Testimony Related to SB 433 Art Hall, Executive Director Center for Applied Economics, KU School of Business Submitted to the Senate Standing Committee on Utilities March 19, 2014
Key Points
The evidence indicates that investors began developing Kansas wind assets many years before the Renewable Portfolio Standard (or Renewable Energy Standard) became a political discussion in Kansas. Unless the purpose of the mandate is explicitly to force Kansas consumers to buy electricity from a particular type of generation source, then the Kansas Renewable Energy Standards Act was never needed.
Some advocates use the so-called “infant-industry” argument to rationalize the economic importance of the Renewable Energy Standards Act. If that argument ever had validity—and the evidence indicates that it never did—the argument is no longer valid. The data presented below—and the evidence regularly promulgated by advocates for the wind industry in support of the Renewable Energy Standards Act —demonstrates that the Kansas wind industry has become well-developed and remains economically healthy.
Maintaining special privileges for an economically healthy industry is a form of crony capitalism—not authentic economic development. Crony capitalism is a corrupted form of economic competition that allows certain businesses to profit from the result of legal protection rather than from legitimate economic competition for consumers’ loyalty.
Research across different economies consistently shows that prosperity—sustainable economic development—results from authentic economic competition, because it forces entrepreneurs to discover business models that actually work for consumers making free choices. Longer-term, it is possible that the Renewable Energy Standards Act may become detrimental to the development of Kansas wind resources by making uneconomic tomorrow’s superior technologies as a result of mandating the implementation of today’s technology.
Economic mandates are anti-entrepreneurship and anti-innovation. Wind is a Kansas asset; it is not going anywhere. Kansans will be served best by attracting entrepreneurs that can develop wind energy profitably on a level playing field. Success does not depend on perpetuating crony capitalism.
The viewpoints expressed by Art Hall are his alone, based on his research and independent judgment; they should in no way be interpreted as representing the viewpoints of the University of Kansas (or any sub-unit thereof) or the Kansas Board of Regents.
Chart 1: Wind-Powered Electricity Generation on Kansas Soil (Nameplate Capacity) 3,500
3,000
Megawatts
2,500
2,000
1,500
1,000
500
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Wind (KS + Non-KS Buyers)
Wind (KS Buyers Only)
Renewable Mandate (less current hydro)
Source: Kansas Corporation Commission, “Report on Electric Supply and Demand, 2014� Note: Includes the Kansas Power Pool, even though that organization is not statutorily obligated to comply with the renewable mandate.
Aggregate Compliance-Related Renewable Electricity Generation Capacity: Surplus or Deficit (-) Year Megawatts
2020 237
2021 225
2022 212
2023 198
2024 211
2025 189
2026 164
2027 146
2028 45
2029 20
2030 3
Chart 2: A Profile of the Kansas Electricity System 20,000
18,000
16,000
14,000
Megawatts
12,000
10,000
8,000
6,000
4,000
2,000
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Peak Load + 12% Reserve Margin
Base Load
Base + Intermediate (+LF)
Base + Intermediate (+LF) + Peaking
Base + Intermediate (+LF) + Peaking + Wind (KS buyers only)
Source: Kansas Corporation Commission, “Report on Electric Supply and Demand, 2014” Note: Does not include Westar’s planned retirement of 688 MW in 2022. The company is obliged to replace it.
Chart 3:
Source: U.S. Energy Information Administration, “Higher Wind Generation in the Southwest Power Pool is Reducing Use of Baseload Capacity,” September 5, 2013. http://www.eia.gov/todayinenergy/detail.cfm?id=12831
Chart 4: Share of Net Electricity Generation on Kansas Soil by Fuel Source 80%
70%
60% Coal
50%
40%
30% Wind
20%
Nuke
10%
Gas
0% 2001
2002
2003
2004
2005
Coal
Source: U.S. Energy Information Administration
2006
Nuclear
2007
2008
Natural Gas
2009
Wind
2010
2011
2012
2013