little of the money spent on RECs actually gets to energy producers, due to green power marketers who act as middlemen in the REC marketplace.

If RECs represent the “positive environmental qualities” of renewable energy, they also represent the negative ones. Energy sources like wind and solar create negative externalities for ratepayers and the environment. Wind and solar are intermittent sources of power and must be backed up when the sun isn’t shining and the wind isn’t blowing. This means utilities must have non-intermittent energy sources such as hydropower or natural gas generators. Oregon’s hydropower system is already complex, and adding wind has made operating the system more difficult. Due to that fact, utilities must rely on other generation sources like natural gas peaking plants and possibly even coal plants for backup power.

When gas and coal plants are used as backup power, maintenance costs and generator inefficiency rise. This can be monetarily costly but also worse for the environment. If power plants designed to operate continually are used to make up for intermittent generators, their fuel consumption rises while overall electricity output stays the same or falls. Wind turbines, the main energy source supported by RECs, damage sensitive bird and bat populations with their large spinning blades.

In the end, Beaverton is faced with two facts. If RECs don’t encourage new renewable energy, the city has wasted taxpayer money and made false claims. If, on the other hand, RECs spur more renewable energy development, then more grid variability and environmental externalities will occur, mitigating the positive benefits of that energy. The City of Beaverton needs to faithfully represent its residents by eliminating the dubious purchase of RECs and return to straightforward policies that are transparent and effective.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

Green Data Center Bill Is Just More “Greenwashing”

By William Newell

In February, the Oregon Legislature passed House Bill 4126. This bill would allow utilities to purchase renewable energy certificates, or RECs, to meet Oregon’s renewable portfolio standards, rather than actually purchasing electricity produced by renewable sources.

The bill is simply “greenwashing.” “Greenwashing” is a tactic for companies, in this case large data centers, to burnish their environmental credentials without actually being any “greener.”

Many RECs are sold separately from renewable electricity and are meant to give energy producers extra income. While buying RECs allows purchasers to claim the use of renewable electricity, this notion is deeply flawed. The low price of the certificates (one to five dollars) prevents such commodities from realistically encouraging an increase in renewable energy production. RECs alone are not the reason renewable energy is generated or new plants are built. It is simply selling the right to claim that your electricity is renewable. Not only that, but RECs generally support solar and wind energy, which can negatively impact grid reliability, other generation sources, and the environment. Oregon-based Nike backed off from purchasing RECs because of their controversial nature.

The Legislature needs to alter course to avoid costing ratepayers boatloads of money with little actual return. It is time to stop the forced subsidization of energy sources that do more harm than good to our electric grid and our environment.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

Airbnb, Destructive Innovation, and Liberty

By William Newell

Portland is brainstorming regulations for temporary lodging made possible by websites like Airbnb. Airbnb describes itself as a “community marketplace for people to list, discover, and book unique accommodations around the world.” The proposed rules would make homeowners pay a tax, get a permit, and follow certain limitations. Portland’s slow and conditioned acceptance of home lodging businesses serves as a microcosm of one of America’s most troubling problems: our fatal conceit.

Individual liberty is a founding principle of American government and one of our most sacred rights. We protect our individual liberty in part because the dynamism that liberty affords individuals is necessary for a flourishing society. The only time individual liberty is to be attenuated is when one individual interferes with the rights of another.

Portland’s rules simply encourage a political system that erodes liberty and takes with it America’s diversity, dynamism, and drive. If a widow living on a fixed income wants to rent a room to help make ends meet, why should she be stopped because her home wasn’t “zoned” for lodging? If a young couple rents an extra room to pay off college loans, should they have to pay tourism taxes? Those who advocate for bans or restrictions not aimed at mitigating externalities and protecting individual rights are really questioning the underlying dignity and respect we should each be afforded.

*In his essay on the failures of central planning, The Fatal Conceit, Friedrich Hayek argued that individuals are best suited to know their own circumstances and to act to improve them. Actions based upon the presumption of superior knowledge by governments to impede individual endeavors tend to fail and to create more harm than otherwise would have occurred.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

Portland’s 100% Renewable Energy Goal Is Still Fantasy

By William Newell

The 2013 North American World Environment Day opened with a speech from Mayor Charlie Hales on the need for Portland to lead on renewable energy policy as it has on other environmental practices. As part of this renewed leadership effort, the Mayor reiterated a 2012 Portland City Council resolution which called on the City to use only renewable energy in its operations. However, this is not the first time the City has created a goal of 100 percent renewable electricity and sold it as an opportunity to lead―only to fail to get anywhere near the goal.

In reality, the Mayor was touting an objective which has existed since 2001. The goal originated as a part of the Local Action Plan on Global Warming, and it called on the City to “purchase 100 percent of City government electricity load from new renewable resources” by 2010. After the initial 2001 proposal, the City purchased three-year renewable energy credits (RECs) equivalent to about ten percent of the City’s electricity use.

