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25 by 2025 'Green Energy' Studies Ignore Costs
Michigan Capitol Confidential ^ | 8/25/2012 | Michael LaFaive

Posted on 08/29/2012 9:50:22 AM PDT by MichCapCon

Mackinac Center analysts have long been critical of the way consultants — and frequently their clients — misuse economic modeling software.

We were reminded why with the recent publication of two papers purporting to show large job creation, if only state voters would approve a renewable energy mandate on the statewide November ballot.

The initiative, commonly known as the Michigan Renewable Energy Amendment, would mandate that 25 percent of Michigan's energy usage be provided by renewable sources by the year 2025. There is at least one major problem with each study, however: costs.

The study authors' did not include the estimated costs of the mandate in their respective models. The utility industry has estimated that the mandate will cost some $12 billion. Until these costs or some other reasonable approximation thereof are included, neither report should be taken seriously.

The two studies were produced by Michigan State University for the Michigan Environmental Council and the consultancy Hill Group Management Consultants of Pennsylvania for the Energy Innovation Business Council, respectively. Each uses input-output models to measure the jobs impact of the mandate. Both use a model known as IMPLAN, and the former also used a model known as the Jobs and Economic Development Impact model.

The first study, “Projected Job and Investment Impacts of Policy Requiring 25 Percent Renewable Energy by 2025 in Michigan,” was produced by Michigan State University scholars, and was commissioned by the Michigan Environmental Council. It should be noted that the MEC, an environment-focused nonprofit, supports passage of the 25 by 2025 mandate. The MEC press release accompanying this study reported that passage of the mandate would create a minimum of 74,495 jobs.

First, and as Michigan Capitol Confidential has already noted, the press release misled readers because the report doesn’t actually say that. The report breaks down its job count to 74,495 job years. That is, a person newly hired by a wind company and who works 25 years would count as 25 job years, though it is still just one job.

Second, the report doesn't include costs associated with this mandate, only the benefits, so the model treated all new spending as manna from the heavens. Such an assumption does not comport with reality. As economist (and former Mackinac Center intern) Daniel J. Smith remarked, "The increasingly sophisticated Keynesian models … still fail to address the most basic question, 'Where is the money coming from?'"

Costs do occur and — if actually fed into the model — would show a different and perhaps negative jobs impact.

To the authors' credit, they responsibly spell out the fact that their modeling efforts "only reflect gross and not net impacts." Unfortunately, their disclaimer is on page 23 — the last page of the written text and far from the money quotes journalists typically seek upfront. This gross versus net fact was also left out of the MEC's mandate-aggrandizing press release.

The other study, "Economic Impact of New Energy Manufacturing in Michigan," similarly employed an input-output computer software model; the authors claim, however, that only "20,791 jobs would be supported" by the mandate. This study also ignores costs. Although the report isn't as explicit on this issue as the MSU paper, the authors confirmed by phone that their calculations involved a gross and not a net impact.

It must be underscored here that the two studies come to vastly different job creation conclusions. There are probably a number of good explanations for this, most notably that one counts job years while the other just counts jobs. Regardless of the reasons, these reports show how easy it is for consultants to obtain wildly different estimates of the same study subject (renewable mandate and jobs), over the same time period and using the same impact model (IMPLAN).

Economic models are not exempt from economic incentives, which may help temper the results produced in these particular models.

This author is far from the only individual to criticize the use of these models. In his 2006 paper, "Economic Impact Studies: Instruments for Political Shenanigans," author John Crompton argues that "most economic impact studies are commissioned to legitimize a political position, rather than to search for economic truth."

In his 1993 paper, "The Misuse of Regional Economic Models," Edwin Mills demonstrates how such impact models might be abused for political gain and offers some thoughts on how this occurs:

... [T]o justify increased spending, government officials must identify some publicly desired goal to be accomplished by government spending. Creation of new jobs is among the best such goals that can be found. ... [T]hey must make it plausible that government can accomplish the goal in a way that the private sector cannot. This is where REMI is so valuable. It is a complex computer model that lay people cannot understand or evaluate, and it has important scientific merits. Thus, the frequent government claims that the best scientific model available shows that x thousand jobs will be created by the project helps to carry the day.

Michigan economist and economic consultant Patrick Anderson made a similar argument in his 2005 book "Business Economics and Finance," writing, "Because the claimed economic impact of a proposed development can affect political support for a proposed project … an incentive often exists to exaggerate the benefits."

While economic impact software can be a useful tool for measuring economic phenomenon based on policy changes, they (and the output they produce) must be used responsibly.

Until the sponsors of the 25 by 2025 studies rework their estimates to include all the costs associated with this mandate, voters should not use these studies as an assessment of the proposed mandate's economic impact.

