Lower Renewable Energy Benchmark May Discourage Production

November 16, 2009

Email this story Print this post Add your comments

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.

Texas Power’s new offering, Texas Power Pure, is a month-to-month plan with variable rates, according to a press release.

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.

Email this story Print this post Add your comments

Advertisers

Make sustainability part of your strategy.

Get equipped at the SAP Sustainability Resource Center. >>

Unclear about the EPA's new GHG Rule?

Learn how it could affect your business. >>

EPA mandatory emissions reporting starts Jan 1st

CSA Standards can help your organization get ready for compliance. Find out how. >>

Product Environmental Compliance Best Practices

How to achieve compliance at a significantly lower cost. Download the full report. >>

Join the Discussion

Reader Comments

If this proposal goes through it will make investment in renewable energy not so favorable.
The cost of building new clean power plants will not change much, how will it repay itself if you can’t sell the energy produced and show timely profits with investors ?

david faylor | November 16th, 2009

While this cut in the MPR may reduce solar installations in the short term, it highlights several encouraging signs for renewable generation:
1. Natural Gas prices (and associated electricity prices) are highly volatile. They can go up as sharply as they come down. A PV Solar panel, once installed, offers price certainty that is valuable and that some (companies and homeowners) will pay a premium to obtain.
2. Absent improvements in electricity storage, renewable generation will always represent an alternative to natural gas, and vice versa. This is good news for renewables. Over time, GHG legislation and supply issues will make natural gas more expensive relative to renewables, which will become less expensive in the future (economies of scale, progress down the learning curve, technological innovations, etc.).

While retail electricity markets are transforming, we must keep our collective vision on the long-term goals. For renewable generation to be a credible alternative to fossil-fueled generation in the long term, it must eventually compete on price and value (like cost certainty value, public relations value, and others) without subsidies. Reductions in the MPR, as long as they don’t kill the renewable industry in the short term, will make the industry stronger in the long term. As an industry, let’s redouble our innovation efforts to reduce costs throughout the renewable generation value chain (production, distribution, installation, maintenance), improve technology and efficiency, and increase marketing and education prowess. These efforts will ensure short-term survival and lead to long-term success.

Paul Alvarez | November 16th, 2009

The cost of building new clean power plants, from wind turbines to PV Solar panels, has come down significantly recently due to the reduction in demand. Increased competition (in the form of a lower MPR) will put pressure on all parts of the value chain – manufacturers, designers, installers, etc. — to innovate if they are to survive. Manufacturers’ integration of inverters into PV Solar panels is but one example, offering not only lower hardware prices but also lower design, installation, and maintenance costs over non-integrated designs.

Paul Alvarez | November 16th, 2009

Recent Daily News [ see all ]

11/20/2009
11/19/2009
11/18/2009

Charts [ see all ]

European Paper Industry Cuts CO2 Emissions by 42% since 1990

S. America Takes Most Urgent View of Copenhagen Talks

Nike Tops Annual Climate Action Scores

Oceans May Trap more Carbon than Forests

Jobs

View All Jobs >> Post a Job >>

Comments and Discussions

Trade Association on Trade Group on EPA Chemical Regs: ‘If Everything is a Priority, Then Nothing is a Priority’
"Seriously… that..."

Gary Markowitz on Supermarkets Tackle Emissions Reductions, Fuel Efficiency
"Supermarkets waste over 10 percent of their energy through improper..."

peter in ireland on Ontario May Follow California’s Lead on TV Energy Efficiency
"Governor Schwarzenegger is shooting himself in the foot! 1...."

Environmental Leader on S. America Takes Most Urgent View of Copenhagen Talks
"The survey respondents (the PDF report mentions 4,000 respondents in 38..."

Jake on UPS Trying New Hydraulic Hybrid Trucks
"A point of clarification: the Reuters press release referenced herein reports that 20 UPS will purchase..."

Custom Organic Shirts on S. America Takes Most Urgent View of Copenhagen Talks
"90% of North Americans believe it is urgent to get a global climate..."

peter dublin on California City’s Green Building Ordinance Applies to Commercial Buildings
"Why energy efficiebnt regulation on buildings –..."

Environmental Leader