Six years later in 2007, the City again tried to purchase more RECs; but the negotiations failed after the sales company decided to sell its RECs to Washington and California. The City spent more than $100,000 just to negotiate the deal.

2009 marked another important step for Portland’s green dreams with the announcement of the Climate Action Plan, which contained essentially the same goal as those proposed in 2001. This time the City would purchase or produce renewable energy with 15 percent of the energy coming from the City’s own generation by 2012. Yet again, by 2012 the City had failed to meet its goal, obtaining about 14 percent of its electricity from renewable sources and only nine percent from “self-production.” The other five percent came from state renewable portfolio standards, which mandate that utilities obtain five percent of their energy sales from renewable sources. This was a lucky development for the City, but ultimately it does little to help Portland accomplish its goal.

In 2012, the Portland City Council passed another resolution which prompted the City’s various bureaus to purchase enough RECs to “offset” 100 percent of the City’s electricity. This is the resolution on which the Mayor focused in his speech. But now, with no large-scale purchases or projects to meet the target, at the beginning of 2014 the City has yet to accomplish its goal. The City still only gets 14 percent of its electricity from renewable sources. This means the City is more than 85 percent behind meeting the objective. After more than a decade of goal setting and public speeches, the City has failed to achieve its goal. Can Portlanders really expect the City to change its behavior now, after 12 years of speeches and resolutions?

The reality is that Portlanders should not want the City to accomplish its long-overdue goal for a few key reasons. First, the proposed method of meeting the target has been through purchases of renewable energy credits, but this is a waste of city resources as RECs are no guarantee of reduced environmental impact. Second, the City has tried to produce its own energy through various means, but often through solar or wind installations―and these are wasteful and undermine grid stability.

To understand why REC purchases are wasteful, it is important to understand what they are. RECs are a commodity which represents the environmental benefits of one megawatt-hour of renewable electricity. One REC is “produced” when one megawatt-hour of electricity is generated from a source that is categorized as “renewable.” RECs are then sold, and purchasers can claim that they “used” renewable electricity.

But there are many problems with this narrative. When the City buys RECs, the purchase benefits government-favored wind operators while encouraging nothing. RECs do not require that proceeds go to expanding renewable generation capacity, and they are too inexpensive to be a sufficient incentive to expand renewable energy production. Interestingly, RECs are extremely cheap, which sounds good for the City budget, but it actually undermines their ability to spur further renewable energy development. Ultimately, RECs play second fiddle to more substantial renewable incentives like the Wind Production Tax Credit.

The main reason for the City to purchase RECs is that they are supposed to “offset” Portland’s carbon emissions from electricity use. But the credits don’t represent credible offset emissions because there is no requirement for RECs to show how much emissions were really avoided in their production. RECs cannot be tracked from creation to final purchase. Another problem with the “offset” theory is that RECs subsidize intermittent energy sources such as solar and wind. Intermittent energy sources must be backed up by other sources (possibly including fossil fuel plants), which either must be “ramped” up and down or “idled” to make up for cloudy or calm days. Relying on intermittent energy sources can actually result in more carbon emissions from existing fossil fuel plants and backup generators and a less reliable electricity grid.

The story of Portland’s 100 percent renewable energy goal is an unfortunate one. Portland hasn’t delivered on its promise, while touting failed solutions. RECs―the City’s preferred “green” solution―are not transparent, credible, or effective. Portlanders should really be thankful the City hasn’t met its own goal, which would have wasted taxpayer dollars on a questionable program.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

Too Little of a Good Thing

By William Newell

The recent Portland School Board decision to expand enrollment at Benson Polytechnic High School exemplifies an odd mindset within the public education system. The board’s decision allows Benson to increase its enrollment from 821 to 850 students, due to public outcry over the limit. Benson was designed to handle 2,000 students, yet the school educates fewer than half that number because of district policy.

When businesses provide customers with quality products and services, they attract even more customers. Expansion is a sign of success, and businesses profit from it. Sadly, the same can’t be said of public education. When a public school succeeds, its enrollment gets capped. Its success is considered a drain on other schools: If a school is in high demand, students will flock there and neglect their “neighborhood” schools. Yet, this is the very point of having a market. Poorly performing businesses fail and successful ones rise, but everyone benefits from success.

When schools fail to meet students’ needs, students should be able to attend schools that do. This is why the Benson situation is absurd. The school board shouldn’t limit quality public education. When Portland parents want more seats in schools like Benson, the board should find ways to give them more of the educational programs and opportunities that they demand―either by expanding that school or creating more such schools in the district.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

Reverse the Trend: Restore Oregon’s Economic Freedom

By William Newell

Our world is freer today than ever before. More people are free from war, poverty, and crime; and they are also more free to start a business, find a job, and join the middle class. Despite the recent recession, the world’s economy has grown 70 percent over the last 20 years (from $32 trillion to $54 trillion), in large part because of the expansion of markets into developing nations. Fortunately for more and more people, their governments are liberalizing markets and allowing competition, rather than enacting Soviet-style “five-year plans.”

