Gov. Deval Patrick wants to transform the Bay State into a green showcase for the country, with trendy solar complexes and wind farms galore.
But the cost of creating this eco-friendly paradise is staggering when it comes to that other, essential green – billions in added costs for everyone from local developers to manufacturers.
While public debate is focused on the possibility of a gas tax and the rising cost of the state’s health care experiment, the Patrick administration is quietly preparing to slap $5 billion – and probably more – in additional environmental and energy costs on Bay State businesses, business groups contend.
All at a time, of course, when the Bay State is grappling with the worst downturn since the Great Depression.
And the prospect that one of the most expensive places in the country to do business is about to get even costlier has some Massachusetts businesses eyeing the exits, industry groups say. Others looking at the state, in turn, are having second thoughts.
“Companies vote with their feet, especially the energy intensive ones,” contends Robert Rio, senior vice president of government affairs at the Associated Industries of Massachusetts (AIM). “We are seeing companies hesitate coming to Massachusetts because of the electric rates.”
Economic Electrocution
The Bay State’s high energy costs, already near the top nationally, claimed its latest victim earlier this month.
Breyers ice cream announced plans to shut down its Framingham plant, taking with it more than 200 jobs. The ice cream maker is now looking at locations in other states in the Midwest and beyond with dramatically lower energy costs.
There’s also concern about the state’s remaining paper manufacturers, mostly clustered in Western Massachusetts, which are also sensitive to rising power costs.
But for every company that is threatening to leave, there are others that won’t consider coming here after they look closely at what they will be shelling out to keep the lights on.
Data centers and even biotech companies are now having reservations about setting up shop in a state with such high electric costs, Rio contends.
However, the Bay State’s already-high costs may be poised for another increase amid an ambitious push by the Patrick administration to boost the use of renewable energy.
One of the latest plans calls for a $42 million solar complex in Western Massachusetts – roughly five to six times the cost of building a traditional gas-fired plant of the same size. That could push the electric bills of some manufacturers up by $150,000 or more, said Rio, who added AIM has weighed in with state regulators against the project.
No matter that Massachusetts, along with its high electric rates, also ranks near the bottom in terms of greenhouse gas emissions.
And that’s the tip of the iceberg, with plans to have 20 percent of the state’s energy needs powered by renewable energy by 2020. Getting there, given the higher cost of these projects compared to traditional power plants, could cost billions more, Rio contends.
“We have crossed the line from doing things rationally,” Rio said. “Now we are going to reduce greenhouse gases at any cost.”
Not so, contends Phil Guidice, commissioner of the Massachusetts Department of Energy Resources.
While renewable energy might be more expensive now, that could change in a flash again should oil rise back to $140 a barrel as it did last summer.
It makes sense for Massachusetts to start preparing and get some experience with renewable energy, even if there is a higher cost attached to that.
“The status quo is not acceptable,” he argues.
$5 Billion Clean-Up
Yet even as Bay State companies grapple with ever higher electric bills, they are now faced with a double whammy.
Along with rising energy costs, local firms, from developers to manufacturers, also face billions more in potential costs to comply with tough new Patrick administration environmental regulations.
State environmental regulators started with a program designed to prevent storm water from running off parking lots and pavement into the Charles River and its tributaries.
Now they have expanded it across the state.
Sounds like a laudable goal, but I doubt anyone at the state Department of Environmental Protection took out their calculator and punched in some numbers to figure out how much it would cost businesses to comply.
That, anyway, is what David Begelfer, chief executive of Massachusetts NAIOP, which represents the state’s development industry, did, and he came up with an astronomical number: more than $5 billion – or enough to build five Hancock Towers.
It’s a calculation based on the thousands of institutions, businesses and development projects that would be forced to repave their parking lots and put in expensive infrastructure.
The regs kick in not just when new projects are built, but even when a company or institution wants to add a few more spaces to their parking lot.
A typical business with a 5-acre parking lot that wants to repave a small portion of it, say 5 percent, could be forced to shell out as much as $450,000, NAIOP contends, citing recent private sector research.
A letter writing campaign by business groups like NAIOP and AIM have prompted state environmental regulators to take another look.
Laurie Burt, commissioner of the Massachusetts Department of Environmental Protection, said her department is cognizant of the cost to businesses, but argued they are necessary to eliminate a major pollutions threat.
While she declined to offer a rival cost estimate, Burt argued that billions is too high. She noted the changes could be made over a 10-year period as well.
Begelfer, though, warns substantial changes, not minor modifications, are needed.
“We feel there needs to be a total overhaul,” he said.
And the Patrick administration might do well to take a big step back on the rest of its ambitious green agenda as well.
It’s great to be green, but not at the cost of driving companies and jobs out of state.
“You are going to have businesses that are going to have to make some very tough decisions and look elsewhere if there is a cost structure that is substantially lower,” NAIOP’s Begelfer warns.
