The Democratic Party’s plan to boost energy efficiency would have the opposite effect of its intended goals of reducing emissions, cutting energy costs and promoting clean energy, the American Action Forum details in a new report issued Tuesday.
Instead of focusing on energy efficiency, the conservative think tank recommends scarcity pricing, which requires that consumers pay more when electricity is in high demand and less when demand is low, to drive down energy demand and encourage clean energy.
It also recommends doing away with energy-efficiency regulations, which it says stymie innovation and have cost U.S. households nearly $1,350 over the past decade.
The study takes a close look at the Democratic Party platform issued last month during the convention in Philadelphia and focuses on one of the party’s top energy proposals: Increasing energy efficiency regulations to reduce energy demand and increase clean energy.
“We will cut energy waste in American homes, schools, hospitals and offices through energy efficient improvements; modernize our electric grid; and make American manufacturing the cleanest and most efficient in the world,” the Democratic platform says. “These efforts will create millions of new jobs and save families and businesses money on their monthly energy bills.”
The American Action Forum’s study concludes that raising energy efficiency isn’t so simple and can’t be achieved without the consequences of higher prices, less innovation and more emissions.
First, raising efficiency in the hopes that it will increase renewable energy resources isn’t as simple as the party would like to believe. Increasing energy efficiency reduces demand for electricity, which would stifle wind and solar power, the report finds.
“The problem with this line of thinking is that there are sources of electricity that generate power with virtually zero environmental impact,” said the report obtained by the Washington Examiner. “If you adopt a policy that reduces the demand for electricity, you are also reducing the demand for clean energy.
“Even worse, the biggest beneficiaries of increasing electricity demand are new energy sources — which are all cleaner than current coal plants,” the report said. “Regulating efficiency standards creates a market where there is less need to innovate and keeps us using the same dirty power plants.”
That would limit innovation on clean energy sources, reduce competition for new power sources and create regulatory costs that are passed onto the consumer, it said.
The efficiency agenda also reduces profits for companies, which stifles innovation. “Profit is the motivator for market participants to take chances on new technology,” it said. “Energy efficiency standards reduce energy demand, helping to keep prices low, which consequently reduces profits.”
The Democratic platform also ignores the reality that the regulations required to accomplish the goals of a cleaner environment come with a cost.
The American Action Forum tabulated that energy efficiency standards over the past decade have amounted to $168 billion in additional costs for consumers.
Washington justifies the regulations by combining their future benefits of energy savings and emission reductions to declare the rule “to be sufficient enough that the burden is worth bearing,” the report said. But the method is flawed. It relies on energy being both clean and expensive to justify the need for regulation. And as a consequence, “the closer we get to our actual policy goal of cheap, clean energy, the less benefit these regulations actually deliver,” it said.
“One has to question the wisdom of a policy that imposes hundreds of billions of dollars in burdens, but is only justifiable if other policy goals fail,” the report said.
Energy efficiency standards are a key part of President Obama’s climate change agenda. The Energy Department is aggressively pursuing the president’s goal by issuing regulations at a staggering clip. A number of the new rules will drive up the costs of new appliances, such as refrigerators and home heating and cooling systems.
Appliance manufacturers are pursuing litigation on some those regulations, and industry groups are pressing for quick passage of a comprehensive energy bill this fall that addresses problems with the government’s aggressive efficiency push.
“Achieving the energy vision that policymakers so frequently articulate is going to require technological advancements, not just more of the same,” the report says. “Energy efficiency standards are an impediment to the market conditions that encourage innovation, stymieing our progress towards newer, cleaner, and cheaper energy sources.
“Even worse, these regulations impose significant cost burdens, which are only considered ‘justifiable’ if the status quo persists.”
It recommends promoting the idea of scarcity prices to encourage new products that consumers actually want.
“This would encourage conservation at times when it is most valuable, such as using a fan instead of air conditioning during a heat wave, buying (as a choice) more efficient heaters in the winter, or investing in better home insulation,” according to the report.
“Promoting scarcity pricing, instead of energy efficiency, is a better way of promoting clean energy; where the costs to consumers send clear signals that there are cheaper and more efficient ways to manage their electricity consumption,” it concludes.
