New Hampshire can’t freeze the timber industry in time

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Economic progress, like progress in any field, cannot be achieved by freezing the status quo in place. Government attempts to do so result only in delaying rather than advancing progress.

Following Gov. Chris Sununu’s June 19 veto of two bills to subsidize New Hampshire’s biomass power plants, three of those plants announced that they were winding down their operations. Some blame the governor for the plants going idle. That’s like blaming the National Endowment of the Arts for the demise of jazz.

Jazz, once America’s dominant form of music, in 2014 tied classical as the least popular genre. Chuck Berry, a huge jazz fan, released Maybellene in 1955, dooming the genre that put the “roll” in rock ’n’ roll.

Musical tastes changed, and no subsidy from Washington elites could’ve protected the big bands of the 1940s or the quartets of the 1950s from the rock ’n’ roll revolution.

In the economy, industries rise and fall too, moved by forces that are beyond the control of public officials or elite taste-makers.

The forest products industry in New Hampshire has suffered a decades-long decline triggered by cultural and economic changes no government meddling can reverse.

In 1957, when Berry released his classic song “Rock and Roll Music,” 7,810 people were employed in paper manufacturing in Coos County alone. By 2013, when Robin Thicke topped the charts with “Blurred Lines,” UNH’s Cooperative Extension service reportedthat 7,756 people were employed in the forest products, maple and Christmas tree sectors combined in the entire state. That year, 3,000 more people were employed in forest-based tourism occupations than in production.

(By the way, by 2013 rock ’n’ roll had all but vanished from the Billboard Hot 100, replaced by pop and hip-hop. Only one rock band, Paramore, had a year-end top 100 song that year. If only federal taxpayers had subsidized Guns n Roses….)

Cake, one of the last great alternative rock bands, had a single on its last album called “Federal Funding” in which it mocked government funding for the well-connected. Cake got it what many people don’t. Government subsidies benefit political insiders at the expense of everyone else.

No one wants loggers to lose jobs they love. But the notion that the state’s timber industry can be saved by forcing electricity ratepayers to subsidize a handful of inefficient biomass power plants was never based in a realistic assessment of the New Hampshire economy, the forest products industry, basic economics or clever alternative rock lyrics.

New Hampshire’s economy has evolved over the centuries, as all economies have done since the rise of capitalism and democratic governance. Subsidies for favored industries can only delay the inevitable, and at a high cost.

A report last year concluded that Maine has spent $250 million to prop up its fading biomass industry. New Hampshire, which has for years forced electricity ratepayers to subsidize the industry, would make its economy weaker, not stronger, by continuing this practice.

Biomass plants are in trouble because it’s cheaper to create electricity by burning natural gas than by burning wood. If forcing people and businesses to buy more expensive wood-generated electricity was good for the economy, then we would have the best economy in the country simply by passing laws mandating that people buy only New Hampshire-made goods and services.

Imagine. Instead of driving dangerous automobiles, we could all be riding around in luxurious Concord Coaches. Instead of using national airline companies, we could sail to Europe on gorgeous tall ships built in Portsmouth. Sure, it would be hugely expensive and wasteful for consumers, but think of all the jobs that would be saved!

Sadly, that’s not how the economy works. States can only hurt economic growth by forcing people to pay higher prices for locally made goods and services.

Trying to freeze some economic sectors in time is never good policy, but it’s especially bad when the state has so many job openings that it’s experiencing a severe worker shortage. The best move is to let people transition from jobs in declining industries to jobs that are in higher demand and offer a brighter future.

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Vetoing renewable energy bills would strengthen NH’s new 10-Year Energy Strategy

Three renewable energy bills awaiting action by Gov. Chris Sununu are in conflict with the state’s revised 10-Year Energy Strategy, which the governor championed in April. A veto of these bills would be consistent with the state’s energy plan and with the governor’s goal of fighting increases in New Hampshire electricity rates. Letting the bills become law would undermine the plan and encourage legislators to ignore it going forward.

The 10-Year Energy Strategy, released by the Office of Strategic Initiatives in April, represents an important and long-overdue shift in state energy policy. Acknowledging the negative economic impact of the state’s high electricity costs, the strategy makes lowering those costs a top priority.

“Addressing energy costs is a critical goal for New Hampshire,” the strategy states. “Expensive energy – or pursuing policies that raise the cost of energy – directly and negatively impacts New Hampshire families and businesses and the quality of life in our state. As such, the priority of this Strategy is to organize goals around cost-effective energy policies.”

Senate Bills 365, 446 and 577 all conflict with the state’s goal of lowering energy prices. Each one would push electricity rates higher for the sole purpose of forcing ratepayers to subsidize a handful of renewable energy businesses.

