Fight whips up over wind rules 

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Houston-based Reliant has sparked a debate over subsidies that has the EPA, citizens and consumer advocates concerned

By Janet Elliott

AUSTIN – Texas’ robust wind power industry could be stifled by new market rules being pushed by Reliant Energy before state regulators, consumer advocates and the Environmental Protection Agency are warning.

Lawmakers last year doubled requirements for the amount of wind generation in the state by 2015. The new goal of 5,880 megawatts would be enough to power 1.3 million homes for a year.

Now the Public Utility Commission is finding it difficult to implement the targets as electric companies are arguing among themselves and with consumer and environmental groups about the intent of the legislation.

At issue is whether the PUC should count voluntary green power programs like those offered by Austin Energy, a city-owned electric company not regulated by the state, toward the targets. Reliant says language in the bill clearly states that voluntary usage of wind power should be included.

Critics say that would allow Reliant and other electric providers to lower the amount of renewable energy they must purchase, limiting the industry’s growth.

Currently, the PUC does not count voluntary programs or wind capacity sold out-of-state toward the existing state mandates. The wind industry credits the existing market structure for helping Texas surpass industry pioneer California in installed wind capacity.

Reliant says competitive electric companies can subsidize wind power for only so long, particularly at a time when rising electricity costs are a top concern for consumers.

“When Texas created this program, the idea was renewable energy needed a chance to get started. At some point, the subsidies to the renewable energy generators should go away and the industry should stand on its own merit,” Reliant spokes-
woman Pat Hammond said.

The subsidies initially were designed to help reduce air pollution from coal-fired plants as part of the 1999 law that deregulated many of the state’s electric markets, including those in Houston and Dallas.

2 to 3 percent of demand
Texas has the ability to generate 2,400 megawatts of wind power, between 2 percent and 3 percent of the state’s demand. The new goals would take Texas toward 5 percent of total usage.

Reliant is calling for all mandated purchases of renewable energy to end by 2015.

“It is atrocious that one company will try to take that success away from Texas and our citizens,” said Beth O’Brien, clean energy organizer with Public Citizen.

Other companies such as TXU and Green Mountain Energy have aligned with the environmental groups and wind industry. The amount of wind a company must purchase is based on its market share. Those that buy less can be fined.

The PUC, which has received more than 700 e-mails from citizens concerned about Reliant’s position, recently delayed its rule-making process to address less controversial aspects of the legislation that add new transmission lines to get wind power from West Texas to populous areas of the state.

“I’m disappointed that Reliant Energy is actively working to derail renewable energy development in the state of Texas,” Evelyn Chorush of Houston wrote in a typical missive.

Reliant’s position could limit the development of renewable energy sources in Texas, forcing those who want to buy clean energy voluntarily to look outside the state, according to comments from the EPA filed with the PUC.

The EPA believes that Senate Bill 20 should set a floor on renewable energy generation and not a ceiling, said Kathleen Hogan, director of EPA’s climate protection partnerships division.

And last week, six lawmakers from the Panhandle urged the PUC to “be mindful of SB 20’s fundamental purpose to increase the state’s usage of renewable energy.”

Houston-based Reliant is relying on language in the bill that states “all renewable capacity installed in this state and all renewable energy credits awarded, produced, procured, or sold from renewable capacity in this state are counted toward the goal.”

Hammond said Reliant has contracts for 431 megawatts of renewable energy. She said the company supported the new law and anticipates that Reliant will double its purchases of wind power in coming years.

Supporters of wind energy, like Mike Sloan of the Wind Coalition, say wind power is cost-competitive with electricity generated by natural gas, particularly if companies enter into long-term contracts.

However, Phillip Oldham, a lawyer for the Texas Industrial Energy Consumers, said the price of a “renewable energy credit” has gone up, instead of down, as the market has grown.

The credits, which look like stock certificates, are the mechanism set up by the PUC to determine whether utilities are buying enough wind power. The state issues the credits to wind generators, which sell them at market value to companies like Reliant and TXU.

Oldham, whose clients include chemical plants, refineries, timber companies and high-tech manufacturers, said although the state is ahead of its current goals, prices for the credits are still rising.

“It didn’t make economic sense,” he said.

1,500 pounds of coal
The head of the Renewable Energy Laboratory at Texas A&M University said each renewable energy credit replaces the emissions burned by 1,500 pounds of coal.

Kalyan Annamalai, a professor of mechanical engineering, said that because production of renewable energy is limited, he thinks some voluntary purchases could be counted toward the goal but that 80 percent to 90 percent
of the requirement should be met through mandatory purchases.

Even Houston is getting into the renewable energy business. The city is seeking federal approval to sell $50 million in energy bonds to purchase 17 turbines in Kenedy County.

That power could provide up to 13 percent of the city government’s usage, said Issa Dadoush, director of the building services department.

“We believe in renewable energy. It’s safe to the environment and makes a lot of sense,” Dadoush said. “It will limit our exposure to rising natural gas prices.”

Dadoush said if the city could buy the wind power cheaper on the wholesale market, it would abandon the project.

janet.elliott@chron.com

Copyright 2006 Houston Chronicle Austin Bureau