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.

As TriMet Sinks, Should Portland Suburbs Go Down With the Ship?

Last week Cascade released a report encouraging cities and counties to consider leaving TriMet due to its financial mismanagement.

TriMet has long admitted that its labor costs are unsustainable. In addition, the agency’s addiction to costly rail construction has cannibalized bus service, which has been cut by 14% in the past five years.

Comparison with other local transit districts paints a stark picture. The cost per mile of operation for the TriMet commuter rail line is $43.74. TriMet’s flagship service, light rail, costs $11.96 per mile. Yet, the small city of Sandy runs its own bus service for $2.57 per mile.

TriMet predicts that additional service cuts will be required by 2017 and every year thereafter to balance the budget, which essentially would shut down the agency by 2025. TriMet’s only strategy has been to seek contract concessions from the bargaining unit representing most workers, but this is unlikely to succeed. The ongoing PERS crisis shows that once management agrees to expensive fringe benefits for unionized workers, it’s almost impossible to reduce them later.

TriMet is in a death spiral of its own making. Local jurisdictions might be hoping for the best, but they should plan for the worst. Leaving TriMet is an option that needs to be on the table.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. 

TriMet Violates Clean Air Act While “Regulators” Stay Silent

In previous decades the Portland region failed to meet national air quality standards for carbon monoxide pollution and was designated a “non-attainment” area under the federal Clean Air Act. As a result, the region was required to develop and implement strategies to reduce carbon monoxide.

One of the strategies is that TriMet must increase transit service by 1% annually for the period 2006-2017, on the premise that more transit service will reduce auto-related carbon monoxide emissions. TriMet’s compliance must be measured on the basis of a 5-year “rolling average” of actual hours of service. The “baseline year” for compliance is 2004 and includes the opening of the Yellow MAX line, which began operating that year. This strategy was specifically devised by TriMet to grandfather in the Yellow line, thus giving the agency the best chance for compliance.

However, even with this advantage, TriMet has not met the obligation to increase service. In fact, TriMet service has been steadily decreasing. This is a potential problem not only for TriMet, but for other local governments. If the Portland region were to be found out of compliance with the Clean Air Act, the federal government could delay or cancel federal dollars for such projects as Milwaukie light rail and the Columbia River Crossing. For regional politicians, this would be a disaster.

In January, the crisis was taken up by one of the obscure committees run by Metro―the Transportation Policy Advisory Committee (TPAC), comprised mostly of local government bureaucrats. TPAC agreed to recommend that compliance be measured on the basis of cumulative average of service hours for the 10-year period 2007-2017. The new “baseline year” would become 2008.

After TPAC, the plan had to be approved by the Oregon Environmental Quality Commission (EQC), the governing board for the state DEQ. The EQC took testimony in August and rubber-stamped the TPAC recommendation in early December.

Last week the issue moved to JPACT, another obscure Metro committee that approves all regional transportation spending. The free pass for TriMet was quickly approved.

The final stop will be the Metro Council, which will approve the change on December 19.

Sadly, none of the four entities approving the recommendation ever seriously considered enforcing the Clean Air Act. The top priority at every level has been to craft an escape hatch so that business as usual can continue. However, even a cursory look at the evidence would have shown that TriMet had no excuses for non-compliance.

For example, Metro/TriMet/DEQ have all claimed that the “abrupt drop” in TriMet service was “caused by the recent deep recession.” However, as shown in Table 1, the drop in TriMet fixed-route service has not been abrupt; both hours of service and miles of service were lower in 2012 than they were in 2004, so this has been a problem for years.

 

Table 1

Annual Fixed Route Service Trends for TriMet

2004-2012

 

FY 04

FY 06

FY 08

FY 10

FY 12

Change

Veh. revenue hours

1,698,492

1,653,180

1,712,724

1,682,180

1,561,242

-8.1%

Veh. revenue miles

27,548,927

26,830,124

26,448,873

25,781,480

23,625,960

-14.2

Moreover, the recession had little to do with the cuts because TriMet’s operating budget has grown by 62% since 2004 (Table 2).