Senate Bill 365 would require Eversource to pay above-market rates to the state’s six biomass power plants.

Senate Bill 446 would expand the state’s net metering program to include biomass power plants. The net metering law forces utilities to buy electricity from qualifying renewable generators at above-wholesale rates.

Senate Bill 577 would extend an agreement through which Eversource buys power from the Burgess Biopower plant in Berlin at above-market rates.

Each of these bills deliberately raises New Hampshire electricity rates in direct contradiction of what the state’s new energy strategy describes as the “critical goal” of reducing those rates.

The stated goal of these bills is to preserve several hundred jobs in the forest products industry. Yet by pushing electricity rates ever further upward, these bills jeopardize tens of thousands of jobs in other industries, particularly in manufacturing, which employs 70,000 people in the Granite State.

In an April statement announcing the new energy strategy, Gov. Sununu emphasized the importance of prioritizing low energy prices.

“New Hampshire has made great strides over the last year to reinvigorate our economy and to reaffirm our commitment to being open for business,” Sununu said. “Short term political calculations of the past must give way to long-term investments for the future. We are working hard to lower our electricity rates – some of the highest in the nation – and today’s energy plan will chart New Hampshire’s course forward.

“Whether it’s the family working hard to make ends meet or the business that has to put off hiring new employees, high electricity costs weigh down on everyone – especially the elderly and those on fixed incomes. It’s time for change. New Hampshire’s 10 Year State Energy Strategy will address our urgent needs. This plan sets the stage for New Hampshire to finally get out of the business of picking winners and losers in the energy market.”

The Josiah Bartlett Center for Public Policy agrees that New Hampshire’s economy is best served by an energy policy that ends the practice of “picking winners and losers in the energy market” and instead commits to lowering prices by removing state interventions that raise rates.

These three bills conflict with that goal and continue the outdated and discredited practice of rigging the energy markets to benefit politician-preferred groups at the expense of consumers.

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On housing and energy, putting consumers first

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Housing and utilities comprise the largest portion of household budgets. In only nine other states and the District of Columbia do residents spend more on those two items than Granite Staters do, per Bureau of Economic Analysis data. Yet legislators have not been keen to reduce those costs for the people who elect them.

On the contrary, they often prefer to pass laws that make those items more expensive.

So the release this week of a new 10-Year State Energy Strategy that set cost efficiency as its primary goal was a big deal. The previous strategy, set in 2014, focused on manipulating energy markets to favor expensive and inefficient priorities such as renewable energy, with little attention given to the cost that would fall to consumers.

To understand the magnitude of the shift, imagine a hippie folk rock act ditching the acoustic guitars, cutting their hair and putting out an R&B album — a good R&B album.

“Addressing energy costs is a critical goal for New Hampshire. Expensive energy – or pursuing policies that raise the cost of energy – directly and negatively impacts New Hampshire families and businesses and the quality of life in our state,” the new energy plan states. “As such, the priority of this Strategy is to organize goals around cost-effective energy policies.”

The plan does not oppose all subsidies for renewable energy initiatives. It does advocate limiting any such subsidies to the start-up period to prevent ongoing cost-shifting.

This consumer-focused approach to energy policy is at odds with several bills in the Legislature this session to continue or expand subsidies of inefficient biomass power plants. Senate Bill 446 would further subsidize biomass facilities and solar arrays. Senate Bill 365 would further subsidize biomass facilities. Senate Bill 577 would further subsidize biomass facilities.

The permanent ratcheting up of electricity rates by compelling ratepayers to subsidize politically favored businesses is a long-standing New Hampshire practice. The new energy strategy discourages this. Its focus on lowering rates has drawn praise from the state’s ratepayer advocate. Whether legislators will respond by reconsidering their support for higher rates is the question.

Local housing regulations vs. consumers

As with energy, housing costs are rising when they could be stabilizing. There is huge demand for new housing in New Hampshire, and builders are eager to fill it. The problem is that local regulations make it extremely difficult to build new homes or apartments to respond quickly to surges in demand.

Those regulations also add costs that make it hard, if not impossible, in many communities to build residences that lower-income families can afford.

New Hampshire’s average monthly rental rates are higher than Maine’s, Vermont’s and Rhode Island’s and are comparable to Connecticut’s. Average rental rates in Connecticut are only $68 higher than in New Hampshire for a one bedroom and $63 higher for a two-bedroom. Median rents in Manchester are higher than in many larger cities such as Philadelphia, Atlanta and Orlando.