TOPICS: Business/Economy; Science
KEYWORDS: 2012; envirofascism; globalwarming; globalwarminghoax; greenenergy; greenfraud; michigan; thegreenlie

1 posted on 08/29/2012 9:50:25 AM PDT by MichCapCon
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To: MichCapCon

Money laundering.

2 posted on 08/29/2012 9:53:43 AM PDT by freekitty (Give me back my conservative vote; then find me a real conservative to vote for)
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To: MichCapCon

This is all a mute point! With out liberals help and give 17 years, technology will be such that these numbers and goals will be irrelevant!

3 posted on 08/29/2012 10:02:44 AM PDT by big bad easter bunny (If it weren't for coffee I would still be living with my parents!)
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To: freekitty

These type of models are no different than the AGW/IPCC CO2 scam models. Grants provided to people who will make projections based on the outcome the funders wanted in the first place. Total waste of taxpayers money. Exactly how the socialist democrats operate. Expect nothing less from the HIDE THE DECLINE PARTY

4 posted on 08/29/2012 10:04:29 AM PDT by spawn44 (MOO)
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To: MichCapCon
The study authors' did not include the estimated costs of the mandate in their respective models.

That has been the modus operandi for the last 50 years.

Tossing money around willy nilly without concern for where the money to pay for it is or where it would come from.

One of these days the economy is going to say "ENOUGH" and get even!/s

5 posted on 08/29/2012 10:20:51 AM PDT by EGPWS (Trust in God, question everyone else)
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To: MichCapCon

Not going to happen. Put up all of the windmills you want, they cannot supply a reliable source of power. It’s a money laundering scheme perpetated by the green lobby, plain and simple. If you want cheap power, drill for all of that natural gas and oil that’s sitting under the Great Lakes. It’s their, ask the Canadians. Michigan has been destroyed by the socialist liberal democrats, turning it into the graveyard state. I had to leave there after living there for 40 years. I couldn’t stand watching an industrial powerhouse being reduced to ruin anymore. Point the finger at who you want for the decline of industrialization, but there’s plenty of people here and elsewhere who cheered it’s demise. Oh, and for the blame the union crowd, the unions weren’t the sole reason for the downfall, they only played their part as useful idiots.

6 posted on 08/29/2012 10:38:44 AM PDT by factoryrat (We are the producers, the creators. Grow it, mine it, build it.)
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To: MichCapCon; 11B40; A Balrog of Morgoth; A message; ACelt; Aeronaut; AFPhys; AlexW; America_Right; ..

Global Warming PING!

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7 posted on 08/29/2012 9:08:21 PM PDT by Tolerance Sucks Rocks (Obama should change his campaign slogan to "Yes, we am!" Sounds as stupid as his administration is.)
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To: MichCapCon
It is a complex computer model that lay people cannot understand or evaluate, and it has important scientific merits. Thus, the frequent government claims that the best scientific model available shows that x thousand jobs will be created by the project helps to carry the day.

If the model is "too complicated for me to understand" I assume that means that it doesn't work or that it's just agenda-driven bullshit, and they're trying to cover that up. If the model were valid, I'd certainly be able to understand it. Therefore, when they start chanting this crap about it being too difficult to understand, the only rational thing to do is, not to ignore, but to count it as points AGAINST whatever they want you to do. Otherwise they're in a "nothing to lose" scenario and they might as well at least try lying to you.

8 posted on 08/29/2012 10:56:34 PM PDT by Still Thinking (Freedom is NOT a loophole!)
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To: Tolerance Sucks Rocks

Thursday, August 30, 2012

Smart Grid meters start three Chicago area home fires

Smart meterCrain’s reports on problems developing in Philadelphia which led to suspending smart-meter installations that state lawmakers okayed for Illinois’ Com Ed last year during a heated - and finger-pointing - debate on the Illinois Senate floor. Now the topic’s getting hotter as smart meters were found to be involved in three suburban Chicago home fires.

Two weeks after Commonwealth Edison Co.’s sister utility in Philadelphia suspended smart-meter installations after a fire and more than a dozen incidents of overheating, ComEd says there have been three “small fires” involving smart meters it installed in suburban Chicago homes.

“ComEd has experienced three smart meter events that resulted in damage to metering equipment and to the immediate area around the meter due to small fires,” the utility said in a statement responding to questions from Crain’s. Two of the incidents were at homes in River Forest and the third was at a home in Berwyn.

In addition, 15 other smart meters have exhibited “higher than normal heat conditions causing damage to the smart meter,” ComEd said. While the cause of the overheating appeared to be due to connections in the houses, ComEd as a precaution replaced the meters, it said.

The meters were installed as part of a pilot program that led to state passage last year of the controversial “smart grid” law.

9 posted on 08/30/2012 6:59:14 AM PDT by KeyLargo
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To: MichCapCon

so for each job year it will cost someone else 4-5 lost job years.


10 posted on 08/30/2012 8:21:38 AM PDT by dila813
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