Maryland's Renewable Energy Policies To Cost Billions

According to a study by the Beacon Hill Institute, Maryland’s Renewable Portfolio Standard will impose steep opportunity costs on Marylanders for electricity. 

The report estimates that total net cost of Governor O’Malley’s renewable energy mandates will cost $3.3 billion by 2022 and cause electricity prices to increase by 0.62 cents a 6 percent increase.  In 2022 the mandate will impose a $474 million cost on state electricity costs.

The Maryland Renewable Portfolio Standard requires state utilities to derive 20 percent of their retail electricity sales from renewable sources by 2022.  The program began as a modest mandate under former Governor Bob Ehrlich, however upon taking office O’Malley increased the mandate and made several other changes including special carve outs for solar and wind power. 

Utilities satisfy the mandate, not by increasing renewable energy source, but by purchasing renewable energy credits. Those credits can also be banked and sold to other utilities.   Utilities are allowed to pass on to customers, the cost of purchasing credits. 

The Beacon Hill report does not focus on emissions, instead it studies the opportunity costs of the O’Malley administration picking winners and losers.  The authors concede that the renewable energy mandate will generate benefits for a small group of favored industries.  

However: 

But all of Maryland’s electricity customers will pay higher rates, diverting resources away from spending on other sectors as well as reducing business investment. The increase in electricity prices will harm the competitiveness of the state’s businesses, as the costs of inputs increase particularly in the energy-intensive manufacturing industries. Firms with high electricity usage will likely move their production, and emissions, out of Maryland to locations with lower electricity prices. Therefore, the RES policy will not reduce global emissions, but rather send jobs and capital investment outside the state.
 As a result, Maryland residents will have fewer employment opportunities as they watch investment flee to other states with more favorable business climates. Policymakers should monitor the utilities RES compliance reports for further cost increases and act, if necessary, to curb the mandates that benefit only a few special interests.

The Maryland Public Service Commission does monitor the program and utilities compliance reports and submits its own annual report to the legislature.  However, portions of the utility compliance reports are not available for public inspection. The PSC denied a Watchdog Wire public records request for BG&E, PEPCO, and Delmarva compliance reports stating, “your request covers records that were filed confidentially because they contain confidential financial information.”  The Public Service Commission denies the public the right to know who sold state utilities the renewable energy credits, the costs of which are born by the rate paying public.

State renewable portfolio standards are also a draw for green energy rent seekers, attracting speculators looking to cash in on renewable energy credit trading market.   We can’t know who is cashing in on trading Maryland’s renewable energy credits because the Public Service won’t release that information.

Previous commission reports have noted “upward pressure” on renewable energy credits due to the solar carve out and that the O’Malley administration’s manipulation of the law reduced supply, increased demand, and thereby increased the price of credits.  Furthermore, the graduated percentage increases in the law act as automatic price hikes.  Indeed, the 2011 PSC Report found that renewable energy credit owners were banking 90 percent of their RECs for sale in future years. 

Maryland electric ratepayers should be concerned that they are financing a renewable energy asset bubble.

O’Malley first ran for office on the promise of rolling back electric rates, however rates have increased 39 percent over his two terms.    

*Reflects average price for February 2014