With a booming economy, thousands more jobs than we can fill, and a statewide rental vacancy rate below 5 percent for 18 of the last 20 years and below 2 percent for the last years, the rate of home construction in the state should be rising aggressively. It is rising, but not at rates that would come close to filling demand. Local housing restrictions are in the way.

A fix to help builders navigate these restrictions more quickly and less expensively is offered in Senate Bill 557. It would create a housing appeals board to which developers could appeal decisions of local boards, committees and commissions. Now, appeals go to the superior court. It often takes years for an appeal of a local housing decision to reach a resolution in court.

The housing appeals board would take these appeals out of the court system and resolve them quickly. The board would be required to hold a hearing within 90 days of receiving an appeal and make a decision within 60 days of the hearing. This would dramatically speed the appeals process while eliminating expensive legal costs for both builders and municipalities (taxpayers).

At a hearing in the House Finance Committee this week, no one spoke against the bill and the New Hampshire Municipal Association did not oppose it. Nonetheless, the committee voted to refer it to interim study. It will come before the full House on Thursday.

If legislators followed the lead of the Office of Strategic Initiatives and made reducing costs a top priority in both of these areas, the impact on Granite Staters could be dramatic. Making the state a lower-cost place to live and work would bring economic benefits far exceeding any that could come from propping up obsolete power plants or ignoring the costs of local land use regulations.

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The renewable energy job subsidy schemes

Did you know that you’re the target of multiple state schemes to transfer wealth quietly to a handful of politically favored businesses scattered around New Hampshire? Well, you are, unless you live off the grid and are receiving this email on a home-brewed server built with whittled sticks and hand-mined silicon and powered by hungry marmots.

If you use electricity, the state is deliberately transferring money from your bank account (or buck-skin pouch if you’re turning survivalist but haven’t fully migrated off the grid yet) to various businesses liked by a majority of legislators.

The Renewable Portfolio Standards and Regional Greenhouse Gas Initiative are well-known plots to subsidize the types of energy businesses legislators prefer over the ones that offer customers the best rates. Less well known are other schemes to subsidize biomass plants.

New Hampshire Business Review had a good overview this week of two Senate-passed bills that would expand these subsidies.

SB 365 would compel New Hampshire’s default energy providers to buy power from small generating facilities (biomass plants, waste incinerators and hydro-power dams).

The bill states that these small power plants “are at-risk due to energy pricing volatility.” That is a creative interpretation. The plants are at risk because they struggle to compete on price with power plants that use lower-cost fuels such as natural gas.

Senate Bill 577 requires the Public Utilities Commission to open up for reconsideration (with the legislative intent of expanding) an existing order allowing a power purchase agreement between Eversource and the Burgess BioPower Plant in Berlin. Under that agreement, Eversource buys power from the Berlin plant at above-market rates until Eversource customers have overpaid for their electricity by $100 million.

Under pressure from legislators, Eversouce entered into this agreement in 2011. The $100 million in customer overpayments was not supposed to be hit for 20 years, but the halfway point was passed last year. SB 577 was written to keep this gravy train going.

Then there is Senate Bill 446, “an act relative to net energy metering limits for customer-generators.” As was explained in testimony at as the House Science, Technology, and Energy Committee public hearing on Wednesday, the bill’s title is not an accurate representation of its primary purpose. Its purpose is to subsidize New Hampshire’s six remaining biomass power plants.

Under net metering, people with small solar arrays can sell power to utility companies. The catch is that the state requires utility companies to buy the power at a rate set above the wholesale rate, creating a subsidy. This transfers money from ratepayers (you, your employer, your local government, your school district, etc.) to these “consumer-generators.”

SB 446 lets large-scale renewable power generation facilities that produce between 1 and 5 megawatts of electricity claim net metering subsidies (at a rate set by the Public Utilities Commission). It further states that facilities generating up to 25 mw can be paid under the net metering scheme for their first 5 mw of electricity. This huge expansion of the net metering subsidy was designed specifically to transfer your money (and everyone else’s) to the state’s six remaining biomass plants (though the bill also includes large-scale solar projects).

At the public hearing on Wednesday, numerous speakers said the subsidy was critical because without it 900 jobs in the wood products industry would be lost. Though sponsors could not say how much the bill would cost ratepayers, no one disputed an estimate of $20 million per year.

So to save 900 jobs in a state with a 2.6 percent unemployment rate and more than 15,000 job openings, legislators want to make everyone else in the state — including the employers of the state’s remaining workforce of more than 703,000 people — pay $20 million more a year for electricity.

New Hampshire Employment Security projected just this month that New Hampshire would produce 83,822 job openings this year. That’s 82,922 more jobs than would be lost if the state’s six biomass plants closed.

