Renewable Mandates in States Raise Biz Costs

The latest edition of SBE Council's "Small Business Survival Index" has just been published. The Index ranks the states in terms of their public policy climates for entrepreneurship.

Of course, the cost of energy comes into play in terms of competitiveness for businesses. And various and varying public policies certainly affect cost differences among the states.

Among the energy-related measures in the Index are renewable energy mandates on electricity producers. Why? As explained in the Index: "Various states have imposed a renewable mandate on electricity producers, which dictates that a certain percentage of electricity consumed must be produced from renewable sources. Other states have proposed renewable goals, which are not mandatory, but lay the groundwork for mandates. These mandates drive up the cost of electricity for entrepreneurs and businesses, as the mandates require the use of higher cost energy sources. The Institute for Energy Research reports that electricity costs are 40 percent higher in states with renewable mandates."

Using information from the Institute for Energy Research, the Index breaks states into three groups. The first group imposes a renewable mandate, whether in full effect now, being phased in, or targeted for a future date.

These states are pushing electricity costs higher due to political preferences:

Arizona

California

Colorado

Connecticut

Delaware

Hawaii

Illinois

Iowa

Kansas

Maine

Maryland

Massachusetts

Michigan

Minnesota

Missouri

Montana

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

Ohio

Oregon

Pennsylvania

Rhode Island

Texas

Washington

West Virginia

Wisconsin



The second group again lays the groundwork for a renewable mandate by setting up a renewable goal. Those states:

North Dakota

Oklahoma

South Dakota

Utah

Vermont

Virginia


And finally, the third group has no government goal or mandate:

Alabama

Alaska

Arkansas

District of Columbia

Florida

Georgia

Idaho

Indiana

Kentucky

Louisiana

Mississippi

Nebraska

South Carolina

Tennessee

Wyoming

This last group of states has the wisest policy, which in effect is no renewable mandate policy. Quite simply, by leaving such decisions to the marketplace, both individual and business consumers are going to get their electricity in the most efficient, reliable and cost effective manner. Considering that the cost of electricity often is a major cost consideration for businesses, the lack of any government renewable mandate or goal is a notable competitive advantage.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.