The high cost of renewable power; PUDs on track to meet state energy targets, but at what cost? 

Investments in wind power to meet new state renewable-energy targets will contribute to higher rates at some Washington utilities next year, but not at Chelan and Grant County PUDs.

At least not yet.

Officials at both PUDs say their utilities should be on track to meet the new targets with existing resources through at least 2016.

Beyond that, without changes or clarifications to the state’s Energy Independence Act, both could be faced with buying wind, solar or other renewable power that isn’t needed to cover local demand at costs five to 10 times higher than electricity produced by their Columbia River dams.

Both will be audited for compliance next year. They face stiff fines if they don’t meet their targets.

“We’re working to comply with the targets… Our best opinion is, we’re doing it right,” said Andrew Munro, director of external affairs for Grant PUD. “Until we meet the first goal, we’ll continue to roll up our sleeves.”

“The intent of the law is good – to reduce our dependency on foreign oil and promote good, clean, non-carbon-emitting energy,” said Gregg Carrington, managing director of energy resources at Chelan PUD. “But if you’re just doing it for the law and not being smart about it, people will pay more for energy and no one wants that.”

Wind investments made in anticipation of the law will contribute to rate increases this year at Clark Public Utilities, Cowlitz PUD and Tacoma Power.

Snohomish County PUD officials estimate that acquiring renewables ahead of need – just to comply with the law – could cost its ratepayers between $20 million to $30 million by 2020 if additional growth doesn’t come to justify the investment.

That traditional hydropower doesn’t count toward the state targets remains a sore spot for many in hydropower-rich North Central Washington.

They argue that Northwest hydroelectric dams, which provide nearly 70 percent of the state’s electricity, already give Washington the greenest energy supply in the nation, without forced investments in other renewables.
Voters’ voice

But Washington voters want the state’s utilities to focus on conservation and a renewable-energy mix that goes beyond traditional hydropower.

They spoke with their ballots in November 2006 by approving I-937, the initiative that created the Energy Independence Act.

The act requires utilities that have at least 25,000 customers to meet conservation targets every two years and maintain a 10-year plan for continued conservation.

It also requires these qualifying electric utilities to supply at least 3 percent of their demand from wind, solar, geothermal or other qualifying renewable energies by 2012. This target increases to at least 6 percent by 2016 and at least 15 percent by 2020.

The energy industry calls these targets a “renewable portfolio standard.” They’re not new.

Across the country 27 states and the District of Columbia have targets that range from 8 percent in Pennsylvania to 40 percent in Maine. Five other states have voluntary targets.

Here in Washington traditional hydropower doesn’t count toward the targets, but improvements that allow dams to generate more electricity with the same amount of water do count. This is called “incremental hydro.”

Chelan and Grant PUDs say their existing, small investments in the Nine Canyon wind farm near Kennewick, together with gains in efficiencies they’ve already achieved – or plan to achieve – by overhauling aged generators at their dams, will be enough to hit the first two targets for renewables.

The law requires utilities to meet the renewable energy targets even if they already have enough traditional hydropower or other energy sources to meet their demand.

In North Central Washington the law applies only to Chelan and Grant PUDs. Douglas and Okanogan County PUDs, with 15,300 and 20,600 customers, aren’t yet big enough to meet the customer-count requirement.
Clarity, please

The Chelan County PUD’s Carrington says the utility has already purchased “micro turbines” that could be added to fish passageways at the dams to generate a little more electricity.

They’re more expensive, but could be a good investment if power prices on the region’s wholesale market rebound and utility officials were sure that the extra generation could count toward the state’s renewable-energy targets.

Right now, public utilities have no certainty.

The law creates a way for private utilities to have their projects reviewed for compliance with the act before they build them. Public utilities can submit their proposals for review, but can’t get an assurance until state audit time, after the project is built.

That’s a reform that many public utilities have already proposed. Other proposed changes include:

Expand the definition of “qualifying renewable” so more types of investment count toward the targets. These could include spending on fish habitat and hydropower used to fill in the gaps when wind farms aren’t generating.
Count new hydropower that uses existing dam structures but doesn’t impound more water.
Don’t force utilities to pay for qualifying renewables or investment credits (called RECs) in renewables if they don’t need the extra power for customer demand.
Deduct from the renewable targets power used to supply job creators that locate in the area for green hydropower, such as data centers or manufacturing plants.
Recognize existing hydro in some capacity.
If wind or REC investments are necessary, remove the requirement that they be linked only to Northwest-based projects.

Road to reform

Since the law took effect three efforts at reform have languished in the state legislature for lack of consensus.

State Rep. Dave Upthegrove, D-Des Moines, chair of the House Environment Committee, is heading the latest review. He hopes to present a proposal to the House next year.

“The question is how to find a political path forward to address people’s interests in a way that would have some support to make into law,” Upthegrove said. “There are a lot of areas worthy of changes. We might be able to zoom in on a couple.”

He added, “There’s a limited knowledge of energy issues among legislators. This makes demagoguery easier – decisions based on who’s for it or who’s against it (rather than on the facts). Everything is on the table,” he said.

The Northwest Energy Coalition, an alliance of regional advocacy groups that support renewable energy, conservation and consumer projection, was the driving force behind I-937 and remains a leading advocate of the act.

They say they’ll consider changes that preserve the law’s intent to diversify the state’s clean-energy mix.

“The coalition is always willing to enter into discussions about potential modification as long as its focus is to make the law work better,” said Danielle Dixon, senior policy associate.

She declined to comment on most specific utility proposals for change.

The law, she says, will usher in more price stability for ratepayers by adding renewable power sources to the state’s mix that could fill in for periods of drought, when hydropower production is lower, or when prices skyrocket for traditional fossil fuels, including natural gas.

“The ultimate goal of I-937 is to diversify our resource, so we’re not as vulnerable to drought, natural gas prices or greenhouse gas emissions and to move us away from fossil fuels,” she said. “Over time, I-937 ensures jobs in the state and helps to ensure we don’t have all our eggs in one basket. Renewables do not necessarily cost more.”