Table 2

TriMet Financial Resources

2004-2013 (000s)

 

 

2004

2006

2008

2011

2012

2013

% change

 

 

 

 

 

 

 

 

Passenger fares

$ 59,487

$ 68,464

$ 80,818

$ 96,889

$ 102,240

$ 112,500

+89%

Payroll tax revenue

$ 168,378

$ 192,450

$ 215,133

$ 226,456

$ 248,384

$ 259,233

+54%

Total operations revenue

$ 315,130

$ 342,274

$ 404,481

$ 410,388

$ 488,360

$ 508,971

+62%

It’s interesting that the pollutant in question here―carbon monoxide―is a serious one that can permanently injure or kill people, and has been explicitly regulated under the Clean Air Act for over 40 years. Yet, local air quality regulators don’t care about TriMet’s non-compliance. Meanwhile, Metro is squandering a vast amount of public money on its co-called “Climate Smart Communities” plan, aimed at decreasing carbon dioxide―a harmless trace element that has never been explicitly regulated by the Clean Air Act.

In fact, the most notable consequence of increased CO2 levels in lab experiments is the faster growth of plants, which is generally thought to be a good thing. But CO2 has been demonized by environmental activists as a cause of “global warming,” so it must be regulated.

The new compliance plan for TriMet subtly changes the goal posts. By moving from a five-year rolling average to a 10-year average, and shifting the baseline year to 2008, TriMet picks a better year to begin measuring (service levels had already dropped by 2008), and gives itself more future years to “forecast” increased service, even if there is no reason to think such service will materialize. TriMet has publicly stated that the cost of employee fringe benefits must be reduced by 50% in order to restore lost service, and everyone who has watched public employee union negotiations knows that such concessions will never be made.

TriMet is a federal clean air scofflaw, but the local “regulators” are all in on the scam. For a region that prides itself as an environmental leader, this is a disgrace.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Metro’s War on Single-Family Housing Continues

For more than a decade, the regional government, Metro, has been quietly herding people into high-density neighborhoods. For those unaware of this policy, the recently announced plans for 80 acres of development near the light rail station at Sunset Transit Center should be a wake-up call: The developers plan to build 2,175 new housing units, and none of them will be single-family homes. In order to meet Metro-imposed density requirements, the project will be dominated by mid-rise apartment complexes, along with commercial and retail buildings.

Metro anticipates that virtually all future development projects will be similar. In draft documents for a planning exercise called “Climate Smart Communities,” Metro notes that the current number of Portland-area households in mixed-use neighborhoods is 26%. By 2035, that number likely will rise to at least 36%. No options for reducing density are being studied.

Metro’s vision of ubiquitous apartment bunkers means that the region will slowly become a childfree zone, because few parents wish to raise their children in vertical housing. Portland parents, and those who hope to become parents, should ask hard questions about why the Metro Council thinks this is a great leap forward for livability.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Surprise! Mandatory Paid Sick Leave Has Real Costs

By Erin Shannon

In March, Portland’s City Council unanimously voted to enact mandatory paid sick leave for Portland businesses. While the law sounds well intentioned, it is poised to hurt the very employees it’s meant to help and may damage the businesses that employ them. A recent survey by the Employment Policies Institute (EPI) reveals that Seattle’s 2012 paid sick leave ordinance is increasing the cost of doing business there. Our law could have similar results in Oregon when it takes effect in January.

The Seattle survey targeted service industry employers, such as restaurant and retail businesses that would be newly providing paid sick leave to employees as a direct result of the new law. More than 56% of these employers said the new mandate would increase their cost of doing business, with over one quarter of those saying the increase would be “big.”

Proponents of paid sick leave argue employers will offset those increased costs through reduced employee turnover. But the EPI survey shows two-thirds of Seattle employers who have started providing paid sick leave do not believe the law will reduce turnover, and one third of Seattle employers think the law will increase unscheduled absences among employees taking advantage of the benefit even though they are not sick.

