Wind energy development in the United States and worldwide has been touted over the last few years as a key economic engine necessary to move us out of recession and back into a growing market. While energy policy has become a priority at all levels of governance, the focus has shifted away from meeting demand needs in favor of job growth. Governors around the country are pledging millions in public dollars to attract project development, including the chance to become a manufacturing center for wind turbine components.
But as with many of the benefits attributed to wind energy development, the details tell a different story.
Earlier this year, the Vermont Department of Public Service published a report entitled The Economic Impacts of Vermont Feed in Tariffs. The Department evaluated the economic consequences of The Vermont Energy Act of 2009 (Act 45) passed last year. Act 45 established mandatory cost based prices for 50 MW of renewable energy technologies. The statute set energy prices for this energy at "generally higher, and in many cases significantly higher, than current estimates of prices for market based alternatives".
According to the report, the analysis found the Feed in Tariff program would increase Vermont capital investment and create jobs during its 26 year life cycle, however, the net gain in employment was found to be far less than conventionally thought. Following an initial increase in temporary construction-related jobs, long term employment would average thirteen full time jobs per year, including both direct and indirect employment in the energy sector as well as the job and income related effects of increased electricity costs. But other sectors, predominately service sectors, would suffer long term net job losses. In essence jobs would be created in one sector of the Vermont economy at the expense others.
But job transfers were not the only finding reported by the Department. The model also showed that above-market energy costs due to higher electricity prices would have the deleterious effects of "reshuffling consumer spending and increasing the cost of production for Vermont businesses" and that "increased costs for households and employers would reduce the positive employment impacts of renewable energy capital investment and the annual repair and maintenance activities".
The findings of this report are significant in light of contentious debates underway in Vermont's neighboring Massachusetts and Rhode Island. Each State is under pressure to approve power purchase agreements for the proposed Cape Wind and Deepwater Wind offshore wind projects. Electricity prices cited in both contracts are significantly above market rates.
We applaud Vermont's effort to consider objective economic principles that test the claimed benefits of renewable energy development. Unfortunately, our experience has shown many regulators are content to accept that wind development will produce a cleaner environment and healthier economy without substantiation.