In today's WSJ, Congressman Kevin Cramer (R, Norh Dakota) asks the following questions; 1. how costly will it be for the stability of the U.S electricity grid to swap out low cost, dirty and reliable coal for more expensive, clean, and intermittent renewables such as wind and solar? 2. How much will residential and industrial and commercial electricity prices rise by because of this power composition shift? 3. Could the EPA's estimate of an annual energy efficiency gain of 1.5% be achievable or does this over-state the efficiency gains? These are fair questions that serious economists should be factoring in as we try to conduct prospective cost/benefit studies of shifting towards "green power".
For details on the President's Clean Power Plan read this.
Peng Liu, Nils Kok and I will soon release a paper where we study energy efficiency trends for hotels that are part of the same chain. Our results both provide some support for the President's optimism and other of our results support Mr. Cramer's more pessimistic view. Why are hotels interesting? they allow us to conduct a "apples to apples" comparison of similar pieces of the capital stock and observing their trends in energy efficiency over time.
Note the technological optimism implicit in the President's plan. The impact on U.S firms who require 24 hour a day consistent access to power hinges on the rise of affordable battery technology to store power generated by intermittent wind and solar.