These employers are likely not off the mark. A survey by the Urban Institute in San Francisco found few employers reported reduced employee turnover as a result of that city’s paid sick leave law. As one business owner noted in that survey, if every employer is required to provide the benefit of paid sick leave, turnover becomes a moot point because that benefit is no longer an incentive for an employee to remain with one employer over another.

Regardless, many employers are not relying on offsetting increased business costs with reduced employee turnover, because they are offsetting those costs in other ways. In Seattle, employers reported that in response to the new paid sick leave mandate they had taken one of the following cost-cutting measures:

  • 15.7% of employers raised prices in response to the paid sick leave law.
  • 18.3% of employers reduced hours and staff.
  • 17.3% increased the cost to employees of current benefits, or eliminated benefits they used to offer.

These survey results are not unusual. Surveys in San Francisco and Connecticut, which both mandate paid sick leave, revealed similar results.  A survey of San Francisco employees by the Institute for Women’s Policy Research found nearly 30% of the lowest-wage employees were laid off or given reduced hours after passage of that city’s paid sick leave mandate. The Urban Institute survey similarly found some San Francisco employers had cut back employee bonuses, vacation time, and part-time help to absorb the new costs. In Connecticut, employers reported that state’s paid sick leave law forced them to raise prices, reduce hours and wages, and sometimes eliminate jobs.

There is no arguing that mandatory paid sick leave increases the cost of doing business. It is a fact. Employers are forced to pay the wages of the worker who has called in sick, while paying another worker to fill in for the sick worker. Alternatively, the employer can opt to let the sick employee’s work go unfinished and sacrifice service, productivity and sales (while still paying the sick worker). Either way, it is a cost to the employer.

Some employers, especially the larger ones, can absorb the increased cost. Others, like restaurants, already allowed employees to trade shifts with sick workers without the law, thereby costing no one. But many employers, especially those running small businesses, operate on a shoestring profit margin. When the costs to run their business go up, they simply cannot afford to absorb them. They have no other choice than to pass those costs on to consumers, or to the very workers paid sick leave is designed to protect.

Erin Shannon is Director of the Center for Small Business at Washington Policy Center in Olympia, Washington. She is a guest contributor at Cascade Policy Institute, Oregon’s free market public policy research organization.

Hotel Proposal Is Pouring Good Money After Bad

Last week the Metro Council unanimously approved two resolutions in favor of subsidizing a Headquarters Hotel near the Oregon Convention Center in Portland. The original idea behind the Convention Center was that with the right package of amenities, people would come to Portland and spend money eating and shopping when not attending meetings. When the Convention Center didn’t generate the hoped-for revenue, it was expanded. When occupancy rates still dropped, Portland officials started planning a hotel.

Other cities have tried this strategy, and it hasn’t worked. Subsidized convention hotels elsewhere have had disappointing results. Not only have they not increased convention business significantly, but they haven’t made their occupancy projections, either. Now those cities are saddled with money-losing convention centers and money-losing hotels.

In 2007, the Portland Development Commission (PDC) rejected the only hotel proposal that didn’t require government subsidies. The Grand Ronde Indian Tribe offered to build a hotel with private money if they could include a casino. After the PDC turned them down, a tribal spokesman said, “We refuse to raid taxpayer dollars for any project.”

The core functions of government are to protect our lives, liberty, and property, not to provide our entertainment and build convention venues. Instead of throwing more taxpayer money at the Convention Center, Portland officials should consider the advice of management guru Peter Drucker, who warned: “There is nothing so useless as doing efficiently that which should not be done at all.”

Steve Buckstein is founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Mayor Hales’s Environmental Vision Lacks Grounding in Reality

Recently, Mayor Charlie Hales gave a speech welcoming out-of-town dignitaries visiting Portland as part of “World Environment Day.” Speaking before an obviously friendly audience, Mayor Hales made a number of claims that show a lack of critical thinking about environmental issues. Four in particular deserve comment.

