Xcel Energy has announced a historic plan to make renewable energy more than half of all its energy supply by 2026, but not everyone was cheering. Republicans in the state legislature were quick to denounce the plan, but people who study renewable energy for a living say their concerns are unfounded.
“We keep hearing that renewable energy has finally come of age and can compete with traditional power providers on a level playing field, yet when push comes to shove, they’re always coming back for more handouts and special preferences, that come at ratepayer or taxpayer expense,” state Sen. Jerry Sonnenberg said in a statement issued by the Colorado Senate Republicans.
“When a similar idea came before the General Assembly last session, Senate Republicans said ‘no’ because we think it will eventually drive up energy costs and undermine grid reliability,” state Sen. John Cooke said in that same statement. “But rather than just take ‘no’ for an answer, the company is working with the governor and other powerful allies to push this through in a very irregular and undemocratic way.”
Should consumers be concerned that the renewables plan will increase costs or make their electricity less reliable?
Xcel Energy’s plan, which still requires approval from the Colorado Public Utilities Commission, calls for the closure of two coal-fired power plants in Pueblo and the addition of significant new wind, solar and natural gas capacity.
Federal policy toward renewable energy and coal plants is in the process of a significant transition under the Trump administration. Whereas before the federal government strongly supported the addition of more renewable energy — a plan that would have mandated it was sidelined by the courts — now the Department of Energy is highlighting the benefits of coal and nuclear.
A recent report from the Department of Energy emphasized the importance of maintaining coal plants as part of the nation’s power supply. Coal can provide continuous power and fuel can be stockpiled at these plants in the event of emergencies that would interrupt the supply chain, the federal report argued.
In the memo commissioning the study, Secretary of Energy Rick Perry cast regulatory policies from the Obama administration as bad for the economy and our energy supply.
U.S. coal plants have been closing in large numbers in recent years. The main cause of these closures, according to the DOE report and many others, is lower costs for natural gas and the greater efficiency of natural-gas power plants. Another factor is new requirements for pollution control, as retrofitting old coal plants sometimes doesn’t make economic sense.
People who study renewable energy issues said that any problems with grid reliability would only happen with much higher levels of renewables than Xcel is proposing, and even then, they could be managed with appropriate infrastructure investments.
Chris Clack, a mathematician who specializes in modeling and forecasting for power systems, said Xcel could add a lot more renewables than the company is proposing and not have any problems.
“I’ve been doing modeling of Xcel, and we found that Xcel could retire several gigawatts of coal without any impact to grid reliability,” he said. That’s far more than the 660 megawatts that Xcel is taking offline with the two Comanche plants. A third coal plant in Pueblo will remain open.
Clack did the modeling on behalf of Climate Policy Initiative, and he’s discussed his results with Western Resource Advocates, which has signed on to Xcel’s plan; however, he has no direct ties to Xcel and isn’t one of the parties supporting Xcel’s proposal in front of the PUC.
Clack said hydroelectric and natural gas facilities provide enough continuous power to balance out or “firm” the intermittent power coming from wind and solar.
Mark Dyson, a manager in Rocky Mountain Institute’s electricity program, called reliability a “red herring” when it comes to renewables. Even coal plants have reliability issues, such as stockpiles freezing in very cold weather.
“Xcel is, like other utilities, finding it the most cost-effective option for their customers to stop burning fuel and buy renewables,” Dyson said. “It’s not about being a leader. They are finding that it’s cheaper for their customers if they invest in renewables.”
It’s the job of the PUC and the Colorado Office of Consumer Counsel to make sure Xcel’s plan doesn’t cost consumers more than sticking with fossil fuels. However, the members of the PUC are appointed by Gov. John Hickenlooper (who is too into renewables for conservatives and too friendly with oil and gas for environmentalists) and one of them used to run the governor’s Colorado Energy Office. This makes some conservatives worry that the PUC will favor a policy of more renewables even if it costs more or not subject the plan to the full scrutiny it deserves.
“Xcel is going to run a reverse auction for the wind it wants to procure,” Dyson said. “If the cost comes in higher than what it costs for them to continue to run the Comanche plants, they will keep running the Comanche coal plants. There is no way they are going to sign up for something that is more expensive than what they’re already doing, and if they sign a contract, they are locking that in with incredible certainty.”
Colorado law requires that investor-owned utilities like Xcel get 30 percent of their power from renewables by 2020, but those utilities can’t go above and beyond that just to be good environmentalists. As regulated monopolies, the state guarantees them a certain amount of profit in exchange for reviewing and approving resource plans and rates, and the PUC isn’t supposed to approve a deal that doesn’t work for consumers.
In fact, the inability of Xcel to rapidly increase the amount of renewables on the system is a the major reason Boulder has spent seven years in a so-far unsuccessful attempt to start its own municipal utility that would, city officials believe, be far greener. Regulatory and legal hurdles have made the path forward difficult and expensive.
Xcel wants to increase wind and solar sooner rather than later to take advantage of tax credits that reduce the cost of utility-scale wind and solar projects. Those tax credits come up for renewal from time and time, and there’s always anxiety about whether they’ll be discontinued. Supporters say the tax credits have had the desired result of encouraging investment in new technologies that have brought costs further down, but just about any industry will lobby for ongoing subsidies when they can.
These tax credits have garnered Republican support in states like Colorado where they’re seen as important to the economy, but many conservatives still dislike them. They say the true cost of wind and solar to consumers is masked by the tax credits, which consumers also pay for indirectly, as taxpayers.
Mark Stutz, a spokesman for Xcel Energy, said that solar and wind projects in recent years have been competitive or cheaper than fossil fuel bids, and that those prices are locked in at the time contracts are signed.
Is this an “end-run” around the legislature?
That’s a reference to the wrangling over the Colorado Energy Office that occurred at the end of the legislative session and ultimately resulted in the office not being funded because Democrats and Republicans couldn’t agree on a host of issues. Republicans put forward a plan to shut down some renewables programs and do more to support all fuel sources, including nuclear, and allowing investor-owned utilities like Xcel to buy natural gas reserves, which Democrats rejected. In the end, even a simple extension of funding was unsuccessful.
In an email, Stutz said Xcel followed the conversations around the bill but did not lobby for any of the amendments.
“Xcel Energy did not actively lobby amendments moved by a legislator or adopted to SB-301, which was introduced fairly late in the session,” he said.
“As you know, there were many of them, both in the Republican-led Senate and in the Democrat-led House. There were, of course, many conversations occurring around most all bills at the Capitol. Our role is ensure that ideas are in the best interests of our small and large customers, based on issues of safety, reliability and affordability.”
It’s pretty normal for Xcel to take its resource plans — its roadmap of where and how it plans to get electricity in the coming years — to the PUC.
“We are currently in the 2016 electric resource plan before the PUC,” Stutz said. “It is certainly in our purview, and we’re encouraged to submit proposals to the PUC. This is certainly an appropriate thing for us to present to the PUC.”
Xcel expects to present a recommended energy portfolio to the PUC in the first quarter of 2018, based on the results of the company’s solicitation, and a final decision would come in summer 2018.