It should be obvious that it’s not good policy to try to save 900 jobs (if that) in a dying industry by ratcheting up electricity rates by tens of millions of dollars a year, thereby jeopardizing thousands of jobs in thriving manufacturing and other businesses. Yet this bill still passed the Senate. Maybe all the Senate’s calculators are broken.

(This essay was originally published in our weekly email newsletter of March 30, 2018. Sign up for our newsletter here and get a fresh take on a hot New Hampshire issue every Friday.  If you don’t like them, you can unsubscribe at any time.)

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An Assessment of the New Hampshire Coastal Risk and Hazards Commission Report

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January 2017

By Michael Sununu

Among the many drivers of unsound public policy in this day and age, perhaps the most odious is the alarmism over changes in climate that are supposedly driven by human activity. Time and again, we have seen costly, unjustified, and economically destructive public policy implemented in the name of climate protection, proclaiming that humanity can and should micromanage the earth’s climate, the largest and most complex system mankind will ever encounter. The justification for these costly actions is based on flimsy evidence, exaggerated claims, and a profound ignorance of the natural evolution and cycles of our climate systems. National, state, and local governments have all acted to impose damaging regulatory regimes, costly mandates, and harsh anti-development initiatives in the name of climate change, and New Hampshire has not been immune to the consequences.

On November 30, 2016, the New Hampshire Coastal Risk and Hazard Commission (“NHCRHC”) released its final report (http://www.nhcrhc.org/wp-content/uploads/2016-CRHC-final-report.pdf). This report is 124 pages of alarmist hand wringing, with a litany of recommendations that would expand government and strangle development in the Seacoast area. The apparent goal of the authors is to prod state legislators, bureaucrats and local officials to institutionalize acceptance of anthropogenic global warming (AGW) in state law and state regulations, based on the premise that sea level rise (SLR) threatens our Seacoast in an unprecedented fashion. The unstated result of these actions would be to cede control from local towns to the state, impose huge barriers to development and undermine the economy in the region.

Unfortunately, there is not enough critical analysis and skepticism of the basis for the fears outlined in the report. The result is a document heavy on fearful scenarios, calls to action and demands for spending.

This paper is an attempt to put much of the science in its proper context, educate the reader with real data, raise the types of questions that should have been raised by the NHCRHC, consider the nature of the actual risks involved, and question whether the recommendations are really what the state, the region, and local communities need at this time.

Download the full report: NHCRHC Assessment

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Don’t Make the Rest of Us Pay for Your Solar Subsidies

Don’t Make the Rest of Us Pay for Your Solar Subsidies

Charles M. Arlinghaus

 

Solar advocates are fighting to protect and increase the subsidized, above-market electric rates they get through a program called net metering. The debate isn’t about whether to allow solar energy but over how much of a subsidy to give solar and how to pay for the electric grid. As with so many issues, reasonable compromises are possible that allow every residential solar panel to be treated equally with reasonable accommodation but limited subsidies.

 

New Hampshire, like most states in the country, has a government program called “net metering” that serves to encourage small scale usage of solar panels as well as a small amount of wind energy. One benefit of producing your own electricity is that you don’t buy any during the periods when your panel or wind turbine is producing electricity.

 

But you can’t actually “go off the grid.” Solar, for example, only produces electricity about 10-15% of the time and you need electricity the other 85% of the time too. What’s more, you can’t store almost any of the excess you produce when the sun is shining. There are no effective ways to store electricity on a large scale so it must be produced essentially as needed — when you flip the light switch, there must be a turbine turning somewhere that very second and you must be connected to it by a wire.

 

Under net metering, an individual or other very small producer puts his excess power back into the grid. and this is where the subsidy comes in.

 

It would be difficult or impossible for a homeowner to market and sell the power by himself. So, the electric utility is required by the state government to buy your excess power keeping track of it through what is called a smart meter. The utility is required to buy the extra power not at the normal rate it purchases power we use — the market price — but rather at the retail rate, a rate that is double or triple the rate at which it would otherwise purchase power.

 

In other words, the state’s net metering law forces utilities to purchase power from individuals at an above market, subsidized rate — an excess charge that is then paid for by other customers.

 

Because this arrangement is a subsidy that raises the cost of electricity, the amount other ratepayers are required by law to subsidize is capped at a total of 50MW of electricity.

 

A program that started as something of an aside for the homeowner putting a few panels up on his roof has grown to include smaller businesses and municipalities seeking to arbitrage the enhanced rate. Solar marketing companies have done a good job utilizing the subsidy and other government cash incentives to expand the program and they’ve reached the cap.

 

Supporters of eliminating the cap believe the program would expand dramatically if subsidies were more broadly spent but therein lies the problem.

