Lower Renewable Energy Benchmark May Discourage Production
As more utilities begin offering customers the ability to purchase electricity generated from renewable sources, other utilities may benefit from a drop in the benchmark price that they must pay independent producers for renewable energy.
The California Public Utilities Commission (CPUC) has proposed a 15 percent cut in the benchmark that utilities must pay over a 20-year period, according to the Wall Street Journal.
If the proposal goes through, utilities owned by PG&E Corp., Edison International and Sempra Energy would be able to negotiate lower long-term contracts of about 9.67 cents per kilowatt-hour for solar, wind and other renewable power, starting in 2010.
By 2020, the benchmark price for 20-year contracts would be 13.6 cents per kWh, a further 13 percent drop after accounting for projected inflation.
The benchmarks are based on natural gas prices in an effort to reflect the cost of building and operating natural gas power plants. Natural gas prices have been deflated this year, which is why the commission proposed lower rates.
If accepted by the full commission, the CPUC’s proposed lower benchmarks could reduce the rate of return for companies that are adding solar and wind to their operations, thus reducing the incentive to add more.
Meanwhile, California utilities are required by 2010 to attain a fifth of their power from renewable resources, although there is a three-year grace period.
In Dallas, Texas, a utility is offering its customers the ability to purchase their electricity from renewable sources.
This is not the first renewable energy option for Texas electricity consumers. Austin Energy has offered such a plan for some time.
Earlier this year, the utility proposed raising the amount of electricity that Austin must purchase from renewables, which in 2008 was 30 percent, to 35 percent.
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