First, the Mayor said that the city “must urge” the Oregon State Treasurer to divest of all state holdings in fossil fuel. This might be a harmless gesture if the Mayor did that with his own personal portfolio, but forcing public investment managers to sell off holdings for strictly political reasons would be a violation of their fiduciary trust to those whose funds they manage. Arbitrarily selling assets would increase transaction fees and could reduce total returns to beneficiaries by disposing of securities at discounted prices (relative to true market values).

Moreover, divesting fossil fuel assets would have no effect on any measurable environmental problem.

The Mayor also invoked the tired “Peak Oil” argument that companies managing fossil fuel assets must inevitably fail because oil, gas, and coal are finite resources. But that prediction has been wrong for over 100 years and will continue to be wrong for the foreseeable future. Indeed, at least one international energy statistical agency has predicted that the United States likely will be energy-independent by 2020 due to technological innovations in oil and gas exploration that are causing large increases in production.

Mayor Hales further warned that we must act before the “carbon bubble bursts.” While it is true that we currently have a carbon bubble, it’s not the one he is thinking of. It is a government-created buying binge in carbon offsets, renewable energy credits, and green tags. These products, which exist primarily to satisfy regulatory mandates, have no underlying assets backing them and represent one of the largest Ponzi schemes in history. When the fraud is finally exposed, holders of these worthless securities will be forced to write off billions of dollars in losses.

If the Mayor is really concerned about avoiding the subprime carbon market, he should publicly instruct his staff to quit buying renewable energy credits.

Second, Mayor Hales pledged to begin implementation of the resolution passed last year requiring 100% of city electricity from politically correct “renewable sources.” Unfortunately, the Mayor is more than a decade late to this party, and the beer is stale. Back in 2001, the City Council pledged the very same thing, to be implemented by 2010. When that deadline passed, the city had managed to reach only about seven percent of the goal.

Not only is this goal unachievable for the city, it’s not even desirable. Since large-scale hydroelectric projects and nuclear power plants are typically excluded by green power advocates as “renewable” energy sources, the only way to achieve 100% renewable energy purchasing in the short term would be through massive expenditures for utility-scale wind energy. But since wind is guaranteed to fail randomly, it must be backed up at all times by base-load sources such as hydro, natural gas, and coal. If hydro steps in when wind fails, there is no net environmental gain. It’s one renewable substituting for another. If coal and gas are used, there is a net environmental loss, since these sources must be kept running even when not needed.

The Mayor’s vision is akin to forcing a rental car company to buy a large percentage of cars that randomly stop working, and then maintaining a back-up fleet that is kept idling 24 hours a day to rescue the stranded cars on a moment’s notice. Nobody would propose such a policy for an auto fleet; and environmentally conscious politicians should not advocate it for the electricity grid, either. Wind power is an expensive nuisance to the grid and should be discouraged, not mandated.

Third, the Mayor pledged that within 10 years, the bike “will be the preferred mode of transportation for all trips under three miles in Portland.” While politicians love to make outrageous predictions―since no one can disprove them―there is nothing in the recent past that suggests bicycling will come anywhere close to meeting this forecast. Bicycling has achieved a healthy market share for commuter trips into the central city, but over a 24-hour period for the entire city, cycling is minimal. Even in the South Waterfront district, a massively subsidized high-density neighborhood with a vibrant cycling population, 79% of all daily passenger-trips to and from the district are made in motorized vehicles.

Finally, Mayor Hales pledged that over the next 20 years, the Council will identify new revenues that will allow the city to turn every street in Portland into a “Complete Street” with pervious surfaces, street trees, and sidewalks. Given that the condition of Portland streets has been declining for years and been the subject of several scathing reports by the Portland City Auditor, I’d suggest a much more humble goal for the Mayor. He should stop the pork-barreling of massive amounts of tax dollars on streetcars, light rail, and “traffic calming” projects (the primary cause of our current road system embarrassment) and begin allocating most transportation dollars to fixing and maintaining what we have.

