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Another reason for lowered expectations on renewable energy: hidden costs

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January 17, 2013


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Another reason for lowered expectations on renewable energy: hidden costs

As we noted here recently, enthusiasm for renewable energy—touted for years to help the environment while growing Colorado’s “New Energy Economy”—has ebbed somewhat in the past few years as the fundamental limitations of wind and solar power have become clearer.

As we’ve also noted, renewables can become even costlier amid state mandates making them comprise an ever-larger share of our energy portfolio—creating an unfair burden on residential and business consumers. We were reminded of that in today’s Denver Post, where reporter Mark Jaffe noted that, “A review by the Lawrence Berkeley National Laboratory…finds for most of the 29 states with renewable energy standards the rate impact has been less than 10 percent and in 13 states it has been less than 5 percent.” Though the upshot of Jaffe’s analysis is that renewable-energy mandates don’t cost as much as some had feared, it appears they nevertheless drive up power bills. A lot, in some cases.

Now consider that a lot of the extra costs associated with renewable energy aren’t even listed on its price tag—a fact that can skew the national energy debate. In their quest to incentivize the expansion of renewables among public utilities such as Minneapolis-based Xcel Energy and Rapid City, S.E.-based Black Hills Energy, both of which operate extensively in Colorado, state and federal policy makers have implemented assorted devices that can distort both the true cost of—and the demand for—renewable energy.

A case in point is a  flap over a remark earlier this month by an Xcel lobbyist in Washington, as reported by the Minneapolis-St. Paul Pioneer-Press:

Xcel Energy, long the nation’s top wind energy provider, had to do some damage control Monday, Jan. 7, after its chief Washington lobbyist implied the Minnesota utility was considering a split with its wind energy allies…

…The lobbyist, John O’Donnell, was quoted Friday in the National Journal, a Washington, D.C., publication, saying “we are in the process of reviewing our relationship” with the American Wind Energy Association. Xcel is a member of the association. O’Donnell also told the Journal that Xcel may not buy more wind power because (a congressionally renewed wind-energy) tax credit did not do enough to benefit wind energy customers like Xcel.

Shortly afterward, Xcel chief exec Ben Fowke issued a statement assuring the public that wind energy remains an important part of the utility’s future.

What was most noteworthy about the story, though, was Xcel’s underlying beef, regarding Congress’ decision to continue funding the wind-enegy tax credit:

Xcel had been disappointed that the one-year extension of the production tax credit for wind energy, known as the PTC, did not include the utility’s suggestion for something called a “consumer renewable credit” to help utilities…

…The PTC is paid to developers to offset the cost of building a windmill farm, but the proposed consumer renewable credit would go to utilities like Xcel to offset some of the costs of using wind energy, such as having natural gas power plants ready to take up the slack when the wind dies down, Xcel officials explained.

No, Congess didn’t go for the extra “consumer renewable credit” to utilities like Xcel this time around—though Fowke pledged he’d push for it again in next year’s federal budget—but it did vote to continue directly subsidizing the development of wind farms. That subsidy, of course, costs the whole economy and ultimately, at least in part, comes out of the pockets of the same Xcel ratepayers who are supposed to benefit from wind energy.

But wait, there’s more. Even with sweeteners like tax credits, Xcel’s appetite for more renewable energy appears to have hit a wall. Given the above-mentioned costs and other limitations inherent in the likes of wind energy, its use may have reached a saturation point.

If that comes as news, that’s probably because the public may not be aware of it—thanks to another public-policy gimmick that miscasts the true level of renewable-energy demand. As explained in a recent letter to the editor in the Denver Post from former Colorado Public Utilities Commission staffer Richard Mignogna, there is:

…a commonly held misconception that Xcel’s renewable generation must grow to 30 percent by 2020 (under state law). It has been well documented that, due to its purchase of too much renewable generation, too soon, at too high a price, Xcel has already accumulated sufficient renewable energy credits, which have a five-year shelf life, to achieve compliance with the renewable standard well into the next decade even without acquiring any additional renewable capacity. Thus, it does not necessarily follow that Xcel’s renewable energy generation will increase at all by 2020.

So, consumers are being made to pay more for renewable energy, not only through the front door of higher power rates but also through the back door of tax-funded subsidies. And yet, for all the added expense, consumers still aren’t getting all the additional renewable energy they think they’re paying for.

Meaning that, yet again, it’s not Xcel or state or federal policy makers who get the short end of the stick; it’s rank-and-file consumers.


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