The High Cost of Green Energy Programs in Massachusetts

This new analysis prepared by the Beacon Hill Institute of Suffolk University shows how Massachusetts green energy policies will cost State ratepayers more than $9.8 billion over the next decade. These costs will be in addition to the market prices for energy, already among the highest in the nation, according to the authors.

Executive Summary

Massachusetts has attempted to lead the push for renewable energy and energy efficiency programs. The state currently offers over 25 unique mandates, programs and incentives to promote renewable energy and energy efficiency. Since all of these mandates, programs and incentives attempt to influence the behavior of utilities, consumers and businesses they incur costs. Massachusetts ratepayers will continue to pay for these programs through higher electricity bills.

The Beacon Hill Institute at Suffolk University (BHI) has quantified the cost of 11 of the state green energy mandates, programs and incentives. We start with the major green energy costs today. From that baseline we use legislative mandates, third‐party estimates and our own estimates to forecast how these individual costs will change over time.

We find that that the major green energy mandates, programs and incentives will cost $490 million this year, more than $985 million in 2020 and more than $9.8 billion cumulatively over the next eleven years. By 2020, the total cost of these mandates, programs and incentives will amount to over 2.6 cents per kilowatt hour (kWh) of electricity. In 2020, that amounts to $159 per year for families consuming the state average for residential electricity, $1,503 per year for an average commercial business and $14,255 per year for an average industrial company. Over the eleven years, the average household ratepayers will incur $1,582 in higher electricity prices to fund these 11 mandates, programs and incentives, the average commercial ratepayer will spend $15,559 and the average industrial ratepayer $141,255. These figures do not include the cost incurred from the state's other 14 green energy mandates, programs and incentives.

We choose these 11 mandates, programs and incentives because current data are readily available and quantifiable. Data is unavailable for the other 14 mandates, programs, and incentives, such as property and sales tax incentives, precluding the calculation of any reliable estimates. It is likely that the total cost of all the green energy mandates, programs and incentives in Massachusetts is significantly higher than we have found here and will continue to grow over the next decade.

In addition, we compare the number of mandates, programs and incentives and their costs, where possible, in Massachusetts with other states we identify as economic competitors. The competitor states are highly ranked in both the BHI 2009 Competitiveness Index and Massachusetts Technology Collaborative The Index of Innovation Economy, 2009. Massachusetts imposes more green energy mandates, programs and incentives than its competitors.

As noted above, our cost estimates are only a fraction of the total costs of all 25 mandates, programs and incentives. As a result, Massachusetts electricity ratepayers will face skyrocketing electricity rates in this decade due to the state's green energy mandates, programs and incentives, unless policymakers reverse course and provide relief. Businesses that are large consumers of electricity will bear the greatest burden of the higher electricity rates, which will force some to close and others to seek locations with lower electricity costs. The burden threatens the long term competitiveness of Massachusetts.

Authors: Paul Bachman, M.A, Benjamin Powell, Ph.D., David Tuerck, Ph.D., Rick Weber, B.S.

Massachusetts Green Energy10 1025 Study Final

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NOV 2 2010
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