One of the great success stories of the last century has been the steady improvement in environmental quality due to market-driven technological change. The best way Portland politicians can help continue this trend is to focus on the fundamentals of making the city a great place for entrepreneurs.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Moving Forward from the Columbia River Crossing

By Kevin Sharp

With the recent suspension of the Columbia River Crossing project, people are already asking, “What should replace it?” The answer, at least for right now, is, “Nothing.” While it is frustrating that the government spent $170 million to not build a bridge, the cost of a poorly conceived bridge would be much greater.

Before Portland and Vancouver do anything else, they need to look seriously into the root of the transportation problems facing each city and plan accordingly. They also need to understand that just replacing the I-5 Bridge with a different bridge is not a lasting solution to the traffic problems. A new bridge needs to be a supplement to the existing Columbia River bridges.

To make the project viable, Portland also needs to abandon its inherently political goal of spreading light rail anywhere and everywhere. A simple bridge to ease traffic congestion is all that is necessary; but Portland transportation planners continually insist on expanding the MAX line to Washington―while Washington residents obviously do not want that. Any attempt to send light rail to Vancouver will only waste more time, taxpayer dollars, and resources that could go to more productive and valuable projects. A bridge should connect the cities; it doesn’t need to drive them apart.

Kevin Sharp is a research associate at Cascade Policy Institute, Oregon’s free-market think tank.

Statement on the Columbia River Crossing Project

For Immediate Release

Media Contact
John A. Charles, Jr., john@cascadepolicy.org
503-459-3727
Sarah Ross Wolf, sarah@cascadepolicy.org
503-242-0900

Statement on the
Columbia River Crossing Project

PORTLAND, Ore. – In light of the decision by the governors of Washington and Oregon to shut down planning for the Columbia River Crossing (CRC) project, John A. Charles, Jr., President and CEO of Cascade Policy Institute, issued the following statement:

“The CRC was never a solution to any transportation problem, and the Washington State Legislature did the right thing by refusing to appropriate more money for it.

“As the two Northwest governors move forward, they should consider the following points:

  • The Interstate Bridge is not in any danger of imminent collapse and should be used for decades to come.
  • Expansion of rail transit between Vancouver and Portland should be taken off the table. Existing express bus service operated by C-TRAN is already providing excellent transit between the two cities.
  • Any new bridge should have a minimum river clearance of 144 feet, which matches the Glenn Jackson Bridge.
  • The governors should consider building at least two new Columbia River bridges in the region, one to the west of I-5 and one to the east of I-205. The reasons are to create redundancy in the case of an earthquake, and to provide better connectivity between the states. By dispersing traffic across four bridges, most congestion problems will disappear, making all classes of bridge users better off and reducing emissions caused by congestion.

“We have ten bridges across the Willamette River in Portland, and each serves an important purpose. There is no policy reason why we should restrict the number of Columbia River crossings to just two.”

###

Even in Portland, Bike Share Can’t Get Private Investors

By Doug DeFilipps

Bike share is a rental system in which bicycles are made available to individuals at low cost for a short period of time. City planners across the United States like bike share programs. Proponents claim that such systems, once created or subsidized by the government, will reduce traffic congestion and pollution.

Portland’s bike share program, run by a company called Alta Bicycle Share, has already received two million dollars from the federal government. Apparently, this was not enough “free” money to be successful, as the program has been hampered by delays. It is also short about three million dollars in equipment costs, and private sector investment has not been forthcoming.

However, the bike share program’s delays may be good for Portland’s bicycle rental companies. The Oregonian reported last year that regular bike rental companies worried about losing money to government-subsidized competition.

If demand for a bike share program in Portland were so great, wouldn’t private investors be lining up to fund it? And why should Portland bike businesses be damaged by a rival with a distinctly unfair advantage―namely, taxpayer money? Portland is a city that values bicyclists. It also should value its private rental companies, not undercut them with taxpayer money. Portland should not throw more good money after bad for government-funded bicycles.

Doug DeFilipps is a research associate at Cascade Policy Institute. He is a graduate of Santa Clara University.

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