The Plunging Cost of Renewables and Boulder's Energy Future
Anne B. Butterfield
April 19, 2011 (Huffington Post)
The talking point about the high cost of renewable energy has become a litany for the fossil fuel crowd. Keeping up with the sacred devotion, Rep. Kathleen Conti, R-Littleton, just introduced a bill to provide more oversight on utility rates increases, particularly with what she calls the number one driver of higher utility bills -- renewable energy.
"Renewables are driving the costs up, and the more we demand from renewables, the more costs will go up," said Conti, according to Colorado News Agency. "People are struggling with their power rates, especially those that are unemployed."
Rep. Randy Fischer, D-Fort Collins, refuted Conti with the knowledge that cost increases are due to coal price hikes and capital construction by utilities to meet growth in energy demand. "The costs of renewables are going down and are on a path that will meet the costs of coal," said Fischer, also pointing to a 2009 law that established a two percent rate-hike cap on renewables, charged through the "RESA" on our XcelEnergy bills.
Fischer must have been reading recent reports out of the Public Utilities Commission, such as an Xcel report indicating that the price of wind generation fell by over 45% since 2009 (to see the report click here, click the Bid Evaluation Report, and see page 4). In response to a request for proposals for about 200 megawatts, Xcel got avalanched by bids for over six gigawatts. The projects will be ready by end of 2012 at prices so attractive that Xcel will replace an older 201 MW project from the queue with a bid from this new batch, saving customers $325 million in wind energy costs over 20 years, getting 25 percent more wind energy.
In Xcel's modeling, bids for new wind will also result in reduced system costs as soon as 2016 (download LWG 1.A1, and see the yellow table at the bottom). And that crossover between renewable and fossil fuel costs comes without the pressure of a price on carbon emissions. The only rational response to this is, Wooohooo!
This trend is also emerging with solar photovoltaic panels. Analysts and industrial installers are saying that solar panel installations will surge in the next two years, with Bloomberg New Energy Finance estimating that large PV projects could cost $1.45 a watt to build by 2020, half the current price. The London-based research company says solar is viable against fossil fuels on the grid in the most sunny regions such as the Middle East.
"The most powerful driver in our industry is the relentless reduction of cost," said Michael Liebreich, CEO of Bloomberg. Better cell technology and more streamlined manufacturing processes will soon make solar cheaper, even competing with coal, without subsidies, say Bloomberg analysts.
That claim was so bold I ran it by presenters in an Energy Central webinar this week. Ralph Romero of Black and Veatch all but confirmed Bloomberg's views. "We've seen this over and over, in Europe and Asia, where expansion of manufacturing brings lower costs, superior quality and incorporation of processes from other industries," adding that this is about to happen in the States.
In Colorado, plunging costs for renewables are furled against the steady upward march of fossil fuels. In March, Xcel filed for an 18 percent increase in the "electric commodity adjustment" (the ECA on your bill) which allows fuel costs to get passed through to customers. This hike would increase a typical monthly bill by about $3 -- with a resultant boost to the RESA of only six pennies. Every buck paid to fossils on Xcel's system leads to two pennies sent to cost-saving renewables.
We Coloradans cannot be surprised to read Xcel's earnings report with CEO Dick Kelly exulting about 2010 being Xcel's sixth consecutive year of meeting or exceeding their earnings guidance. Kelly made particular mention of the acquisition of two natural gas power plants and Comanche's Unit 3 in Colorado, for which we all know Xcel was granted back-to-back rate increases.
Fact is, when it comes to Xcel's earnings growth, Colorado is Xcel's Secretariat. By the end of 2008, Colorado bested Xcel's larger customer territory of Minnesota by 11 cents per share, and in 2009 by 8 cents per share, and in 2010 by 26 cents per share in a surge that outperformed every other subsidiary's improvement by a factor of seven.
So it's no wonder Boulder is taking a whole new look at how to get cleaner power at a better price, with or without Xcel. Rate stability comes through efficiency and renewables -- particularly as coal prices have surged about 10 percent a year since 2004.