Favorable Review of Renewable Energy Standards
Twenty-four states have passed renewable energy standards (RES) that require a certain percent of a state’s electricity to be generated by clean energy. From Texas and Montana to California and New York, state legislatures have passed these standards for a wide range of reasons: To develop local economies, reduce energy imports from out-of-state or out-of-country, reduce pollution, and reduce the environmental impact of digging up fossil fuels. These are state-wide benefits that keep money in the state economy and pollution out of citizens’ lives. Their value is obvious.
But what about costs? Some policymakers are concerned that utility customers’ bills will rise to achieve these benefits. Are renewable energy standards increasing the cost of electricity? Recent reports in Minnesota offer a positive message for the rest of the country.
Minnesota established one of the nation’s
most ambitious renewable energy standards in
2007. The RES directs the state’s electric
utilities to obtain 25 percent of their
electricity from renewable resources by 2025.
The utilities are on track to meet their
benchmarks, and many are tapping into
cost-competitive wind projects across the
Now: Low-Cost or No-Cost
According to analysis by League staff, recent reports filed by Minnesota utilities show that for most utilities, acquiring renewable energy has had either minimal price impacts (less than one percent increase) or no impact on prices at all. For example, Xcel Energy reported that in 2008 and 2009, energy prices were 0.7 percent lower with wind resources than they would have been without them. Otter Tail Power concluded their report by saying, “Over the entire life of a wind project, there is a significant reduction in electricity costs to Otter Tail’s customers.”
Some utilities stated that they would have procured renewables regardless of the state requirements because they are simply the optimal choice for least-cost, least-risk portfolios. During the recent recession, energy demand was significantly down, contributing to lower prices for fossil fuels. As demand picks up, the price of fuel will increase as well, making it more expensive for utilities to run coal and natural gas plants. Wind and other no-fuel renewables are a very good hedge against increasing and fluctuating fossil fuel prices.
Future: Cheaper Energy
A few utilities modeled future
impacts of the RES, looking at an energy
portfolio with additional renewables versus one
with no additional renewables. Those utilities
found that a portfolio with renewable energy
may be cheaper for the utility and its
ratepayers in future years. Otter Tail Power
projects that their RES-compliant portfolio
through 2025 will cost $34 million less than a
“no-wind” scenario, resulting in lower
rates for customers.
In addition to reaping the
benefits renewable energy offers to local
economies, public health, and the environment,
More articles from the Fall 2011 edition of Outdoor America....