 

It is not particularly fair for poor and middle class ratepayers to subsidize the electricity of wealthier consumers who want to get paid back for their solar panels. The $40 -$50,000 cost of installing panels is beyond the savings account of most NH consumers.

 

When the total subsidized load is limited to about 1% of peak load, while still a targeted subsidy it’s small enough that people don’t lose much sleep over it. But advocates would have us eliminate the cap and extend the subsidy to larger and larger solar arrays by getting bigger and bigger businesses into the act, even extending the program to other means of production like hydro — all at an above-market subsidized rate.

 

Remember that every kilowatt of electricity we force the utility to purchase through the subsidy program and other ratepayers to pay for is a kilowatt that could have been bought at less than half that price somewhere else. NH already pays about $500 million more per year for electricity than it would if its costs were average — $527 million in 2014. This program is only a little tiny bit of that right now but every little bit matters.

 

On the other hand, there is an easy, market-based compromise that helps the wealthy solar advocate and doesn’t penalize the rest of us. If we, the ratepayers, bought your excess power at the rate we would otherwise pay — the current market rate — there would be no need for a cap. No subsidy, no cap.

 

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New Hampshire and the Clean Power Plan

September 2015

Josh Elliott-Traficante

In July the EPA released the final rules for its Clean Power Plan. This plan, drawn up under the authority of the Clean Air Act and championed by President Obama, aims to cut carbon emissions from power plants by 32% by 2030. To achieve that goal, the EPA has assigned targets for each state to meet as part of that overall effort, and has given states two options how to reach them. The first imposes emissions standards on fossil fuel fired plant, called the Rate Based Goal, and the second is a complex formula based on current plants, improved efficiencies, and increasing renewable production called the Mass Based Goal. New Hampshire’s assigned target based on emissions standards would cut emissions by 23%, while the formula based reductions call for a 14% cut in emissions.  While either are a tall order, it is an improvement over the first draft of the rule, which expected the state to cut emissions by 46%.

In order to comply with these rules the state must either submit a plan to the EPA, or ask for an extension by September 2016. Mandatory reductions must begin in 2022.

The Rate Based Goal: Not All Power Plants are Created Equal

Under these rules, most of New Hampshire’s power plants are excluded. Of the 153 power generating units in the state, only eleven units located at five plants will be subject to this rule. Three of those plants, Merrimack Station, Schiller Station, and Newington Station are owned by the public utility Eversource Energy[i], while the other two, Newington and Granite Ridge are owned by private companies. Despite the rule only applying to those five power plants, they supply roughly half of the electricity generated in the state.

Power Plant Owner Generation

(Nameplate Capacity)

 Fuel Source Location
Merrimack Station Eversource Energy 460MW Coal Bow
Schiller Station 100MW Coal or Oil Portsmouth
Newington Station 414MW Oil or Natural Gas Portsmouth
Granite Ridge Granite Ridge Energy 900MW Natural Gas Londonderry
Newington Essential Power LLC 605MW Natural Gas Newington

 

Under the rate based rule, by 2030 carbon emissions for coal fired plants would be capped at 1305 lbs/MWh[ii], while natural gas fired plants would be capped at 771 lbs/MWh.[iii] Based on the makeup of the state’s generation assets listed above, this gives the state a ‘blended’ rate of 858lbs/MWh.  As of 2012, carbon emissions for coal fired plants in the state averaged 2,382 lbs/MWh, while natural gas fired plants averaged 878lbs/MWh. If the state chose this option for complying with the rule, the state’s coal fired plants would need to reduce the carbon intensity of their emissions by 46% and natural gas plants by just over 12%.

In theory, to meet that goal, the state could require all of the coal fired plants to switch over to natural gas if they wanted to continue to operate, or shut down. Combined with small improvements to natural gas plant efficiency, that would be enough to meet the Rate Based goal. Whether or not the EPA would accept such a plan remains to be seen.

For those power plants not subject to this rule, such as the nuclear power plant in Seabrook, or any of the various hydroelectric dams scattered around the state, most are exempt because they do not emit carbon. Of those that do emit carbon, some will not be required to cut emissions either due to their size or the end use of the electricity, while others such as wood burning biomass are excluded because they are considered renewable.     

The Mass Based Goal:

The other option given to the states is the Mass Based Goal, where the state’s reduction goals, are expressed in terms of total emissions from generation of electricity. Under this framework New Hampshire will be expected to cut emissions by 14% by 2030, with an interim reduction of 8.6% achieved sometime between 2022 and 2029.

Using this method, rather than ordering reductions from specific power plants, emissions reductions are spread over all of state’s the power generation stations. The idea being that doing so further incentivizes the use of renewable energy and conservation, reducing the need for fossil fuel fired generation. Rather than the EPA telling a state where to cut, and by how much, this method gives the state a reduction target, and leaves it to the state to figure out how to get there.

