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Executive Summary

The Public Utilities Commission of Ohio projects that the state‟s demand for energy will increase by about one percent per year through 2020. According to the Energy Information Administration, world energy consumption could increase up to 57 percent from 2004 to 2030.

Increased demand for energy has already begun to affect the demand for coal, and thus the prices of coal. Ohio generates 87 percent of its electricity from coal, the majority of which is imported. That leaves the state highly vulnerable in the presence of rising coal and oil prices.

A federal cap on carbon is increasingly likely and would lead to a dramatic increase in the cost of electricity generated from coal. Because Ohio is the 4th largest emitter of carbon dioxide in the U.S., any energy policy under consideration for the state of Ohio should compare and contrast the future costs of energy resources in order to promote the least cost option and thereby protect residential, commercial, and industrial electricity users.

Although Ohio is currently vulnerable to rampant increases in electricity rates due to the state‟s heavy dependence on imported coal and looming carbon legislation, it‟s not too late to change the state‟s energy future. By diversifying its electricity mix with renewable energy, Ohio can shield itself from upward-spiraling electricity costs and simultaneously improve public health and spur economic growth; a renewable energy standard (RES) would not only reduce pollution, but it would also create thousands of new jobs, increase the incomes of rural landowners by $ millions, generate tax revenue for school districts, and add $ billions to the Gross State Product (GSP).

Coal prices are going up.

• According to a recent article by the Washington Post, “world consumption of coal has grown 30 percent in the past six years,” driving “international spot prices of coal up by 50 percent or more in the past five months, surpassing the escalation in oil prices…if high prices last, that would raise the cost of U.S. electricity, half of which is generated by coal-fired powered plants.”

• According to a recent article by the New York Times, “spot prices for two benchmark American grades of coal, from central Appalachia and the Powder River Basin of Wyoming…(are) up 93 percent and 64 percent, respectively, in the last year…„Watch out, consumer,‟ said David M. Khani, a coal analyst at Friedman, Billings, Ramsey Group. „You‟re probably going to see accelerating electricity prices in 2009, 2010, and 2011‟…Already, there are some signs of rising prices. Appalachian Power and Wheeling Power, both American Electric Power subsidiaries, on Feb. 29 filed papers seeking approval in West Virginia for a 17 percent increase in revenues, mainly to pay for costlier coal. If the request is approved, a residential customer using 1,000 kilowatt hours a month would see his bill increase from $64.55 to $73.94, starting in July.”

Investing in renewable energy will reduce Ohio’s exposure to increasing and volatile fuel prices.

• The cost of generation from renewable sources is not tied to fossil fuel prices. Thus, renewable energy can protect against volatility in the fossil fuel markets.

• The “fuel” for electricity generation from wind is wind. Thus, because wind does not need to be mined or transported, as does the fuel for other sources of electricity generation, wind power removes a significant cost component and provides a hedge against increasing and volatile fossil fuel and oil prices – the price of oil recently reached $112 a barrel.

A federal cap on carbon emissions is imminent. By investing in renewable energy, now, Ohio can hedge its exposure to the increase in electricity prices resulting from such a cap.

• To prevent the most harmful effects of climate change, the world‟s leading scientists have said that we need to reduce greenhouse gas (GHG) emissions to 80 percent below today‟s levels by 2050.

• The Warner-Lieberman Bill, which is currently being considered in the Senate, would result in a cap on 80 percent of total U.S. emissions. Echoing this sentiment, President Bush recently signed into law an increase in Corporate Average Fuel Economy (CAFÉ) standards.

• Ohio ranks 4th in total carbon dioxide emissions in the United States. Because renewables would be immune to such legislation, they could help to hedge against the increase in electricity rates resulting from a cap on carbon dioxide emissions.

• According to a 2006 analysis by Synapse Energy Economics, one ton of carbon dioxide pollution will likely cost between $10 and $40 in 2010, and between $20 and $50 in 2030.5 At these prices, given Ohio‟s electricity-related carbon dioxide emissions were 145 million tons in 2005, the state‟s carbon exposure would be over $1 billion per year.

• U.S. Department of Energy studies have shown that an RES can help lower the cost to consumers of implementing a carbon cap and trade program. 

Various options have been proposed to reduce carbon emissions associated with electricity generation, such as renewable energy, advanced coal, and advanced nuclear. Among these options, renewable energy is the most cost-effective choice.

• New generation of electricity from wind is CHEAPER than new generation from advanced coal and nuclear power.

• Twenty-five states and Washington D.C. have renewable energy standards. According to a recent report by the Lawrence Berkeley National Laboratory, “The electricity rate increases associated with existing state RPS (renewable portfolio standard) policies, for those states in which such impacts are readily calculable, generally equal one percent or less so far; in several states, the renewable electricity required by these policies appears to be priced competitively with fossil generation.”

• According to the EPA, capturing – not including transporting or storing – 90 percent of carbon dioxide emissions from Integrated Gasification Combined Cycle (IGCC) advanced coal plants would increase the total cost of electricity by 38 percent.

• Indiana recently approved an IGCC advanced coal plant that will result in an average electric rate increase of about 16 percent. This rate will be phased in between 2008 and 2012.

• According to a report by the Renewable Energy Policy Project, from 1970 to 1995, levelized costs per kWh of nuclear power increased from 4 cents/kWh to over 9 cents/kWh (in 1999 dollars). That is an increase of 125 percent. On the other hand, between 1980 and 1995, wind costs decreased from 86 cents/kWh to 6 cents/kWh. That is a decrease of about 93 percent.

• According to the U.S. Department of Energy, since 1980, while capacity has increased, the cost of wind power has decreased nearly twenty-fold.

• According to the U.S. Department of Energy, the best wind sites can compete in the electricity market with traditional fossil-fuel power plants, even in terms of direct costs – when adding in the indirect costs of electricity generation, such as air and water pollution, nuclear waste removal, etc., wind is in fact the favorable option.