Colorado has a renewable energy portfolio standard for energy utility companies:
Investor-owned utilities: 30% by 2020
Electric cooperatives serving fewer than 100,000 meters: 10% by 2020
Electric cooperatives serving 100,000 or more meters: 20% by 2020
Municipal utilities serving more than 40,000 customers: 10% by 2020
The standard started with a ballot measure that voters approved in 2004 and was subsequently strengthened by legislative action twice. The dominant utility in Colorado is Xcel Energy, based in Minneapolis, MN. Despite spending money to defeat the initial ballot measure and the two following standards to generate first 10%, then 20%, and now 30% renewable energy by 2020, Xcel would have, did, and will meet the standards.
As with most topics, implementing high-level policies turned out differently than many RES supporters envisioned. After the 2004 ballot measure passed, Xcel convinced the Public Utilities Commission that it needed to build a 766MW coal plant in Pueblo, CO. CO consumers overwhelmingly objected to the planned plant for a few reasons: nobody was in desperate need of those MW, the plant’s cost (which ended up being over $1 billion) would be passed directly onto those same customers who didn’t need excess capacity, and they wanted Xcel to focus on renewable energy plants (wind and solar). Since the PUC approved the plant, it hasn’t run at capacity. There’s no surprise there. Costs definitely went up on every customer in Xcel’s service region, whether they received Comanche energy or not. This is the primary problem with private and investor utilities: the easiest way to make money is to force consumers to pay for expensive infrastructure. And as I stated above, Xcel will easily meet its renewable energy standard.
How did Pueblo fare? Well, that’s a new part of the story for me. A local utility serviced Pueblo, which Black Hills Energy bought, who opted to replace nearly all its cheap coal capacity with natural gas essentially overnight. This meant ratepayers are footed some more big infrastructure bills all at once. In fact, Pueblo’s residential rate per kilowatt-hour has risen 26 percent since 2010. What portion of Comanche 3’s electricity made it to Pueblo? None of it. Instead, the northern half of the Front Range uses that energy – the same place that wouldn’t allow Xcel to build a coal plant due to pollution and cost.
See what I mean by saying policies need to be better thought out? Who would have thought that Pueblo customer’s couldn’t buy electricity from the newest, most expensive coal plant built near their own town? Instead, people have to buy from another utility which preferred to close down older coal plants (which ran cheaper) in lieu of newer natural gas plants. And instead of directing Black Hills to encourage commercial customers to ramp down their usage during peak summer months, the utility convinced the PUC it needed to build additional large plants that – you guessed it – will further increase customer’s bills in upcoming years. Black Hills is shutting people’s access off because they can’t pay their bills. But Black Hills posted a 24% increase in earnings per share, so that’s what we all want, right?
How soon will Xcel be willing to shut down that new Comanche 3 755MW plant? Because that’s what the most ardent climate activists want. If Xcel were to shut it down, what would happen to ratepayers? They would not only be forced to keep paying for the plant, but would also be forced to pay for replacement plants. How much more costs can consumers absorb, especially in today’s continued weak economy? These are real questions that activists don’t spend time answering. To them, the answer is clear. Fortunately, they can probably afford to pay more for their energy during a significant transition from fossil fuels to renewable energy. But poor people in the developing world aren’t the only ones who will struggle to pay for renewable energy access. There are millions of US citizens who struggle to afford to pay for energy today. Policies designed to reduce GHGs, which I support philosophically, also need to take struggling Americans into account.
On a related note, how long might it be before renewable energy supplies a majority of the world’s energy portfolio? I’ve discussed at length some requirements to achieve <2C warming and have concluded that we won’t accomplish that goal due to the scale of the problem. Vaclav Smil wrote a Scientific American article on this topic in a way that I think makes it easy to understand. Here is his pieces’ main graphic:
Globally, renewables account for only 3.4% of the total energy portfolio. That’s after years of deployment in places like Germany and China (which has more total renewable generation than the US). If renewables attained Smil’s 5% threshold this year, they wouldn’t achieve the 50% threshold until 2064 at the earliest. One way they could do that is if there was much less fossil fuel infrastructure – which is clearly unrealistic. Another way is to do what those ardent activists recommend: shut down fossil fuels by 2020. Which is nearly as unrealistic. Will they go without power to achieve their emissions goals? Or will they demand developing countries continue to go without power instead?
But note something else about this graphic: the slope of subsequent technologies is smaller than for previous technologies. Oil took longer to achieve a lower threshold than coal. Natural gas took longer to achieve a much lower threshold than coal or oil. Is there any rational reason to suspect that renewables’ trajectory will look more like coal’s than oil’s or natural gas’? I don’t think so. And the reason is simple: renewables have to displace 45% of fossil’s generating capacity just to meet a threshold. That doesn’t mean renewables will generate that capacity around the clock like fossils do today. Moreover, the world’s energy demand will not remain constant. Renewables’ 50% threshold will be significantly higher than was coal’s, oil’s or natural gas’. In other words, the energy pie is getting bigger. To account for at least half of the pie, we need more renewable energy than we did fossil energy.
And remember the <2C warming goal requires an even more stringent requirement. Not only do we need to replace all that fossil capacity, we have to pull CO2 from the atmosphere and store it permanently so we achieve net negative emissions by 2050 to 2060.
This problem is immense. And instead of blindly demanding portfolio standards without simultaneously changing utility regulations, we need to design innovative policies that facilitate renewable deployment while keeping household energy cost increases down. We need to facilitate distributed energy generation so that we require fewer large, expensive utility-scale plants. Do we need investor-owned utilities? Why are we forced to pay a middle man for a commodity?