Time Frame Carbon Emissions

(in short tons)

 Reduction

(over 2012)
2012 4,642,898 N/A
2022-2029 4,243,492 8.6%
2030 and Beyond 3,997,579 14%

 

How the state reaches that target could include everything from generating more electricity from nuclear, large scale hydro, renewables to conservation measures. As long as the amount of emissions declines, the state will be considered in compliance. 

Compliance:

As mentioned, the states have a decent amount of latitude when it comes to complying with these rules, including which path to take. However, if a state opts to use the Mass Based Goal, it must use as a fall back option the Rate Based Goal. This is because the Mass Based Goals would be impossible to enforce federally by their broad nature, while the Rate Base Goal, being defined, can be.  According to documents filed by the NH Department of Environmental Services to the EPA during the comment period[iv], the state intends to use participation in the Regional Greenhouse Gas Initiative (RGGI)[v] to meet these requirements, presumably under the Mass Based Goal approach. 

Costs:

Despite the EPA repeatedly insisting that the states have choices when it comes to these new rules, the states still have to comply with the rules. In a parallel to Obamacare, it is like insisting there are choices when it comes to healthcare, while requiring people to purchase insurance. Like Obamacare, there are costs involved.

The forcible sidelining of coal, oil, and to a lesser extent natural gas fired power plants and replacing them with renewables will increase electric rates. If states did not have programs such as RGGI or renewable portfolio standards (RPS)[vi] that in-directly and directly mandated electric utilities buy renewable energy respectively, the utilities would not buy it. Not out of some devotion to fossil fuel fired generation[vii], but because those sources are far cheaper than renewables. If they were cheaper, electric utilities would be buying up as much of it as possible, without the government mandating they do so.

Free Market in Action:

Despite this big push by the EPA, carbon emissions have actually fallen by 16.4% since 2005, without government intervention. Why? Natural gas is cheaper than coal. The fracking boom has dramatically increased domestic supplies of natural gas, causing the price to fall. As such, it becomes cheaper create electricity by running natural gas fired power plants than coal plants. In addition, because of this dramatic decrease in price, along with ample supplies for the future, most newly constructed power plants use natural gas as their fuel source, further undercutting coal. In addition to being cheaper, natural gas also emits far less carbon per megawatt produced. A coal fired plant replaced by a natural gas fired plant producing the same amount of power emits far less carbon in the process.

This 16.4% reduction came about purely from free market forces, not government intervention. Unlike government intervention which increases costs, the free market accomplished this while also reducing energy costs. Using a lower cost fuel results in lower energy prices. By letting the free market work everyone wins. Environmentalists get their reduction in carbon emissions, while consumers get lower electricity rates. Rather than use force, let the free market continue to work.

 

[i] Assuming that the ‘Global Settlement’ is approved by the Public Utilities Commission, these plants will be put up for sale in the near future.

[ii] Pounds per megawatt hour is the measure of how much carbon is emitted per megawatt of electricity produced.

[iii] The difference in these rates is an acknowledgment that natural gas emits less carbon than coal does per megawatt produced.

[iv] LINK

[v] Regional Greenhouse Gas Iniative (RGGI) is a cap and trade program among nine northeastern states that applies to all power plants over 25MW. Carbon credits are purchased at auction, with the number of credits available reduced every year.

[vi] Renewable Portfolio Standards (RPS) are a set of standards set in state law that mandate certain percentages of the power used in the state come from renewable sources. These percentages are increased every year. If a utility fails to acquire enough renewable power, alternative compliance payments must be made.

[vii] There is something to be said about the inherent reliability of those types of plants. People and business still need power at night or when the air is calm. Solar plants can see their output reduced to a fraction just from a cloud passing overhead.

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Too Many Bananas Are Ruining Our State

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Charlie Arlinghaus

May 6, 2015

As originally published in the New Hampshire Union Leader

Are you a Banana? New Hampshire has too many bananas and is suffering because of it. The world is populated with millions of us who seek to live in the modern world when we want to enjoy its conveniences and then turn on our back on that same world and hope that someone else with pay attention to the details that make that convenience possible.

There is a common aspect of human nature that infects so many decisions about the infrastructure that surrounds us. Most of us are familiar with the acronym NIMBY — an abbreviation for Not In My Back Yard. You picture someone saying “that’s a great idea, we should have one of those but not in my back yard. It would better in yours. Big giant compost heap in your yard and we can use mine to sip lemonade.