But what about the champion of free enterprise, the United States; how are we doing in terms of economic freedom? Sadly, the former bastion of free markets is regressing in terms of economic freedom relative to other nations. According to the 2104 Index of Economic Freedom, released by the Heritage Foundation and the Wall Street Journal, the U.S. has fallen out of the top ten most economically free nations.

Many problems with the U.S. economy are mirrored at the local level. States have regressed economically, including Oregon, which had one of the largest reductions in economic freedom of any state over the last two years. If the U.S. and Oregon want to continue generating economic success, we need to remember what got us there in the first place: a free economy and a free society.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

The Check Engine Light Is On

By William Newell

Imagine you’re in a car traveling down I-5 at 60 mph. The car has been modified with solar panels to supplement the car’s gas engine. Suddenly, as you’re driving down the highway, the sun disappears behind the clouds. In order to maintain your current speed, one of two things needs to happen: Another “idling” engine needs to kick in, or the main gas engine needs to “rev” up.

This hypothetical situation is similar to how the electrical grid works. The electric grid, just like the car, needs back-up generators and large high-capacity generators to make up for the times when wind and solar power fail. Often it’s natural gas or coal plants which fill the gaps. These power plants either continually operate without producing electricity as “spinning reserve,” or they operate less efficiently because they are “revved” up and down constantly.

Now, you can probably see the major drawback to subsidizing intermittent energy sources. It is because they rarely create enough sustained electricity to maintain grid stability; and power plants must “spin” or “rev” up and down, meaning little emissions savings are actually achieved.

If our government leaders continue to preach about saving the environment and reducing emissions, they may want to look under the hood to see if their plan will really work.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

Portland’s Renewable Energy Pipe Dream

By William Newell

Since 2001 the City of Portland has aimed to obtain all of its electricity from renewable sources. More than 10 years later, the City has failed to meet its own goals, even after renewing the pledge in 2009 and again in 2012.

To achieve its long-standing goal, the City has sought to purchase renewable energy certificates (RECs), which are said to “offset” emissions from electricity use. Unfortunately, RECs have major problems.

First, RECs are not required to show what emissions were avoided in their “production,” so there are few concrete savings for the City to claim. Second, intermittent energy sources require back-up power to maintain grid reliability. When wind dies down, as it often does, the system must make up the shortfall from natural gas and coal plants. Because some plants must “idle” while others “rev” their electricity production up and down, the plants utilize more fuel to produce less electricity. This ends up mitigating much of the claimed pollution savings.

Many Portlanders dream that the City can perfectly meld an urban forest with the concrete jungle, but behind Portland’s green curtain is an unaccountable government wasting taxpayer dollars on what amount to environmental “indulgences.”

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

If You Like It, Maybe You Can Keep It

By William Newell

“If you like your health care plan, you can keep your health care plan.” These words have come back to haunt President Obama. Contrary to his statement, many Americans enrolled in individual health plans have lost or will lose their current plans due to regulations imposed by the Affordable Care Act. White House spokesperson Jay Carney admitted “it’s true” there are plans that won’t be eligible under the health care law.

According to Forbes, more people have been notified of their plan’s cancellation in three states than have signed up for an online health care exchange account in all 50 states. Many people have seen rates increase, yet are not eligible for the ACA’s insurance rate subsidies. NBC News relayed the saddest part of it all: The Obama Administration likely knew for three years that this would happen and that possibly 80 percent of people in the individual health insurance market could lose their current plans.

This situation highlights the fact that leaders must present the policies they promote in a way that is genuinely reflective of their content. When politicians make outlandish promises and fail to meet them, it undermines public trust and the government’s effectiveness. It just goes to show, when a politician says something that seems too good to be true, it probably is.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

The State of Freedom in Oregon

By William Newell

Today, Oregon is at a crossroads. Oregonians must choose between our current unsustainable path and becoming a place where freedom and prosperity can grow. Sadly, according to the Mercatus Center’s Freedom in the 50 States report which looks at the last 12 years, freedom in Oregon has decreased since 2001; and a major effort will be needed to restore and enhance it.

The report divides freedom into three main components: fiscal, regulatory, and personal. Oregon ranked 28th in the nation in terms of overall freedom. We rank 23rd in fiscal, 30th in regulatory, and 19th in personal. In all three categories, Oregon has fallen since 2001; and since 2009, Oregon freedom has diminished by the largest amount of any state.

Oregon does worse in several major areas. We rank in the bottom third of states in categories of government spending, government debt burden, health insurance regulations, labor market regulations, occupational freedom, alcohol regulations, gambling limits, and travel restrictions.

Oregon ranked in the top third of states in marijuana, education freedom, asset forfeiture, campaign finance, cable/telecommunications, marriage, and civil liberties categories.

Our leaders need to address our growing fiscal and regulatory problems and restore freedom to everyday Oregonians. Instead of a “grand bargain,” Oregon needs a new vision. 

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

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