 |
| (Photo by eXtension Farm Energy via Creative Commons) |
Consumers Energy encountered two surprises this year after it
fast-tracked a Michigan wind farm project to take advantage of expiring
federal tax credits.
One, the project will cost less than the utility thought it would to
build, and two, technology advances mean each turbine will produce more
power than previously projected.
Citing those improved economics, Consumers Energy proposed last week
to eliminate a surcharge on customers’ bills that was designed to cover
the cost of complying with Michigan’s renewable electricity standard.
The utility is downplaying the significance, but environmental groups
are claiming a win, saying the proposal vindicates their position that
utilities have exaggerated the cost of renewable energy.
“The accounting is finally catching up to facts we’ve always known,
which is that renewable projects have been cost effective, and they’re
getting more so,” said David Gard, energy program director for the
Michigan Environmental Council.
While it’s difficult to generalize
about the rate impact of renewable energy standards, the experience of
Michigan’s large utilities suggests they aren’t always as costly as
critics claim.
Lower costs
Michigan’s 2008 renewable energy law
requires all utilities to generate 10 percent of their electricity from
renewables by 2015, and it lets them pass the added expense to
customers in the form of a monthly fee.
Consumers Energy had already cut its monthly renewable surcharge in
each of the past two years. In 2011, the utility adjusted it from $2.50 to 65 cents, and last year it was lowered again to 52 cents.
On July 29, the company filed testimony with the Michigan Public Service Commission in which it proposed phasing out the renewable energy surcharge completely.
The July 29 filing focuses on financial developments around the company’s Cross Winds Energy Park, a 62-turbine, 105-megawatt wind farm to be built in Tuscola County, in Michigan’s thumb region, south of Saginaw Bay.
Consumers planned to spend approximately $275 million on the project,
but the price tag for equipment and construction has since fallen to
about $265 million, the company said.
By moving the project schedule up a year, the company will also
qualify for approximately $110 million worth of federal wind production
tax credits over the next decade.
Meanwhile, the projected net capacity factor — the amount of time the
turbines will generate power — has improved from 41 percent to 45.2
percent because of better turbine performance.
The disclosure from Consumers Energy comes just two months after
Michigan’s other major electric utility, DTE Energy, proposed lowering
its monthly renewable energy surcharge from $3 to 43 cents.
“We’ve experienced lower costs to build our own wind energy parks, as
well as for contracts to purchase power,” Irene Dimitry, DTE Energy’s
vice president for marketing and renewables, said in a June 4 press release.
“Contributing to that have been technology improvements that have led
to better wind and solar energy production, as well as federal
production tax credits that have offset our costs.”
Vindicating environmentalists?
Michigan environmental groups thought the surcharges were too high
from the beginning and are pleased with the utilities’ proposals to
significantly lower or eliminate the fees.
“The utilities weren’t excited about having to do renewable energy.
They thought it was going to be expensive and didn’t want to have to do
more. It turns out, they’re finding that it’s been good business. It’s
good for customers, it’s good for the company, and it’s good for
investors,” said Tiffany Hartung, a campaign organizer for the Sierra
Club’s Michigan chapter.
Dan Bishop, a spokesman for Consumers Energy, rejected that
interpretation and instead described the company’s surcharge proposal as
primarily an accounting change.
“It isn’t that renewable costs are going away. It is a proposal to
simply adjust the billing,” Bishop said. “Our filing is proposing that
they no longer be in a separate surcharge.”
Bishop said he could not say whether other portions of customers’
bills would go up or down under the proposal. He also noted that by the
end of the year the company will have collected a surplus of about $200
million from the surcharge to cover ongoing compliance costs.
He said technology advances and the federal tax credit help, “but
there still is an incremental cost adding renewable energy to your
electric supply portfolio, and to claim otherwise, it’s just not
accurate.”
Regardless, the shrinking surcharges show the utilities’ projections
about what ramping up renewables would cost were also not accurate.
The reality is that the rate impact of renewable electricity standards across the country has been mixed, varying from state to state and utility to utility, but mostly modest.
A 2012 report
by the Center for American Progress found that of 22 states where
enough data existed, 12 saw electricity prices increase at a slower
rate, relative to the national average, after they adopted a renewable
standard.
Concludes the report: “There are no data showing that these standards cause electricity rates to skyrocket.”
The Sierra Club and Michigan Environmental Council are members of RE-AMP, which publishes Midwest Energy News.
Syndicated from Midwest Energy News