New Hampshire’s response to infrastructure has always had a bit of a NIMBY element to it. But lately we seem to have graduated to tropical fruit. Our best acronym now is BANANA — Build Absolutely Nothing Anywhere Near Anything. Every new project is opposed for some reason or another, often for any reason at all. There seems to be an active and vocal group traipsing from one meeting to another seeking to stop anything new from happening.

The problem with these banana people that the status quo is a bad thing and needs to be changed not preserved. The state has spent decades pretending everything is fine with its electricity markets and that nothing needs to happen. and it’s killing us.

Slowly but surely the dynamism that used to be our job market has turned to stagnation. Mediocre job growth means people don’t move here much, younger people can’t stay even if they want to, and too many Granite Staters have to work in Boston or some other place at the end of a horrific commute

And the biggest hole in our competitive armor is electricity.

The fight for jobs needs to be fought on as many fronts as possible but on the electricty cost front we’re not just losing but getting routed.

Last week, new data was released about just how bad we are and how much worse we’re getting. Then again, a glance at your own electric bill probably told you everything is not fine.

In February, New Hampshire’s electric rates were 68% higher than the national average. This is even worse than a year ago when we were an already too high 54% above average. To add insult to injury, we are least competitive in the area we need to be most competitive: the industrial sector. The grotesque 86% above average rates of a year ago for industrial users have ballooned to 105% above average.

This is not a minor expense. It amounts to hundreds of millions of dollars of costly drag on our economic competitiveness.

Think about it this way: the companies that create the best paying jobs in the high tech and manufacturing sectors — the areas we would give our eye teeth to attract — would see double the electric bill if they had the misfortune to locate here. And your banana friends think that’s fine.

If you believe a banana, life is grand and all those people worried about jobs are just being silly. Actually, if we’re being fair most of them don’t care. Their analysis has only gone as far don’t build it. They presume the juice for their iPhone and electric car will materialize some other way. Exactly how is someone else’s problem.

The someone else is us. It’s our problem. We can read the numbers and realize that New Hampshire is on the verge of becoming a backwater. The dynamic state we once were is now limping along, sore and bedraggled.

Stagnation and electric costs are not two different things. Reducing the cost of electricity requires having more of it. Having more of it requires building things — the infrastructure necessary to create a modern life, to power the machinery and technology that are part of well paying jobs.

No one would suggest we build everything anyone wants but we have a big problem and it will require living in a modern world (I live a few hundred feet from a power line). We are going to have to allow more building and fewer bananas.

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Agreeing on the problem isn’t always enough

Charlie Arlinghaus

April 22, 2015

As originally published in the New Hampshire Union Leader

The political process often obscures truth and inhibits agreement. Too often each of us believes he or she knows what’s important but that the things you think are important are trivial and your insistence upon them is a sign of perfidy or cognitive dysfunction. On very rare occasions there is substantial agreement on a problem. This is good only because it allows us to attack someone else’s solution as near-sighted or disingenuous. It is inconceivable that an opponent might have a well intentioned idea that we simply think is a lower priority or might not work as well.

Increasingly politicians are realizing that there is no longer such thing as the grand mythological New Hampshire Advantage. Instead we live in the midst of economic stagnation that rarely hints at the former economic dynamism of our state. To their credit, most politicians fret every once in a while over this depressing economic reality. Most of them aren’t quite sure what to do but are pretty sure that what the other guy wants is wrong.

If you have the bad habit of reading this space with anything approaching regularity you know that I am continually harping on the remarkable growth of the 1980s and 1990s compared to the pathetic stagnation of the last fifteen years. The data are consistent across measurement categories but consider this one dramatic snapshot: Over the same number of months, the recovery of the 1980s created 118,000 jobs compared to 21,000 in the current recovery. This is not, as the poet says, your father’s Oldsmobile. Our economy used to hum and now it coughs.

Everyone tends to be critical of everyone else’s idea but at least people of all stripes and spots are now admitting that the status quo isn’t good enough. That, however, is where the agreement ends.

In general, I believe that anything that lowers the cost of doing business makes New Hampshire a more attractive state. That has traditionally been the way we do business. Some states (New York might be an example) amass large treasure chests and hand out loans and special tax statuses. This has not been New Hampshire’s way for two reasons. First, we can’t compete with the giant states in amassing war chests. New York has more tax burden to forgive and more coins in their fiscal couch than we tend to raise.

Second, we have had a historical preference for not picking winners and losers — which the government of any state tends to do poorly. If we have a program, we create criteria and allow any business which meets the criteria to apply. A notable current exception is the attempt to create programs and policies that apply only to one development in Dixville Notch. But that’s an exception based on romantic nostalgia that causes some to consider a proposal they would reject on principle were it located anywhere else.

