Advocates say that massive amounts of renewable energy are feasible and will save money in the long run. But how do we know that’s true?
Because that’s exactly what’s happening. [Note: this post has been updated to correct some calculations]
Let’s take Colorado. The state has a 30% renewable energy requirement. How are things going? Xcel, the largest utility in the state, says it will meet that requirement in 2012…that’s 8 years earlier than required.
Ok, some may say, but isn’t such a massive investment going to be painfully expensive?
Actually, according to Xcel, investing in renewables is going to save money in the long run. They are required to calculate the counterfactual—what would their costs be if they didn’t buy renewables?
[Note to readers: we discovered an error in the calculation below--the upshot of which is that the underlying premise that renewables are net savings to ratepayers is correct, but the cited $409 million figure is not supportable as the exact amount. The $409 million figure is actually a rolling balance of projected RESA rider revenues, and the fact that it is positive means that supplemental collections to support renewable procurement is, in the long-run, not necessary in CO. Column K is a little closer to what we are looking for, because that shows the estimated incremental cost of the renewable energy analyzed for this plan compared with existing system resources and replacement conventional energy. Col K shows that in 2018 the renewable energy resources analyzed in this plan are cheaper than the energy from the system resources that the new renewable energy displaces. However, it's still not a clean comparison, since it includes existing renewables procured under legacy programs. Column AA represents the rolling deferred balance without RESA rider collections after 2018--which comes out to $118 million of savings by 2021. That is a little closer to what we are looking for, as a number that represents the future positive benefits of renewable energy. However, note that Col AA still includes Windsource collections--Windsource is a supplemental green power program, where subscribers voluntarily pay an extra $1 per month--and interest. Unfortunately, it may not be quite correct to simply subtract the Windsource premium and interest to arrive at purely the renewable energy incremental benefit, because there may be compounding of interest. So, while we can deduce that renewable provide net savings, it's difficult to posit with certainty exactly what those savings are.
Part of the reason is that future costs of fossil fuels fluctuate, and are hard to predict with certainty. Take Xcel's purchase of a 100 MW wind farm called Limon II as an instructive example. According to testimony by the company (pdf), "The net benefit (cost savings) of the Limon II PPA, over the entire 25 year term on a nominal basis, is projected to be nearly $274 Million, or nearly $100 Million on a net present value (NPV) basis. What this means is that we project that the Limon II PPA will save the Public Service system $100 million (NPV) over not acquiring this wind."
So there you have it.
We regret the error.]
According to Xcel’s own calculations, if the state’s renewable energy standard didn’t exist, their ratepayers would pay an additional $409 million by 2021. That bears repeating. According to the utility’s calculations, going renewable will save Colorado ratepayers $409 million. And that’s assuming no new legislation that would require fossil fuels to compensate for carbon emissions. If such a law were passed, then the state’s renewable standard would be expected to save ratepayers $1.1 billion by 2021.
Check it out for yourself. You’ll find the calculations in Tables 7-3 and 7-4 in Volume 2 of Xcel’s RES compliance plan (available in the CO RES docket 11A-418E, link here ). According to Volume 1 of the RES plan, Xcel assumes carbon costs of $20/ton, escalating at 7% annually, as approved in the 2007 Colorado Resource Plan, which introduced possible carbon emission regulation in CO. Xcel is using the numbers from the 2007 CO Plan but on a delayed implementation schedule with carbon costs starting in 2014. (Vol. 1, p. 68). (Hat tip to Erica Schroeder of Keyes & Fox lawfirm for digging up these figures.)
Colorado started on it’s renewable venture in 2004, when voters passed Amendment 37, a ballot initiative to establish a 10% renewable standard in the state. The state legislature upped the requirement to 20% in 2007, and 30% in 2010. And no wonder why—compliance 8 years early, and massive ratepayer savings.
So if anyone asks you if renewable energy can scale, or wonders if it costs too much, share Colorado’s experience. Those questions are answered by facts on the ground.
I came, I read this article, I cquonered.
[...] In Michigan, the Public Service Commission has concluded that its current RPS law – 10% by 2015 – is saving money for energy customers. The Commission determined that new coal plants would cost ratepayers about 13.3 cents per kilowatt hour. But the new renewable plants under contract were coming in at about 9.1 cents per kilowatt hour. Same for California where their PUC has concluded, based on the current 2011 RPS Solicitation, costs are decreasing, making renewable energy more competitive with fossil fuels. Xcel, the largest utility in Colorado, says that the state’s renewable energy standard will ultimately save their consumers as much as $100 million over 25 years. [...]