Otherwise, job creation strategy falls into two camps. One group rejects that notion that businesses care about the cost of doing business and proposes instead to spend more government money. Their theory is that government “investment” is the key to stimulate our moribund economy. It would be wrong to say that all government spending has no effect but taking more in tax dollars and then doling them out does seem to presume that legislators have some superior knowledge base — a supposition somewhat short on evidence.

Others worry every time I suggest reducing our highest corporate tax rate. To them a quite modest cut isn’t enough to offset the beneficial results of increased government largesse. They’re quite right that the reduction is too small to have a dramatic effect but we’ll never lower the rate at all if we don’t start a little bit at a time.

One potential source of common ground is electricity. Some worry about high electric rates a little, others a lot. In January 2015, New Hampshire’s electric rates for all users were 65% higher than the national average. Much worse, for industrial users New Hampshire was 94% higher.

There is no worse signal we can send companies that use a lot of electricity like the high tech industry or manufacturers. With rates that ridiculous, if you tried to move your company to New Hampshire your board of directors can and should fire you for dereliction of duty.

At this point, electricity seems like more than a passing fad. Maybe we can agree 94% higher than the national average isn’t quite the right place to be.

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Stagnation Needn’t Be Our Destiny

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Charlie Arlinghaus

December 4, 2014

As originally published in the New Hampshire Union Leader

One of the problems for all of us is that we are living in the past. We think reality is the same as it was 15 years ago but in actuality we’ve been left behind and are in danger of becoming a museum piece. New Hampshire has been left behind and most politicians are reduced to talking about a previous reality that no longer exists except in their mind. Prosperity has been replaced by stagnation, dynamic growth by brackish backwater. This mediocrity is the problem of our time but too many don’t notice the problem or admit to the new rules we operate under.

The 1970s, 1980s, and 1990s were heady times of rapid job growth in New Hampshire. Each decade featured a dynamic economy, an extraordinary competitive advantage over our neighbors that made New Hampshire a haven of in-migration and led to New Hampshire being called an island of prosperity surrounded by a sea of socialism.

New Hampshire seemed to be a haven for entrepreneurs and high tech companies, a dynamic new economy remaking itself time and again in the midst of candlelit old economies wedded to the old stagnation we associated with yesterday’s socialism.

At the end of those thirty years, the Federal Reserve Bank of Boston, not a traditional cheerleader for New Hampshire, referred to our state as the envy of its neighbors. But that was then, this is now.

At the height of the envy-causing boom, New Hampshire had 28% job growth in five years (1983-1989). The last eight years saw complete job stagnation – the same number of jobs in 2013 as 2005. No single economic statistic is more important to public policy than this.

We are no longer an island of economic dynamism. We are merely one more pebble in a stagnant economic gravel pit.

Yet too many politicians continue to refer to what was once called the New Hampshire Advantage – the competitive economic advantage we once enjoyed over our neighbors that no longer exists.

Our tax picture is broadly better than most. The Tax Foundation ranks us seventh largely because we have no income tax. But subcategories are troubling. Our business taxes are among the worst in the country and business recruiters report that the first thing they are asked about is tax rates.

Unemployment taxes, workers comp rates, the cost of health insurance (labor costs) are all among the highest in the country. Most troubling, and the biggest roadblock we currently face, are our highest in the nation energy costs.

So much of business relocation is psychological, and the psychology of measure after measure after measure being so high and out of range is that places like Texas and North Carolina look more and more attractive.

In the midst of splashing around in this brackish backwater we are treated to politicians talking about preserving some non-existent advantage.

It’s time to face reality. We are not competitive. College graduates of today do not remember a time when New Hampshire was a great place to look for a job. Their whole life has existed while New Hampshire was a place to be escaped to find a brighter future.

I have seen this film before and I don’t like how it ends. Growing up in Detroit, newsstands stocked the Dallas Morning News so people could read the Sunday want ads. It was more useful to them in finding their next job than the local papers could be. I would hate to see people trade in their Union Leader subscription for the Chattanooga Times.

But our die has not been cast. We have not crossed a Rubicon. Instead we have sat still and stillness can be cured by action. We should not resign ourselves to business as usual and the fate of being the third pea in a Northern New England pod of stagnation.

The dynamism of the past may be gone but we can work to tear down walls to competitiveness. Admit that our advantage is gone and we can fight to get it back. We are still a small state and somewhat more nimble than many would be competitors. We have not gambled millions on giveaways and irreversible programs.

Every action taken in the next legislature should be judged by whether it raises or lowers the price of doing business in New Hampshire, whether it makes us more or less competitive. Stagnation needn’t be our destiny.

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